As filed with the Securities and Exchange Commission on April 4, 1996
Registration No.
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.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No.
(Check appropriate box or boxes.)
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Troika Dialog Russia Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, New York 10022
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Approximate date of proposed public offering
As soon as practicable after the Registration Statement become effective
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Pursuant to Rule 24(f)(2) under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of shares of common
stock, $.001 par value per share, of all series of the Registrant, now
existing or hereafter created. The Registration Fee required by Rule 24f-2 is
$500.00.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8 (a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
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 2
3. Condensed Financial Information *
4. General Description of Registrant 2
5. Management of the Fund 14
5a. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities 22
7. Purchase of Securities Being Offered 16
8. Redemption or Repurchase 17
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA 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 22 (Part A)
13. Investment Objectives and Policies 2 (Part A)
14. Management of the Registrant 2
15. Control Persons and Principal Holders 2
of Securities
16. Investment Advisory and Other Services 5
17. Brokerage Allocation and Other Practices 6
18. Capital Stock and Other Securities 22 (Part A)
19. Purchase, Redemption and Pricing of 16, 17(Part A)
securities being offered
20. Tax Status 8
21. Underwriters 15 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements Filed as an exhibit
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
June 3, 1996
Lexington Troika Dialog
RUSSIA FUND, Inc.
P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Service-1-800-526-0056
Institutional/Financial Adviser Services-1-800-367-9160
24 Hour Account Information-1-800-526-0052
A NO-LOAD MUTUAL FUND WHOSE INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION THROUGH INVESTMENT PRIMARILY IN THE EQUITY SECURITIES OF RUSSIAN
COMPANIES.
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Lexington Troika Dialog Russia Fund, Inc. (the "Fund") is a
no-load open-end non-diversified management investment company. The
Fund's investment objective is to seek long-term capital appreciation
through investment primarily in the equity securities of Russian
companies. The Fund involves speculative investments, special risks,
such as political, economic and legal uncertainties, currency
fluctuations, delays in settling portfolio transactions and risks of
loss arising out of Russia's system of share registration. The Fund
may not be appropriate for all investors (See "Risk Factors and
Special Considerations").
Shareholders may invest or reinvest shares at any time without
sales charge or penalty. Redemption on shares held less than 365 days
are subject to a redemption fee of 2% of the redemption proceeds (See
"How to Redeem Shares").
Lexington Management Corporation ("LMC") is the Fund's Investment
adviser. Troika Dialog Asset Management, ZAO is the sub-adviser of the
Fund. Lexington Funds Distributor, Inc. ("LFD") is the Distributor of
Fund shares.
This Prospectus sets forth information about the Fund that you
should know before investing. It should be read and retained for
future reference.
A Statement of Additional Information dated June 3, 1996, which
provides a further discussion of certain matters in this Prospectus
and other matters that may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, call the appropriate telephone
number above or write to the address listed above.
Mutual fund shares are not deposits or obligations of (or endorsed
or guaranteed by) any bank, nor are they federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
("FDIC"), the Federal Reserve Board or any other agency. Investing in
mutual funds involves investment risks, including the possible loss of
principal, and their value and return will fluctuate.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Investors Should Read and Retain this Prospectus for Future Reference
<PAGE>
FEE TABLE
Estimated Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management fees ...................................................... 1.25%
12b-1 fees ........................................................... 0.25%
Other fees ........................................................... 1.85%
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Total Fund Operating Expenses ........................................ 3.35%
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Example: 1 year 3 years
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You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end of each period ...................... $54 $103
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
indirectly. For more complete descriptions of the various costs and expenses,
see "Investment Adviser, Sub-Adviser, Distributor and Administrator" below. The
Expenses and Example (except the 12b-1 fees) appearing in the table above are
based on the Fund's estimated expenses for the current fiscal year. The 12b-1
fees shown in the table reflect the maximum amount which may be paid under the
Distribution Plan. See "Distribution Plan." Shares held less than 365 days are
subject to a redemption fee of 2% of the redemption proceeds. See "How to Redeem
Shares."
The Example shown in the table above should not be considered a
representation of past or future expenses and actual expenses may be greater or
less than those shown.
DESCRIPTION OF THE FUND
The Fund is an open-end non-diversified management investment company. It is
called a no-load Fund because its shares are sold without a sales charge.
INVESTMENT OBJECTIVE AND POLICIES
Lexington Troika Dialog Russia Fund, a series of Lexington Troika Dialog
Russia Fund, Inc. is an open-end non-diversified management investment company.
The Fund's investment objective is to seek long-term capital appreciation
through investment primarily in the equity securities of Russian Companies.
As used in this Prospectus, the term "Russian Company" means a legal entity
(i) that is organized under the laws of, or with a principal office and domicile
in, Russia, (ii) for which the principal equity securities trading market is in
Russia, or (iii) that derives at least 50% of its revenues or profits from goods
produced or sold, investments made, or services performed, in Russia or that has
at least 50% of its assets situated in Russia. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
Russian Companies. Under current conditions, the Sub-Adviser expects to maintain
at least 20% in very liquid investments to maintain liquidity and provide more
stability; as the Russian equity markets develop and grow and liquidity becomes
less of an issue the Sub-Adviser expects to maintain greater equity exposure.
As used in this Prospectus, "Russia" refers to the Russian Federation, which
does not include other countries that formerly comprised the Soviet Union.
Investments in Russian Companies involve a high degree of risk and special
considerations not typically associated with investments in other more
established economies or securities markets, such as political, economic and
legal uncertainties, currency fluctuations, delays in settling portfolio
transactions and risks of loss arising out of Russia's system of share
registration. Additionally, the securities markets in Russia are in the early
stages of development and are characterized by a relatively small number of
equity issues and relatively little trading volume, resulting in substantially
less liquidity and greater price volatility.
Russia's system of share registration and custody creates certain risks of
loss that are not normally associated with investments in other securities
markets. These risks are discussed more fully on page 6 of this Prospectus, and
investors should read this section in detail.
2
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To achieve its objective, the Fund intends to invest primarily in equity
securities of Russian Companies. As used in this Prospectus, equity securities
means common or preferred stock (including convertible preferred stock), bonds,
notes or debentures convertible into common or preferred stock; direct
investments in Russian companies; stock purchase warrants or rights and American
Depository Receipts or American Global Depositary Receipts.
The Fund intends to invest its assets over a broad economic spectrum of
Russian Companies including, as conditions warrant from time to time issuers
from the following sectors: oil and gas, energy generation and distribution,
communications, mineral extraction, trade, financial and business services,
transportation, manufacturing, real estate, textiles, food processing and
construction. The Fund is not permitted to invest more than 25% of its assets in
any one industry.
The Sub-Advisor's approach to selecting investments emphasizes fundamental
company-by-company analysis in conjunction with broader analysis of specific
sectors. Although, when relevant the Sub-Advisor may consider historical value
measures, such as price/earnings ratios, operating profit margins and
liquidation values, the primary factor in selecting securities for investment by
the Fund will be the company's current price relative to its long-term earnings
potential, or intrinsic value as determined using discounted cash flow analysis
and other valuation techniques, whichever is appropriate. In addition, the
Sub-Advisor will consider overall growth prospects, competitive positions in
export markets, technologies, research and development, productivity, labor
costs, raw material costs and sources, profit margins, returns on investment,
capital resources, state regulation, management and other factors in comparison
to other companies around the world which the Sub-Advisor believes are
comparable. The Sub-Advisor in selecting investments will also consider
macroeconomic factors such as inflation, GDP growth, government spending and the
government's support of particular industries.
The Fund's investments will include investments in companies which, while
falling within the definition of Russian Companies, as stated above, have
characteristics and business relationships common to companies in a country or
countries other than Russia. As a result, the value of the securities of such
companies may reflect economic market forces applicable to other countries, as
well as to Russia. For example, the Fund may invest in companies organized and
located in countries other than Russia, including companies having their entire
production facilities outside of Russia, when securities of such companies meet
one or more elements of the Fund's definition of Russian Company.
The Fund is permitted to invest indirectly in securities through sponsored
or unsponsored American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") and other types of Depository Receipts (which, together with ADRs and
GDRs, are hereinafter collectively referred to as "Depository Receipts"), to the
extent such Depository Receipts become available. ADRs are Depository Receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. GDRs and other types of
Depository Receipts are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust companies, and evidence
ownership of underlying securities issued by either a foreign or a United States
corporation. Generally, Depository Receipts in registered form are designed for
use in the U.S. securities market and Depository Receipts in bearer form are
designed for use in securities markets outside the United States. Depository
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the securities underlying unsponsored Depository Receipts are not obligated
to disclose material information in the United States and, therefore, there may
be less information available regarding such issuers and there may not be a
correlation between such information and the market value of the Depository
Receipts. For purposes of the Fund's investment policies, the Fund's investments
in Depository Receipts will be deemed to be investments in the underlying
securities.
To the extent that the Fund's assets are not invested in Russian equity
securities, the remaining 35% of the Fund's assets will be invested in (i) debt
securities issued by Russian Companies or issued or guaranteed by the Russian
Government or a Russian governmental entity, as well as debt securities of
corporate and governmental issuers outside Russia, (ii) equity securities of
issuers outside Russia which the Sub-Advisor believes will experience growth in
revenue and profits from participation in the development of the economies of
the Commonwealth of Independent States ("CIS"), and (iii) short-term and
medium-term debt securities of the type described below under "Investment
Objective and Policies-Temporary Investments." The Fund may invest in debt
securities that the Sub-Advisor believes, based upon factors such as relative
interest rate levels and foreign exchange rates, offer opportunities for
long-term capital appreciation. It is likely that many of the debt securities in
which the Fund will invest will be unrated and, whether or not rated, the debt
securities may have speculative characteristics (See "Risk Factors and Special
Considerations").
3
<PAGE>
Although the Fund does not generally intend to invest for the purpose of
seeking short-term profits, the Fund's investments may be changed when
circumstances warrant, without regard to the length of time a particular
security has been held. As more companies in Russia are privatized and as more
companies increase their capitalization and float, the Sub-Advisor expects
turnover to increase in order to capitalize on these new opportunities. It is
expected that the Fund will have an annual portfolio turnover rate that will
generally not exceed 150%. A 100% turnover rate would occur if all the Fund's
portfolio investments were sold and either repurchased or replaced within a
year. A high turnover rate (100% or more) results in correspondingly greater
brokerage commissions and other transactional expenses which are borne by the
Fund. High portfolio turnover may result in the realization of net short-term
capital gains by the Fund which, when distributed to shareholders, will be
taxable as ordinary income. See "Tax Matters."
Temporary Investments
During periods in which the Sub-Advisor believes changes in economic,
financial or political conditions make it advisable, the Fund may, for temporary
defensive purposes, reduce its holdings in equity securities and invest without
limit in certain short-term (less than twelve months to maturity) and
medium-term (not greater than five years to maturity) debt securities or hold
cash. The short-term and medium-term debt securities in which the Fund may
invest consist of (a) obligations of the U.S. or Russian governments, and their
respective agencies or instrumentalities; (b) bank deposits and bank obligations
(including certificates of deposit, time deposits and bankers' acceptances) of
U.S. or foreign banks denominated in any currency; (c) floating rate securities
and other instruments denominated in any currency issued by various governments
or international development agencies; (d) finance company and corporate
commercial paper and other short-term corporate debt obligations of U.S or
Russian corporations; and (e) repurchase agreements with banks and
broker-dealers with respect to such securities. The Fund intends to invest for
temporary defensive purposes only in short-term and medium-term debt securities
rated, at the time of investment, A or higher by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") or, if unrated by either
rating agency, of equivalent credit quality to securities so rated as determined
by the Sub-Advisor. For purposes of the Fund's investment restriction
prohibiting the investment of 25% or more of the total value of its assets in a
particular industry, a foreign government (but not the United States government)
is deemed to be an "industry," and therefore investments in the obligations of
any one foreign government may not equal or exceed 25% of the Fund's assets. In
addition, supranational organizations are deemed to comprise an industry, and
therefore investments in the obligations of such organizations may not, in the
aggregate, equal or exceed 25% of the Fund's assets. See "Investment
Restrictions."
Repurchase agreements with respect to the securities described in the
preceding paragraph are contracts under which a buyer of a security
simultaneously commits to resell the security to the seller at an agreed price
and date. Under a repurchase agreement, the seller is required to maintain the
value of the securities subject to the repurchase agreement at not less than
their repurchase price. The Sub-Advisor will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price including accrued interest. Repurchase agreements may involve risks in the
event of default or insolvency of the seller, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
The investment restrictions set forth below under "Investment Restrictions"
are fundamental and may not be changed without the approval of a majority of the
Fund's outstanding voting securities. All other investment policies and
practices described in this Prospectus are not fundamental, meaning that the
Board of Directors may change them without the approval of shareholders. As used
herein, a "majority of the Fund's outstanding voting securities" means the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented and (ii) more than 50% of the
outstanding shares. There is no assurance the Fund will be able to achieve its
investment objective.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investors should recognize that investing in securities of Russian Companies
involves significant risks and special considerations, including those set forth
below, which are not typically associated with investing in United States
securities markets. The specific nature of such risks may vary according to the
country in which investments are made. The Fund is authorized to engage in
certain transactions involving derivative instruments which may involve special
risks. See "Hedging Transactions and Use of Derivative Instruments" and "Debt
Securities-High Yield, High Risk Securities" below.
4
<PAGE>
Political and Economic Factors
Since the breakup of the Soviet Union at the end of 1991, Russia has
experienced dramatic political and social change. The political system in Russia
is emerging from a long history of extensive state involvement in economic
affairs. The country is undergoing a rapid transition from a
centrally-controlled command system to a market-oriented, democratic model. The
Fund may be affected unfavorably by political or diplomatic developments, social
instability, changes in government policies, taxation and interest rates,
currency repatriation restrictions and other political and economic developments
in the law or regulations in Russia and, in particular, the risks of
expropriation, nationalization and confiscation of assets and changes in
legislation relating to foreign ownership.
The political environment in Russia in 1996 is more stable than in 1993 and
earlier when clashes between reformers and reactionaries were continuous,
setting the stage for an attempted coup d'etat in October 1993. Nevertheless,
there is still a great deal of uncertainty surrounding the political future of
the country. The civil war in Chechnya has highlighted the political tensions
that exist between the central government in Moscow and some of the regions
within the Russian Federation and has contributed to political instability by
weakening confidence domestically and internationally in the government. The
risk exists that armed conflict in Chechnya will continue, which could deter
foreign investment and international aid and further weaken the reformist
government's control. A continuing trend away from reformers toward
conservatives could further deter foreign investment if foreign policy
initiatives contrary to western interests (Iran, Iraq) lead to a deterioration
in relations between the Russian Federation and the West. The risk also exists
that the political tensions associated with the war in Chechnya will lead to
attempts for independence in other regions within the Russian Federation. The
war in Chechnya and other inflammatory issues may also lead to greater tensions
and divisions between the President and the Duma, which currently has a greater
percentage of communists and other conservatives than in the recent past.
The military could have a negative impact on Russia's political and economic
future. The declining stature of Russia as a world power has led to a widespread
sentiment among Russians for a return to Russia's status as a superpower.
Demobilization of troops, cuts in the military budget, the growth of significant
gaps in living standards between the military and civilian sectors, and the
growing perception of an external threat from NATO could lead to further
political unrest.
Moreover, it is uncertain whether Russia's privatization process will
continue. Anatoly Chubais, the government official most closely associated with
economic reforms and privatization was dismissed early in 1996 amidst
allegations of corruption in the economic reform process. The policies and
intentions of his successor are yet to be defined although government officials
have publicly pledged their continued support for the reform process. It is also
unclear whether the reforms intended to liberalize prevailing economic
structures based on free market principles will be successful, particularly in
terms of foreign ownership of Russian companies.
The planned economy of the former Soviet Union was run with qualitatively
different objectives and assumptions from those prevalent in a market system and
Russian businesses do not have any recent history of operating within a
market-oriented economy. In general, relative to companies operating in Western
economies, companies in Russia are characterized by a lack of: (i) management
with experience of operating in a market economy; (ii) modern technology; and,
(iii) a sufficient capital base with which to develop and expand their
operations. It is unclear what will be the future effect on Russian companies,
if any, of Russia's continued attempts to move toward a more market-oriented
economy.
Russia's economy has experienced severe economic recession, if not
depression, since 1990 during which time the economy has been characterized by
high rates of inflation, high rates of unemployment, declining gross domestic
product, deficit government spending, and a devaluing currency. The economic
reform program has involved major disruptions and dislocations in various
sectors of the economy. The economic problems have been exacerbated by a growing
liquidity crisis which culminated in a bank liquidity crisis in August 1995. The
taxation system has had numerous attempts at reform, but a failure to collect
taxes is an ongoing major problem.
The Russian government has adopted a budget for 1996 that calls for a
continued reduction in the inflation rate, the government deficit, positive GDP
growth, and greater employment. The budget also calls for continued
non-inflationary means of financing the deficit including the extension of a
$10.2 billion loan from the International Monetary Fund ("IMF"). There is
increasing rhetoric by incumbents and challengers alike calling for greatly
increased government spending. So, although major macroeconomic indicators are
showing strong signs of improvement, there can be no assurance that the severe
economic problems of the recent past will not be repeated.
5
<PAGE>
Further, Russia presently receives significant financial assistance from a
number of countries through various programs. To the extent these programs are
reduced or eliminated in the future, Russian economic development may be
adversely impacted. Market Characteristics
The Russian securities markets are substantially smaller, less liquid and
significantly more volatile than the securities markets in the United States. In
addition, there is little historical data on these securities markets because
they are of recent origin. A substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges and
over-the-counter markets. A limited number of issuers represent a
disproportionately large percentage of market capitalization and trading value.
Some issuers may be exposed to center-regional conflicts in jurisdiction in the
areas of taxation and overall corporate governance which could put the Fund's
investments at risk.
The Fund's holdings of equity securities of Russian Companies could
represent a relatively significant portion of the total float of such securities
available for public trading and, therefore, the large size of the Fund's
holdings in specific securities relative to the trading volume in those
securities could adversely affect the prices at which the securities are bought
or sold and could lengthen the time period during which buying and selling
programs are effected. In addition, because the Russian securities markets are
smaller and less liquid than in the United States, obtaining prices on portfolio
securities from independent sources may be more difficult than in other markets.
Settlement and Custody Risk
Because of the recent formation of the securities markets as well as the
underdeveloped state of the banking and telecommunications systems, settlement,
clearing and registration of securities transactions are subject to significant
risks not normally associated with investments in the United States and other
more developed markets. Ownership of shares (except where shares are held
through depositories that meet the requirements of the 1940 Act) is defined
according to entries in the company's share register and normally evidenced by
extracts from the register or in certain limited cases by formal share
certificates. However, there is no central registration system and these
services are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision and it is possible for the Fund to lose its registration
through fraud, negligence or even mere oversight. The Fund will endeavor to
ensure that its interest continues to be appropriately recorded, either by
itself or through a custodian or other agent inspecting the share register and
by obtaining extracts of share registers through regular audits. However, these
extracts have no legal enforceability and it is possible that subsequent illegal
amendment or other fraudulent act may deprive the Fund of its ownership rights.
In addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for the Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration. Furthermore, while a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice, this regulation has not always been followed by
these enterprises. Because of this lack of independence of registrars,
management of a company may be able to exert considerable influence over who can
purchase and sell the company's shares by illegally instructing the registrar to
refuse to record transactions on the share register. This practice may prevent
the Fund from investing in the securities of certain Russian Companies otherwise
deemed suitable by the Sub-Advisor. Further, this also could cause a delay in
the sale of Russian company securities by the Fund if a potential purchaser is
deemed unsuitable, which may expose the Fund to potential loss on the
investment. Moreover, since the local postal and banking systems may not meet
the same standards as those of Western countries, no guarantee can be given that
all entitlements attaching to securities acquired by the Fund, including those
relating to dividends, can be realized. There is the risk that payments of
dividends or other distributions by bank wire could be delayed or lost. In
addition, there is the risk of loss in connection with the insolvency of an
issuer's bank or registrar, particularly because these institutions are not
guaranteed by the state.
In light of the risks described above, the Board of Directors of the Fund
has approved certain procedures concerning the Fund's investments. Among these
procedures is a requirement that the Fund will not invest in the securities of a
Russian Company unless that issuer's registrar has entered into a contract with
the Fund's sub-custodian containing certain protective conditions, including,
among other things, the sub-custodian's right to conduct regular share
confirmations on behalf of the Fund. This requirement will
6
<PAGE>
likely have the effect of precluding investments in certain Russian Companies
that the Fund would otherwise make. In accordance with procedures adopted by the
Fund, the Fund's Russian sub-custodian has undertaken to provide certain
information on a periodic basis to the Board of Directors concerning the share
registration and custody arrangements in Russia. If the Board of Directors
determines that, over the long term, investment in the securities of Russian
Companies is no longer consistent with the best interests of the Fund's
shareholders, the Fund intends to call a shareholder meeting for the purposes of
considering whether to modify the Fund's investment policies or to liquidate the
Fund's assets and distribute the proceeds to shareholders.
Foreign Currency and Exchange Rates
The Fund's assets will be invested in securities denominated in rubles,
which are not externally convertible into other currencies outside Russia. The
value of the assets of the Fund and its income, as measured in U.S. dollars, may
suffer significant declines due to disruptions in the ruble market, or be
otherwise adversely affected by exchange control regulations. The ruble has
experienced significant devaluations relative to the U.S. dollar. For example,
during the period January 1, 1994 to December 31, 1995, the exchange rate ranged
from a low of Rbs. 5130 :$1 to a high of Rbs. 1255 :$1. Further, the Ruble
experienced a one-day decline of 27% on October 11, 1994. Although the ruble has
been relatively stable over the past year due to a ruble stabilization corridor
administered by the Russian Central Bank (with assistance from an IMF ruble
stabilization fund and use of foreign currency reserves), there can be no
assurance that such steps will be taken in the future or that such steps, if
taken, will be successful. Although the ruble is internally convertible within
Russia, there can be no guarantee of the liquidity or availability of such
markets. Accordingly, the Fund may experience significant delays in converting
currency in connection with its portfolio transactions. The Fund, as a
non-resident of Russia, is restricted in the operations in which it may engage
involving rubles since it may only hold rubles in an "I-type" investment account
or a "T-type" trading account within Russia which can only be used for certain
defined operations connected with investment management.
Currency devaluations may occur without warning and are beyond the control
of the Advisor and/or Sub-Advisor. To the extent such instruments are available
on terms acceptable to the Fund, the Fund may attempt to mitigate the risks
associated with currency fluctuations at times by entering into forward, futures
or options contracts to purchase or sell the ruble. Currently, such instruments
are generally not available.
Investment and Repatriation Restrictions
The laws and regulations in Russia affecting Western investment business
continue to evolve in an unpredictable manner. Russian laws and regulations,
particularly those involving taxation, foreign investment and trade, title to
property or securities, and transfer of title, applicable to the Fund's
activities are relatively new and can change quickly and unpredictably in a
manner far more volatile than in the United States or other developed market
economies. Although basic commercial laws are in place, they are often unclear
or contradictory and subject to varying interpretation, and may at any time be
amended, modified, repealed or replaced in a manner adverse to the interest of
the Fund. There is still lacking a cohesive body of law and precedents normally
encountered in business environments. Foreign investment in Russian companies
is, in certain cases, legally restricted. Sometimes these restrictions are
contained in constitutional documents of an enterprise which are not publicly
available. The Sub-Advisor does not believe that such investment restrictions
currently impose a material constraint on the Fund's ability to realize gains
through investments in Russian Companies. Russian foreign investment legislation
currently guarantees the right of foreign investors to transfer abroad income
received on investments such as profits, dividends and interest payments. This
right is subject to settlement of all applicable taxes and duties. However, more
recent legislation governing currency regulation and control guarantees the
right to export interest, dividends and other income on investments, but does
not expressly permit the repatriation of capital from the realization of
investments. Current practice is to recognize the right to repatriation of
capital. Authorities currently do not attempt to restrict repatriation beyond
the extent of the earlier law. No guarantee can be made, however, that amounts
representing realization of capital or income will be capable of being remitted.
If, for any reason, the Fund were unable to distribute an amount equal to
substantially all of its investment company taxable income (as defined for U.S.
tax purposes) within applicable time periods, the Fund would not qualify for the
favorable U.S. federal income tax treatment afforded to regulated investment
companies, or, even if it did so qualify, it might become liable for income and
excise taxes on undistributed income. In addition, the ability of the Fund to
obtain timely and accurate information relating to its investments is a
significant factor in complying with the requirements applicable to regulated
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investment companies and in making tax-related computations. Thus, if the Fund
were unable to obtain accurate information on a timely basis, it might be unable
to qualify as a regulated investment company or its tax computations might be
subject to revision (which could result in the imposition of taxes, interest and
penalties,). See "Tax Matters."
Tax System
Economic commentators have noted the significant need for structural reform
of the Russian Tax System. The domestic tax burden is high and the discretion of
local authorities to create new forms of taxation has resulted in a
proliferation of taxes, in some cases imposed or interpreted retroactively. Due
to taxes paid in advance in the context of high inflation, effective tax rates
are significantly higher than statutory rates. High tax rates have led to tax
evasion and corruption; tax revenues have been significantly below the
government's budget. High tax rates and the unpredictability of the tax laws
have also deterred foreign investment and the repatriation to Russia of flight
capital, depriving the government of important sources of revenue. There is no
guarantee that these reforms will be implemented.
Hedging Transactions and Use of Derivative Instruments
The Fund is authorized to engage in certain transactions involving the use
of derivative instruments, including forward foreign currency exchange
contracts, currency futures contracts and options thereon, put and call options
on securities, indices and foreign currencies, stock index futures contracts and
options thereon and interest rate futures contracts and options thereon.
The Fund may seek to protect the value of some or all of its portfolio
holdings against currency risks by engaging in hedging transactions. The Fund is
authorized to enter into forward currency exchange contracts and currency
futures contracts and options on such futures contracts, as well as to purchase
put or call options on foreign currencies, in U.S. or foreign markets, to the
extent available. In order to hedge against adverse market shifts, the Fund is
permitted to purchase put and call options on stocks, write covered call options
on stocks and enter into stock index futures contracts and related options. The
Fund also is authorized to hedge against interest rate fluctuations affecting
portfolio securities by entering into interest rate futures contracts and
options thereon. For a description of such hedging strategies, see "Additional
Investment Practices". Currently, there is no market in which the Fund may
engage in many of these hedging transactions; therefore, there can be no
assurance that instruments suitable for hedging currency or market or interest
rate shifts will be available at the time when the Fund wishes to use them.
Reporting Standards
Accounting, auditing and financial reporting standards and requirements in
Russia are less stringent and less consistent than those applicable in many
major Western countries and often cannot be relied upon. Such accounts and
reports are not normally publicly available. Historically, accounting and
auditing has been carried out solely as a function of compliance with tax
legislation and need not be carried out by independent auditors. Less
information is available to investors investing in such securities than to
investors investing in securities of companies in many major Western countries
and the historic information which is available is not necessarily comparable or
relevant. The items appearing in the financial statements of a Russian Company,
even if prepared in accordance with international accounting standards, may not
reflect its financial position or the results of operations in the way that they
would be reflected had such financial statements been prepared in accordance
with generally accepted accounting principles in the United States or other
developed countries. The Fund's financial statements will be prepared in
accordance with U.S. generally accepted accounting principles. Privatization and
Restructuring
The purchase of securities of recently privatized companies involves special
risks. Many recently privatized companies have gone through an internal
reorganization of management in an attempt to improve their competitive position
in the private sector. However, certain reorganizations could result in a
management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. Moreover, the loss
of government support and protection in connection with privatization and sudden
subjection to market competition from which an enterprise was previously
protected, could have a negative effect on such enterprise. Further, unreliable
reporting standards, as discussed above, make the valuation of recently
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privatized companies difficult. The Sub-Advisor will seek to assess the
long-term earnings potential and/or fair market value of recently privatized
companies in light of historical value measures such as price/earnings ratios,
operating profit margins and liquidation values. However, there can be no
assurance that accurate data in support of such assessment will be available.
Errors in valuing recently privatized companies, whether or not the result of
inaccurate or unavailable data, could result in the Fund overpaying for an
interest in such companies.
The transformation of medium- and large-scale state enterprises into open
joint stock companies (i.e., corporatization) and their subsequent privatization
has been carried out by the Russian State Property Committee and Federal
Property Fund and their local organs at an unprecedented rate. In doing this,
much of the responsibility for preparation of enterprises for privatization and
compliance with much of the privatization legislation was delegated to
individuals at the enterprise concerned, rather than being strictly controlled
by state authorities. This enhances the risk that there may be illegalities in
the privatization that may lead to full or partial invalidity of the
privatization of the enterprise concerned or the imposition of sanctions on that
enterprise or individuals within its administration. In fact, many allegations
of such improprieties and/or illegalities have already been made leading to the
dismissal from the government of the chief architect of the privatization
process, Anatoly Chubais. In addition, representatives of the government have
intimated that the privatization process could be slowed down or, in selected
cases, even reversed. Alternatively, an enterprise may not have valid or full
title to all of the assets shown on its balance sheet and may be subject to
obligations arising from a period prior to its privatization. As an investor,
the Fund may consequently lose all or a part of its investments in such
privatized enterprises.
The privatization process has also resulted in certain disputes between
management and shareholders, particularly foreign shareholders, of recently
privatized companies. For example, management of certain companies has resisted
recognizing purchases of equity interests by foreign investors. In addition,
incidents have been reported where foreign shareholders' ownership interests
have been diluted by management through the issuance of new securities to
limited groups of existing shareholders.
Liability of Investors in Joint Stock Companies
The new Russian Civil Code generally provides that shareholders in a Russian
joint stock company are not liable for the obligations of the joint stock
company, and only bear the risk of loss of their investment. However, the Civil
Code provides that where one company has the opportunity to determine decisions
taken by another company (a "subsidiary"), whether as a result of its ownership
interest, under the terms of a contract between the companies, or in any other
way, then, if the first company gives obligatory directions to the second
company, it bears joint responsibility for transactions concluded by the latter
in fulfilling such directions. In addition, where a subsidiary becomes insolvent
or bankrupt as a result of the fault of the parent company then the parent
company is liable for the subsidiary's debts in so far as the subsidiary does
not have enough funds to cover the debts.
Difficulties in Protecting and Enforcing Rights
Russian courts lack experience in commercial dispute resolution and many of
the procedural remedies for enforcement and protection of legal rights typically
found in Western jurisdictions are not available in Russia. There remains
uncertainty as to the extent to which local parties and entities, including
Russian state authorities, will recognize the contractual and other rights of
the parties with which they deal. Accordingly, there will be difficulty and
uncertainty in the Fund's ability to protect and enforce its rights against
Russian state and private entities. There is also no assurance that the Russian
courts will recognize or acknowledge that the Fund has acquired title to any
property or securities in which the Fund invests, or that the Fund is the owner
of any property or security held in the name of a nominee which has acquired
such property or security on behalf of the Fund, because there is at present in
Russia no reliable system or legal framework regarding the registration of
titles. There can be no assurance that this difficulty in protecting and
enforcing rights in Russia will not have a material adverse effect on the Fund
and its operations. Difficulties are likely to be encountered enforcing
judgments of foreign courts within Russia or of Russian courts in foreign
jurisdictions due to the limited number of countries which have signed treaties
for mutual recognition of court judgments with Russia.
Rights apparently granted to the Fund by legislation may be subject to
retroactive change or may be undermined by conflicting legislation, the failure
by a legislator to comply with the proper procedure for passing such legislation
or by changes or uncertainties in the relative priority of legislation passed by
different legislative bodies. For example, certain regulations of the State
Property
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Management Committee concerning depositories and shareholder registers, which
are generally applied as a matter of practice in Russia, were not properly
registered with the Ministry of Justice which as a matter of law should render
them invalid.
Legislation in Russia is in a state of development and is subject to
frequent amendment.
Environrnental Risks
The lack of environmental controls in Russia has led to widespread pollution
of the air, ground and water resources. Also contributing to environmental
pollution are industrial infrastructure problems, particularly oil and gas
pipeline leaks. In addition, there are concerns related to the availability of
equipment and funding for the disposal of nuclear waste. Russian environmental
legislation envisages the possibility of stringent sanctions on companies that
commit serious or persistent breaches, including closure of the enterprise
concerned. The extent of the cost, if any, for the abatement of environmental
hazards by an issuer generally will not be determinable at the time the Fund is
considering an investment.
Corruption and Crime
The Russian economic system suffers from pervasive corruption, a state of
affairs that to a large extent has been carried over from the Communist era.
Many businesses, particularly in the large cities, are subject to the influence
of criminal elements although there is not a single group or confederation of
criminals that can be characterized as "organized" crime, as that term is
understood in Western Europe and North America. In an effort to root out crime,
the President has issued a series of decrees giving the security forces extreme
powers to carry out a crackdown on crime. The President has acknowledged that
many provisions of its anti-crime decrees violate the Russian constitution as
well as the criminal code and these decrees have been viewed by many as a threat
to civil rights. The social and economic difficulties resulting from the problem
of corruption and crime in Russia can adversely affect the value of the Fund's
investments.
Direct Investments
Direct investments in Russian Companies will involve a high degree of
business and financial risk that can result in substantial losses. Because of
the absence of any public trading market for these investments, the Fund may
take longer to liquidate these positions than would be the case for publicly
traded securities and the prices on these sales could be less than those
originally paid by the Fund. Under certain circumstances, this lack of liquidity
may impede the Fund's ability to achieve its investment objective of long-term
capital appreciation. Further, issuers whose securities are not publicly traded
may not be subject to disclosure and other investor protection requirements
applicable to publicly traded securities. Certain of the Fund's direct
investments may include investments in smaller Iess-seasoned companies, which
may involve greater risks. These companies may have limited product lines,
markets or financial resources, or they may be dependent on a limited management
group. The Fund's investments in illiquid securities is limited to 15% of the
Fund's total net assets.
Russian Securities Markets
The securities of Russian Companies are mostly traded over-the-counter and,
despite the large number of stock exchanges, there is still no organized public
market for such securities. This may increase the difficulty of valuing the
Fund's investments. No established secondary markets may exist for many of the
securities in which the Fund may invest. Reduced secondary market liquidity may
have an adverse effect on market price and the Fund's ability to dispose of
particular instruments when necessary to meet its liquidity requirements or in
response to specific economic events such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for
securities may also make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing its portfolio and calculating its net
asset value. Market quotations are generally available on many emerging country
securities only from a limited number of dealers and may not necessarily
represent firm bids of those dealers or prices for actual sales.
Non-Diversification
The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the securities of a single
issuer. Thus, the Fund may invest a greater portion of its assets in the
securities of a smaller number of issuers and, as a result, will be subject to
greater risk of loss with respect to its portfolio securities. The Fund,
however, intends to comply with the diversification requirements imposed by the
Internal Revenue Code for qualification as a regulated investment company. This
intention should not be regarded as assurance that the diversification
requirements will, in fact, be met. See "Tax Matters" and "Investment
Restrictions."
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Debt Securities-High Yield, High Risk Securities
The Fund may invest in debt securities of Russian Companies which may be
unrated or low-rated. It is likely that many of the debt securities in which the
Fund will invest will be unrated, and whether or not rated, the debt securities
may have speculative characteristics. The market value of debt securities
generally varies in response to changes in interest rates and the financial
conditions of the issuer. During periods of declining interest rates, the value
of debt securities generally increases. Conversely, during periods of rising
interest rates, the value of such securities generally declines. These changes
in market value will be reflected in the Fund's net asset value.
The Fund may invest in debt securities rated below BBB by Standard and Poors
("S&P") and Baa by Moody's Investor Services ("Moody"). Such low-rated debt
securities may involve greater risks of loss of income and principal than
higher-rated securities, are speculative in nature, and are commonly known as
"high yield" securities or "junk bonds." The unrated debt securities in which
the Fund may invest will generally involve risks equivalent to those of
low-rated debt securities. Although high risk, low-rated debt securities and
comparable unrated debt securities may offer higher yields than do higher rated
securities, they generally involve greater volatility of price and risk of
principal and income. Securities having the lowest rating for nonsubordinated
debt instruments assigned by S&P and Moody's (i.e., rated CCC by S&P or C by
Moody's) are considered to have extremely poor prospects of ever attaining any
real investment standing; to be unlikely to have the capacity to pay interest or
repay principal when due in the event of adverse business, financial or economic
conditions; and/or to be in default or not current in the payment of interest or
principal. In addition, the markets in which unrated and low-rated debt
securities are traded are more limited than those in which higher-rated
securities are traded. Adverse publicity and investors' perceptions, whether or
not based on fundamental analysis, may decrease the values and liquidity of
unrated or low-rated debt securities, especially in a thinly traded market.
Analysis of the creditworthiness of issuers of unrated or low-rated debt
securities may be more complex than for issuers of higher-rated securities, and
the ability of the Fund to achieve its investment objective may, to the extent
of investment in unrated or low-rated debt securities, be more dependent upon
such creditworthiness analysis than would be the case if the Fund were investing
in higher-rated securities. A debt security rated "D" by S&P means that the
issuer is in payment default.
Low-rated debt securities and comparable unrated debt securities may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade securities. The prices of low-rated and unrated
debt securities have been found to be less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic downturns
or individual corporate developments. A projection of an economic downturn or of
a period of rising interest rates, for example, could cause a decline in
low-rated or unrated debt securities prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If the issuer of low-rated or unrated
debt securities defaults, the Fund may incur additional expenses in seeking
recovery.
Foreign Subcustodians and Securities Depositories
Rules adopted under the 1940 Act permit the Fund to maintain its foreign
securities and cash in the custody of certain eligible non-U.S. banks and
securities depositories. Pursuant to those rules, the Fund's portfolio of
securities and cash, when invested in foreign countries, will be held by its
subcustodians who will be approved by the Board of Directors of the Fund as and
when appropriate in accordance with the rules of the Securities and Exchange
Commission. Selection of the subcustodians will be made by the Board of
Directors following the consideration of a number of factors, including, but not
limited to, the reliability and financial stability of the institution, the
ability of the institution to capably perform custodial services for the Fund,
the reputation of the institution in its national market, the political and
economic stability of the countries in which the subcustodians will be located,
and risks of potential nationalization or expropriation of Fund assets. In
addition, the 1940 Act requires that foreign subcustodians, among other things,
have shareholder equity in excess of $200,000,000, have no lien on the Fund's
assets and maintain adequate and accessible records. Certain banks in foreign
countries may not be eligible subcustodians for the Fund, in which event the
Fund may be precluded from purchasing securities in which it would otherwise
invest, and other banks that are eligible foreign subcustodians may be recently
organized or otherwise lack extensive operating experience.
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ADDITIONAL INVESTMENT PRACTICES
The Fund is authorized to use the various investment strategies described
below, some or all of which may be classified as derivatives, to hedge various
market risks (such as interest rates, currency exchange rates and broad or
specific market movements) and to enhance total return, which may be deemed a
form of speculation. Subject to the requirements of the 1940 Act, the Fund may
hedge up to 100% of its assets when deemed appropriate by the Sub-Advisor. The
Fund is also authorized to use investment strategies to manage the effective
maturity or duration of debt securities or instruments held by the Fund, or to
enhance the Fund's income or gain. Although these strategies are regularly used
by some investment companies and other institutional investors in various
markets, most of these strategies are currently unavailable in Russia and may
not become available in the future. Techniques and instruments may change over
time, however, as new instruments and strategies are developed or regulatory
changes occur.
Forward Foreign Currency Contracts and Options on Foreign Currencies
The Fund will normally conduct 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 contracts to purchase or sell
foreign currencies. The Fund will generally not enter into forward contracts
with terms of greater than one year. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock" in
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed to
settle the transaction. Second, when the Investment Manager believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
or buy the former foreign currency (or another currency which acts as a proxy
for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Cross-hedging
involving the use of rubles involves special risks. The ruble has a limited
trading history and is particularly volatile, making any anticipation of its
movement difficult and increasing the risk of loss. See "Risk Factors and
Special Considerations-Foreign Currency and Exchange Rates." The Fund's forward
transactions may call for the delivery of one foreign currency in exchange for
another foreign currency and may at times not involve currencies in which its
portfolio securities are then denominated. The Fund has no specific limitation
on the percentage of assets it may commit to forward contracts, subject to its
stated investment objective and policies, except that the Fund will not enter
into a forward contract if the amount of assets set aside to cover the contract
would impede portfolio management. Although forward contracts will be used
primarily to protect the Fund from adverse currency movements, they also involve
the risk of loss in the event that anticipated currency movements are not
accurately predicted.
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the U.S. dollar value of
foreign currency-denominated portfolio securities and against increases in the
U.S. dollar cost of such securities to be acquired. As in the case of other
kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received, and
the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
Futures Contracts
For hedging purposes only, the Fund may buy and sell financial futures
contracts, index futures contracts, foreign currency futures contracts and
options on any of the foregoing. A financial futures contract is an agreement
between two parties to buy or sell a specified debt security at a set price on a
future date. An index futures contract is an agreement to take or make delivery
of an amount of cash based on the difference between the value of the index at
the beginning and at the end of the contract period. A futures contract on a
foreign currency is an agreement to buy or sell a specified amount of a currency
for a set price on a future date.
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When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency fluctuates,
either party to the contract is required to make additional margin payments,
known as "variation margin," to cover any additional obligation it may have
under the contract. In addition, when the Fund enters into a futures contract,
it will segregate assets or "cover" its position in accordance with the 1940
Act.
Options on Securities or Indices
The Fund may write (i.e., sell) covered put and call options and purchase
put and call options on securities or securities indices that are traded on
United States and foreign exchanges or in the over-the-counter markets. An
option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that as long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or hold
a call at the same exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains liquid
assets with a value equal to the exercise price in a segregated account, or
holds a put on the same underlying securities at an equal or greater exercise
price. The value of the underlying securities on which options may be written at
any one time will not exceed 25% of the total assets of the Fund. The Fund will
not purchase put or call options if the aggregate premium paid for such options
would exceed 5% of its total assets at the time of purchase.
When-Issued and Delayed Delivery Securities
The Fund may purchase equity and debt securities on a when-issued or delayed
delivery basis. Securities purchased on a when-issued or delayed delivery basis
are purchased for delivery beyond the normal settlement date at a stated price
and yield. No income accrues to the purchaser of a security on a when-issued or
delayed delivery basis prior to delivery. Such securities are recorded as an
asset, and in the case of debt securities, are subject to changes in value based
upon changes in the general level of interest rates. Purchasing a security on a
when-issued or delayed delivery basis can involve a risk that the market price
at the time of delivery may be lower than the agreed-upon purchase price, in
which case there could be an unrealized loss at the time of delivery. Due to
their higher volatility, this risk may be greater in the case of equity
securities purchased on a when-issued or delayed delivery basis. The Fund will
only make commitments to purchase securities on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but may
sell them before the settlement date if it is deemed advisable. The Fund will
establish a segregated account in which it will maintain liquid assets in an
amount at least equal in value to the Fund's commitments to purchase securities
on a when-issued or delayed delivery basis. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in certain types of securities or engaging in
certain transactions. The most significant of these restrictions provide that:
(1) The Fund will not concentrate its investments by investing more than 25%
of its assets in the securities of issuers in any one industry. This
limit will not apply to securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities.
(2) 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, and may enter into forward currency contracts. Transactions in
gold, platinum, palladium or silver bullion will not be subject to this
restriction.
(3) 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
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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.
(4) 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 then in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test. The
Fund will only invest in reverse repurchase agreements up to 5% of its
total assets.
The forgoing investment restrictions (as well as certain others set forth in
the Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of the majority of the
shareholders of the Fund.
The investment policies described below are non-fundamental, therefore,
changes to such policies may be made in the future by the Board of Directors
without the approval of the shareholders of the Fund:
(1) The Fund 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 Sub-Adviser
shall determine whether a particular security is deemed to be liquid
based on the trading markets for the specific security and other
factors.
(2) The Fund will not write, purchase or sell puts, calls or combinations
thereof. However, the Fund may invest up to 15% of the value of its
assets in warrants. This restriciton on the purchase of warrants does
not apply to warrants attached to, or otherwise included in, a unit with
other securities.
(3) 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. The
Statement of Additional Information contains a complete description of
the Fund's restrictions and any additional information on policies
relating to the investment of its assets and its activities.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors which establishes the Fund's policies and
supervises and reviews the operations and management of the Fund. There are
currently nine directors (of whom five are non-interested persons as defined
under the 1940 Act) who meet four times each year. The Statement of Additional
Information contains more data regarding the Directors and Officers of the Fund.
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PORTFOLIO MANAGER The Fund is managed by a portfolio management team. The
lead manager is Gavin Rankin of Troika Dialog. Gavin Rankin is Head of Research
for Troika Dialog. He is responsible, along with other members of the portfolio
management team, for the Funds overall investment strategy. Mr. Rankin was
appointed Head of Research for Troika Dialog in November of 1995. Mr. Rankin has
extensive experience in East European equity research and management.
The other members of the portfolio management team include Mr. Peter Derby,
Mr. Ruben Vardanian, and Mr. Bernard Sucher.
Peter Derby is the founder of Troika Dialog and the President and Chief
Executive Officer of DialogBank, a position he has held since 1991. Mr. Derby
participated in the drafting of corporate, banking and securities legislation in
Russian and is currently a member of the Expert Council of Russia's Federal
Securities Exchange Commission. Mr. Derby holds numerous director positions in
Russian enterprises and charities; he is a founding and current Member of the
Board of MICEX, and is a Member of the Board of Directors of the American
Chamber of Commerce in Russia. Mr. Derby is Treasurer and Member of the Board of
Junior Achievement in Russia. He is a founding Member of the Russian-American
Professional Club in New York City.
Mr. Ruben Vardanian is Director of Troika Dialog. Mr. Vardanian, a Russian
national, is a sitting member of the Moscow Times Index Composition Committee
and is a former Chairman of the DCC. He is also a founding member of Paufor, a
broker-dealer association.
Mr. Bernard Sucher is Managing Director of Troika Dialog. He began his
career as a retail banker for E. F. Hutton and later became an institutional
broker and sales manager for Cresvale, a British broker. Before joining Troika
Dialog, Mr. Sucher performed institutional sales responsibilities at Goldman
Sachs.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
The Fund has entered into an investment advisory contract with Lexington
Management Corporation ("LMC"), P. O. Box 1515 Park 80 West Plaza Two, Saddle
Brook, New Jersey 07663. LMC provides investment advice and in general conducts
the management and investment program of the Fund under the supervision and
control of the Directors of the Fund. LMC has entered into a sub-advisory
contract with Troika Dialog Asset Management, ZAO 6/3 1st Kolobovsky Per,
Moscow, 103051 Russia under which Troika Dialog will provide the Fund with
investment advice and management of the Fund's investment program.
Troika Dialog was founded in Moscow, Russia in 1991 by Dialog Bank and
Troika Capital Corporation. In 1992, it received its operating license from the
Russian Ministry of Finance and began trading in Russian GKOs (Russian
government bonds) the following year. In 1994, Troika Dialog was a co-founder of
the Russian Professional Association of Securities Market Participants (PAUFOR)
as well as the Depository Clearing Company (DCC). The company is an active
trader in Russian government and corporate securities, conducts in-depth
research on Russian securities markets and Russian companies, and acts as an
advisor to a number of multinational and Russian companies in the area of
corporate finance. Troika Dialog is based in Moscow with extensive broker
contacts throughout Russia. Troika Dialog employs approximately 120 employees.
Troika Dialog will provide the Fund with investment advice and management of the
Fund's investment program. Lexington Funds Distributor, Inc. ("LFD"), a
registered broker dealer, is the Fund's distributor.
LMC, established in 1938, currently manages over $3.0 billion in assets. LMC
serves as investment adviser to other investment companies and private and
institutional investment accounts. Included among these clients are persons and
organizations which own significant amounts of capital stock of LMC's parent.
The clients pay fees which LMC considers comparable to the fees paid by
similarly served clients.
As compensation for its services, the Fund pays LMC a monthly management fee
at the annual rate of 1.25% of the average daily net assets. This fee is higher
than that paid by most other investment companies. However, it is not
necessarily greater than the management fee of other investment companies with
objectives and policies similar to this Fund. LMC will pay the Subadvisor an
annual sub-advisory fee of 0.625% of the Fund's average daily net assets. The
sub-advisory fee will be paid by LMC, not the Fund. See "Investment Adviser,
Sub-Adviser, Distributor and Administrator" in the Statement of Additional
Information.
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LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, producing 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 and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities have a majority voting control of
outstanding shares of Lexington Global Asset Managers, Inc. See "Investment
Adviser and Distributor" in the Statement of Additional Information.
BOARD OF ADVISERS
The Fund's Board of Directors will receive oversight assistance from a Board
of Advisers which will be composed of experts in Russian political and economic
affairs. The Committee will be responsible for providing to the Board of
Directors periodic updates on political and macroeconomic conditions and trends
in Russia and their potential implication for the overall investment environment
in Russia. This will enhance the Board of Directors' ability to oversee and
safeguard the assets of the Fund's shareholders.
HOW TO PURCHASE SHARES
Initial Investment-Minimum $5,000. By Mail: Send a check payable to Lexington
Troika Dialog Russia Fund, Inc., along with a completed New Account Application
to State Street Bank and Trust Company (the "Agent"). See the back cover of this
Prospectus for the Agent's address.
Subsequent Investments-Minimum $50. By Mail: Send a check payable to Lexington
Troika Dialog Russia Fund, Inc., to the Agent, accompanied by either the
detachable form which is part of the confirmation of a prior transaction or a
letter indicating the dollar amount of the investment and identifying the Fund,
account number and registration.
Broker-Dealers: You may invest in shares of the Fund through broker-dealers who
are members of the National Association of Securities Dealers, Inc., and other
financial institutions who have selling agreements with LFD. Broker-dealers and
financial institutions who process such purchase and sale transactions for their
customers may charge a transaction fee for these services. The fee may be
avoided by purchasing shares directly from the Fund.
The Open Account: By investing in the Fund, a shareholder appoints the Agent,as
his agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares (see "Dividend, Distribution and Reinvestment
Policy"). Stock certificates will be issued for full shares only when requested
in writing. Unless payment for shares is made by certified or cashier's check or
federal funds wire, certificates will not be issued for 30 days. In order to
facilitate redemptions and transfers, most shareholders elect not to receive
certificates.
After an Open Account is established, payments can be provided for by
"Lex-O-Matic" or other authorized automatic bank check program accounts (checks
drawn on the investor's bank periodically for investment in the Fund) . A
shareholder may arrange to make additional purchases of shares automatically on
a monthly or quarterly basis with the Automatic Investing Plan, "Lex-O-Matic".
The investments of $50 or more are automatically deducted from a checking
account on or about the 15th day of each month. The institution must be an
Automated Clearing House (ACH) member. Should an order to purchase shares of a
fund be cancelled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.
On payroll deduction accounts administered by an employer and on payments
into qualified pension or profit sharing plans and other continuing purchase
programs, there are no minimum purchase requirements.
Purchase Price: The purchase price will be the net asset value per share of the
Fund next determined after receipt by the Agent of a completed New Account
Application in proper form.
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Determination of Net Asset Value: The net asset value of Fund shares is
determined at the official closing time of the New York Stock Exchange each day
that such Exchange is open for trading. In determining net asset value,
portfolio securities listed on a national securities exchange are valued at
their sales price on such exchange as of such time; if no sales price is
reported, the mean of the last bid and asked price is used. However, when LMC
deems it appropriate, prices obtained for the day of valuation from a third
party pricing service will be used. For over-the-counter securities the mean of
the latest bid and asked prices is used. Securities for which there are no
current prices, and any other assets of the Fund for which there is no readily
available market value, shall be valued by Fund management in good faith under
the direction of the Fund's Board of Directors. The calculation of net asset
value may not take place contemporaneously with the determination of the prices
of portfolio securities used in such calculations. Events affecting the values
of portfolio securities that occur between the time their prices are determined
and the close of the New York Stock Exchange will not be reflected in the Fund's
calculation of net asset value unless the Fund's Board of Directors deems that
the particular event would materially affect the net asset value, in which case
an adjustment will be made. Repurchase agreements and certificates of deposit
are stated at amortized cost. In order to determine net asset value per share,
the aggregate value of portfolio securities is added to the value of the Fund's
other assets, such as cash and receivables; the total of the assets thus
obtained, less liabilities, is then divided by the number of shares outstanding.
Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss the Fund reserves the right to
redeem shares owned by the purchaser, seek reimbursement directly from the
purchaser and may prohibit or restrict the purchaser in placing future orders in
any of the Lexington Funds.
The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.
Account Statements: The Agent will send shareholders either purchasing or
redeeming shares of the Fund, a confirmation of the transaction indicating the
date the purchase or redemption was accepted, the number of shares purchased or
redeemed, the purchase or redemption price per share, and the amount purchased
or redemption proceeds. A statement is also sent to shareholders whenever a
distribution is paid, or when a change in the registration, address, or dividend
option occurs. Shareholders are urged to retain their account statements for tax
purposes.
HOW TO REDEEM SHARES
By Mail: Send to the Agent (see the back cover of this Prospectus for the
address): (1) a written request for redemption, signed by each registered owner
exactly as the shares are registered including the name of the Fund, account
number and exact registration; (2) stock certificates for any shares to be
redeemed which are held by the shareholder; (3) signature guarantees, when
required and (4) the additional documents required for redemptions by
corporations, executors, administrators, trustees, and guardians. Redemptions by
mail will not become effective until all documents in proper form have been
received by the Agent. If a shareholder has any questions regarding the
requirements for redeeming shares, he should call the Fund at the toll free
number on the back cover prior to submitting a redemption request. If a
redemption request is sent to the Fund in New Jersey, it will be forwarded to
the Agent and the effective date of redemption will be the date received by the
Agent.
Redemption Fee: A fee will be charged on the redemption of shares equal to 2% of
the redemption price of shares of the Fund held less than 365 days that are
being redeemed. The redemption fee will not apply to shares representing the
reinvestment of dividends and capital gains distributions. Reinvested
distributions will be sold first without a fee. 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 considered to have been sold
first. Redemption fee proceeds will be applied to the Fund's aggregate expenses
allocable to providing custody, redemption services, including transfer agent
fees, postage, printing, telephone costs and employment costs relating to the
handling and processing of redemptions. Any excess fee proceeds will be added to
the Fund's capital.
Checks for redemption proceeds will normally be mailed within three business
days. However, the Fund will only mail redemption checks upon clearance of the
purchase payment.
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Signature Guarantee: Signature guarantees are required in connection with (a)
redemptions by mail involving $25,000 or more, (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owners; (c) changes in instructions as to where the
proceeds of redemptions are to be sent, and (d) share transfer requests.
The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.
With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") specifying the total number
of shares to be redeemed, or (c) on all stock certificates tendered for
redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power.
Redemption Price: The redemption price will be the net asset value per share of
the Fund next determined after receipt by the Agent of a redemption request in
proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information).
The right of redemption may be suspended (a) for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
("SEC") determines that trading on the Exchange is restricted, (b) when there is
an emergency as determined by the SEC as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (c) for such other periods as the SEC may
by order permit for the protection of shareholders of the Fund. Due to the
proportionately high cost of maintaining smaller accounts, the Fund reserves the
right to redeem all shares in an account with a value of less than $500 (except
retirement plan accounts) and mail the proceeds to the shareholder. Such right
reserved by the Fund pertains to circumstances in which the value of shares
falls below the stated threshold due to redemptions, and not due to market
fluctuations. Shareholders will be notified before these redemptions are to be
made and will have 30 days to make an additional investment to bring their
accounts up to the required minimum.
SHAREHOLDER SERVICES
Transfer: Shares of the Fund may be transferred to another owner. A signature
guarantee of the registered owner is required on the letter of instruction or
accompanying stock power.
Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.
Group Sub-Accounting: To minimize recordkeeping by fiduciaries, corporations,
and certain other investors, the minimum initial investment may be waived.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share next determined at the
time of the exchange. In the event shares of one or more of these funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the fifth business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.
The Lexington Funds currently available for exchange are:
LEXINGTON GLOBAL FUND, INC. (NASDAQ Symbol: LXGLX)
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)
LEXINGTON INTERNATIONAL FUND, INC. (NASDAQ Symbol: LEXIX)/Shares of the
Fund are not presently available for sale in Vermont or
Missouri.
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LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)
LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)
LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)
LEXINGTON SMALLCAP VALUE FUND, INC. LEXINGTONGOLDFUND, INC. (NASDAQ
Symbol: LEXMX)
LEXINGTON CONVERTIBLE SECURITIES FUND. (NASDAQ Symbol: CNCVX)/Shares of
the Fund are not presently available for sale in Vermont.
LEXINGTON GNMA INCOME FUND, INC. (NASDAQ Symbol: LEXNX)
LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX) LEXINGTONTAX FREE
MONEY FUND, INC. (NASDAQ Symbol: LTFXX)
Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired.
If an exchange involves investing in a Lexington Fund not already owned and
a new account has to be established, the dollar amount exchanged must meet the
initial investment of the Fund being purchased. If, however, an account already
exists in the Fund being bought, there is a $500 minimum exchange required.
Shareholders must provide the account number of the existing account.
Any exchange between mutual funds is, in effect, a redemption of shares in
one Fund and a purchase in the other Fund. Shareholders should consider the
possible tax effects of an exchange.
TELEPHONE EXCHANGE PROVISIONS-Exchange instructions may be given in writing or
by telephone. Telephone exchanges may only be made if a Telephone Authorization
form has been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of 7 days have elapsed from the date of a
previous exchange. Exchanges may not be made until all checks in payment for the
shares to be exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at the Agent;
shares held in certificate form by the shareholder cannot be included. However,
outstanding certificates can be returned to the Agent and qualify for these
services. Any new account established with the same registration will also have
the privilege of exchange by telephone in the Lexington Funds.
All accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the shares were
transferred and will also have the privilege of exchange by telephone in the
Lexington Funds in which these services are available.
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-certificated shares held by the Agent
in account(s) designated, or in any other account with the Lexington Funds,
present or future, which has the identical registration with full power of
substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, nor 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 imposters or persons
otherwise unauthorized to act on behalf of the account. LFD, the Agent and the
Fund, will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The following identification procedures may include, but are not
limited to, the following: account number, registration and address, taxpayer
identification number and other information
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particular to the account. In addition, all exchange transactions will take
place on recorded telephone lines and each transaction will be confirmed in
writing by the Fund. LFD reserves the right to cease to act as attorney subject
to the above appointment upon thirty (30) days' written notice to the address of
record. If other than an individual, it is certified 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 power to take action called for by this continuing
Authorization.
Exchange Authorization forms, Telephone Authorization forms and prospectuses
of the other funds may be obtained from LFD.
This exchange offer is available only in states where shares of the fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent. For further information
concerning Telephone Exchange Provisions, please see the Statement of Additional
Information.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers a Prototype Pension and Profit Sharing Plan, including a
Keogh Plan, lRA's, SEP-IRA's and IRA Rollover Accounts, 401(k) Plans, Section
457 Deferred Compensation Plans and 403(b)(7) Plans. Plan support services are
available through the Shareholder Services Department of LMC at 1-800-526-0056.
(See "Tax-Sheltered Retirement Plans" in the Statement of Additional
Information.)
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to declare or distribute a dividend from its net investment
income and/or net capital gain income to shareholders annually or more
frequently if necessary in order to comply with distribution requirements of the
Code to avoid the imposition of regular Federal income tax, and if applicable, a
4% excise tax.
Any dividends and distribution payments will be reinvested at net asset
value in additional full and fractional shares of the Fund unless and until the
shareholder notifies the Agent in writing that he wants to receive his payments
in cash. This request must be received by the Agent at least seven days before
the dividend record date. Upon receipt by the Agent of such written notice, all
further payments will be made in cash until written notice to the contrary is
received. An account of such shares owned by each shareholder will be maintained
by the Agent. Shareholders whose accounts are maintained by the Agent will have
the same rights as other shareholders with respect to shares so registered (see
"How to Purchase Shares-The Open Account").
DISTRIBUTION PLAN
The Board of Directors of the Fund has adopted a Distribution Plan (the
"Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940,
after having concluded that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan 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 the compensation of the sales
personnel of the Distributor, payments of no more than an effective annual rate
of 0.25%, or such lesser amounts as the Distributor determines appropriate.
Payments may also be made for any advertising and promotional expenses relating
to selling efforts, 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
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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. LMC, at no
additional cost to the Fund, may pay to Shareholder Service Agents, additional
amounts from past profits for administrative services.
TAX MATTERS
The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund contemplates the distribution of all of its net
investment income and capital gains, if any, in accordance with the timing
requirements imposed by the Code, so that it will not be subject to federal
income taxes or the 4% excise tax on undistributed income.
Distributions by the Fund of its net investment income and the excess, if
any, of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. These distributions are treated as
dividends for federal income tax purposes, but only a portion thereof may
qualify for the 70% dividends-received deduction for corporate shareholders
(which portion may not exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund and must be designated by the Fund as
so qualifying). Distributions by the Fund of the excess, if any, of its net
long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gain, regardless of the length of time shareholders have held their shares. Such
distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in the Fund at a loss before holding such shares
for more than six months, the loss will be treated as a long-term capital loss
to the extent that the shareholder has received a capital gain dividend on those
shares.
Under certain circumstances, the Fund may be in a position to (in which case
it would) elect to "pass-through" to its shareholders the right to a credit or
deduction for income or other creditable taxes paid by the Fund to foreign
governments.
Distributions to shareholders of the Fund will be treated in the same manner
for federal income tax purposes whether received in cash or in additional shares
and may also be subject to state and local taxes. Distributions received by
shareholders of the Fund in January of a given year will be treated as received
on December 31 of the preceding year provided that such dividends were declared
to shareholders of record on a date in October, November, or December of such
preceding year. A statement setting forth the federal income tax status of all
distributions made or deemed made during the year will be sent to shareholders
promptly after the end of each year.
The information above is only a summary of some of the federal income tax
consequences generally affecting the Fund and its U.S. shareholders, and no
attempt has been made to discuss individual tax consequences. A prospective
investor should also review the more detailed discussion of federal income tax
considerations in the Statement of Additional Information. In addition to the
federal income tax, a shareholder may be subject to state or local taxes on his
or her investment in the Fund, depending on the laws in the shareholder's
jurisdiction. Investors considering an investment in the Fund should consult
their tax advisers to determine whether the Fund is suitable to their particular
tax situation.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. In order to avoid this backup withholding, a
shareholder must provide the Fund with a correct taxpayer identification number
(which for most individuals is their Social Security number) or certify that it
is a corporation or otherwise exempt from or not subject to backup withholding.
The new account application included with this Prospectus provides for
shareholder compliance with these certification requirements.
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Fund is an open-end,non-diversified management investment company
organized as a corporation under the laws of the State of Maryland on November
22, 1995 and has authorized capital of 1,000,000,000 shares of common stock, par
value $.001 of which 500,000,000 have been designated the Lexington Troika
Dialog Russia Fund. Each share of common stock has one vote and shares equally
with other shares of the same series in dividends and distributions when and if
declared by the Fund and in the Fund's
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net assets belonging to such series upon liquidation. All shares, when issued,
are fully paid and nonassessable. There are no preemptive, conversion or
exchange rights. Fund shares do not have cumulative voting rights and, as such,
holders of at least 50% of the shares voting for Directors can elect all
Directors and the remaining shareholders would not be able to elect any
Directors.
The Company will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the record holders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
PERFORMANCE CALCULATION
The Fund will calculate performance on a total return basis for various
periods. The total return basis combines principal and dividend income changes
for the periods shown. Principal changes are based on the difference between the
beginning and closing net asset values for the period and assume reinvestment of
dividends paid by the Fund. Dividends are comprised of net realized capital
gains and net investment income.
Performance will vary from time to time and past results are not necessarily
representative of future results. It should be remembered that performance is a
function of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index, Moscow Times Index, Russian Trading System Index,
Morgan Stanley Capital International (EAFE) Index or Standard & Poor's 500
Composite Stock Price Index. Such comparative performance information will be
stated in the same terms in which the comparative data and indices are stated.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the custodian for the Funds' portfolio
securities and other assets. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, is the transfer agent and dividend
disbursing agent for the Fund. Neither Chase Manhattan Bank, N.A. nor State
Street Bank and Trust Company have any part in determining the investment
policies of the Fund or in determining which portfolio securities are to be
purchased or sold by the Fund or in the declaration of dividends and
distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been
selected as independent auditors for the Fund for the fiscal year ending
December 31, 1996.
OTHER INFORMATION
This prospectus omits certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Statement of Additional
Information included in such registration statement may be obtained without
charge from the Fund.
22
<PAGE>
The Code of Ethics adopted by each of the Adviser, Sub-Adviser and the Fund
prohibits all affiliated personnel from engaging in personal investment
activities which compete with or attempt to take advantage of the Fund's planned
portfolio transactions. The objective of each Code of Ethics is that the
operations of the Adviser, Sub-Adviser and Fund be carried out for the exclusive
benefit of the Fund's shareholders. All organizations maintain careful
monitoring of compliance with the Code of Ethics.
Additional portfolios may be created from time to time with investment
objectives and policies different from those of the Fund. In addition, the
Directors may, subject to any necessary regulatory approvals, create more than
one class of shares in the Fund, with the classes being subject to different
charges and expenses and having such other different rights as the Directors may
prescribe.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus, and information or
representations not herein contained, if given or made, must not be relied upon
as having been authorized by the Fund. This Prospectus does not constitute an
offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
23
<PAGE>
Right Col.
-----------------------------
L E X I N G T O N
-----------------------------
-----------------------------
LEXINGTON
TROIKA
DIALOG
RUSSIA
FUND, INC.
The Lexington Group
of
No-Load
Investment Companies
-----------------------------
P R O S P E C T U S
JUNE 3, 1996
------------
Left Col.
Investment Adviser
- --------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Sub-Adviser
- --------------------------------------------------------------------------------
TROIKA DIALOG ASSET MANAGEMENT, ZAO
6/3 1st Kolobovsky Per
Moscow, 103051 Russia
Distributor
- --------------------------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
All shareholder requests for services of any kind should be
sent to:
Transfer Agent
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
or call toll free:
Service: 1-800-526-0056
24 Hour Account Information:1-800-526-0052
Institutional/Financial Adviser Services: 1-800-367-9160
Table of Contents Page
- --------------------------------------------------------------------------------
Fee Table ................................................................. 2
Description of the Fund ................................................... 2
Investment Objective, Policies and Risk Factors ........................... 2
Risk Factors and Special Considerations ................................... 4
Additional Investment Practices ........................................... 12
Investment Restrictions ................................................... 13
Management of the Fund .................................................... 14
Portfolio Managers ........................................................ 15
Investment Adviser, Sub-Adviser,
Distributor and Administrator ........................................... 15
Board of Advisers ......................................................... 16
How to Purchase Shares .................................................... 16
How to Redeem Shares ...................................................... 17
Shareholder Services ...................................................... 18
Exchange Privilege ........................................................ 18
Tax-Sheltered Retirement Plans ............................................ 20
Dividend, Distribution and Reinvestment Policy ............................ 20
Distribution Plan ......................................................... 20
Tax Matters ............................................................... 21
Organization and Description of Common Stock .............................. 21
Performance Calculation ................................................... 22
Custodian, Transfer Agent and
Dividend Disbursing Agent ............................................... 22
Counsel and Independent Auditors .......................................... 22
Other Information ......................................................... 22
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JUNE 3, 1996
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Troika Dialog
Russia Fund (the "Fund"), dated June 3, 1996, 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 ("LMC") is the Fund's investment adviser.
Troika Dialog Asset Management, ZAO ("Troika Dialog") is the Fund's sub-adviser.
Lexington Funds Distributor, Inc. is the Fund's distributor.
TABLE OF CONTENTS
Page
Additional Investment Practices ............................................ 2
Management of the Fund ..................................................... 2
Investment Restrictions .................................................... 3
Investment Adviser, Sub-Adviser, Distributor and Administrator ............. 5
Portfolio Transactions and Brokerage Commissions ........................... 6
Determination of Net Asset Value ........................................... 6
Telephone Exchange Provisions .............................................. 6
Tax-Sheltered Retirement Plans ............................................. 7
Tax Matters ................................................................ 8
Performance Calculation .................................................... 13
Shareholder Reports ........................................................ 13
1
<PAGE>
ADDITIONAL INVESTMENT PRACTICES
The Fund is authorized to use various investment strategies, some or all of
which may be classified as derivatives, to hedge various market risks (such as
interest rates, currency exchange rates and broad or specific market movements)
and to enhance total return, which may be deemed a form of speculation. Subject
to the requirements of the 1940 Act, the Fund may hedge up to 100% of its assets
when deemed appropriate by the Sub-Advisor. The Fund is also authorized to use
investment strategies to manage the effective maturity or duration of debt
securities or instruments held by the Fund, or to enhance the Fund's income or
gain. Although these strategies are regularly used by some investment companies
and other institutional investors in various markets, most of these strategies
are currently unavailable in Russia and may not become available in the future.
Techniques and instruments may change over time, however, as new instruments and
strategies are developed or regulatory changes occur. For a full description of
the Fund's investment practices, see the prospectus under "Additional Investment
Practices."
MANAGEMENT OF THE FUND
The Directors and executive officers of the Fund and their principal
occupations are set forth below:
*+ROBERT M. DEMICHELE, President and Director. P.O. Box 1515, Saddle Brook, N.J.
07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; Chairman and Chief Executive Officer, Lexington Funds
Distributor, Inc.; President and Director, Lexington Global Asset Managers,
Inc.; Director, Unione Italiana Reinsurance; Vice Chairman of the Board of
Trustees, Union College; Director, The Navigator's Group, Inc.; Chairman,
Lexington Capital Management, Inc.; Chairman, LCM Financial Services, Inc.;
Director, Vanguard Cellular Systems Inc.; Chairman of the Board, Market
System Research, Inc. and Market Systems Research Advisors, Inc. (registered
investment advisers): Trustee, Smith Richardson Foundation.
+ BEVERLEY C. DUER, Director, 340 East 72nd Street, News York, N.Y. 10021.
Private Investor. Formerly, Manager of Operations Research Department-CPC
International, Inc.
*+BARBARA R. EVANS, Director, 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May, 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation; prior to March 1987, Vice
President-Institutional Equity Sales, L.F. Rothschild, Unterberg, Towbin.
*+RICHARD M. HISEY, Vice President, Treasurer and Director. P. O. Box 1515,
Saddle Brook, N.J. 07663. Managing Director, Director and Chief Financial
Officer, Lexington Management Corporation; Chief Financial Officer, Vice
President and Director, Lexington Funds Distributor, Inc.; Director,
Lexington Capital Management, Inc.; Director, LCM Financial Services, Inc.;
Chief Financial Officer, Market Systems Research Advisors, Inc.; Executive
Vice President and Chief Financial Officer, Lexington Global Asset Managers,
Inc.
*+LAWRENCE KANTOR, Vice President and Director. P.O. Box 1515, Saddle Brook, N.J
07663. Managing Director, General Manager and Director, Lexington Management
Corporation; Executive Vice President and Director, Lexington Funds
Distributor, Inc.; Executive Vice President and General Manager-Mutual
Funds, Lexington Global Asset Managers, Inc.
+ DONALD B. MILLER, 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).
+ JOHN G. PRESTON, Director. 3 Woodfield Road, Wellesley, Massachusetts 02181.
Associate Professor of Finance, Boston College, Boston, Massachusetts.
+ MARGARET W. RUSSELL, Director. 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor. Formerly, Community Affairs Director, Union Camp
Corporation.
+ PHILIP C. SMITH, Director. 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor; Director, Southwest Investors Income Fund, Inc.,
Government Income Fund, Inc., U.S. Trend Fund, Inc., Investors Cash Reserve
and Plimony Fund, Inc.
*+LISA CURCIO, Vice President and Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds Distributor,
Inc.; Secretary, Lexington Global Asset Managers, Inc.
*+RICHARD LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.
*+JANICE CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J. 07663.
* PETER DERBY, Vice President. 6/3 1st Kolobovsky per, Moscow, 103051, Russia.
Chairman of the Board, Troika Dialog Asset Management, ZAO.
2
<PAGE>
* GAVIN RANKIN, Vice President and Portfolio Manager. 6/3 1st Kolobovsky per,
Moscow, 103051, Russia. Director of Research, Troika Dialog Asset
Management, ZAO.
*+CHRISTIE CARR, Assistant Treasurer P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant. KPMG Peat Marwick LLP.
*+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November 1993, Supervisor of Investment Accounting, Alliance
Capital Management.
*+SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, 07663.
Prior to May 1994, Supervising Senior Accountant, NY Life Securities. Prior
to December 1990, Senior Accountant Dreyfus Corporation.
*+PETER CORNIOTES, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J. 07663.
Assistant Vice President, Lexington Management Corporation. Assistant
Secretary, Lexington Funds Distributor, Inc.
*+ENRIQUE J. FAUST, 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 or Troika Dialog as
defined in the Investment Company Act of 1940, as amended.
+Messrs. Corniotes, DeMichele, Duer, Faust, Hisey, Kantor, Lavery, Luehs,
Miller, Petruski, Preston and Smith and Mmes. Carnicelli, Carr, Curcio, Evans,
Gilfillan, Mosca. and Russell hold similar offices with some or all of the
other investment companies advised and/or distributed by LMC and LFD.
Directors not employed by the Fund or its affiliates receive an annual fee
of $600 and a fee of $150 for each meeting attended plus reimbursement of
expenses for attendance at regular meetings. The Board does not have any audit
or compensation committees.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters or fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:
(1) the Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including
reverse repurchase agreements, foreign exchange contracts, delayed
delivery and when-issued securities, which may be considered the
issuance of senior securities; (b) the Fund may engage in transactions
that may result in the issuance of a senior security to the extent
permitted under applicable regulations, interpretation of the 1940 Act
or an exemptive order; (c} the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related
options shall not be considered to involve the issuance of senior
securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act.
(2) at the end of each quarter of the taxable year, (i) with respect to at
least 50% of the market value of the Fund's assets, the Fund may invest
in cash, U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of
any one issuer limited for the purchases of this calculation to an
amount not greater than 5% of the value of the Fund's total assets, and
(ii) not more than 25% of the value of its total assets be invested in
the securities of any one issuer (other than U.S. Government securities
or the securities of other regulated investment companies).
(3) the Fund will not concentrate its investments by investing more than 25%
of its assets in the securities of issuers in any one industry. This
limit will not apply to securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities.
(4) 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, and may enter into forward currency contracts.
(5) the Fund will not purchase real estate, interests in real estate or real
estate limited partnership interest 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.
3
<PAGE>
(6) 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.
(7) 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 then in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test. The
Fund will only invest in reverse repurchase agreements up to 5% of the
Fund's total assets.
(8) the Fund will not act as 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.
In additional 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 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.
(2) 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.
(3) The Fund will not write, purchase or sell puts, calls or combinations
thereof. However, the Fund may invest up to 15% of the value of its
assets in warrants. This restriction on the purchase of warrants does
not apply to warrants attached to, or otherwise included in, a unit with
other securities.
(4) 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.
(5) The Fund will not purchase securities of an issuer if to the Fund's
knowledge, one or more of the Directors or officers of the Fund or LMC
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer nor will the
Fund hold the securities of such issuer.
(6) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(7) The Fund will not invest for the purpose of exercising control over or
management of any company.
(8) 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.
4
<PAGE>
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.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation ("LMC"), P.O. Box 1515, Saddle Brook, New
Jersey 07663 is the investment adviser to the Fund pursuant to an Investment
Management Agreement dated February 27, 1996 (the "Advisory Agreement").
Lexington Funds Distributor, Inc. ("LFD") is the distributor of Fund shares
pursuant to a Distribution Agreement dated Feburary 27, 1996 (the "Distribution
Agreement"). LMC has entered into a sub-adviser contract with Troika Dialog
Asset Management, ZAO under which Troika Dialog will provide the Fund with
investment advice and management of the Fund's investment program. LMC makes
recommendations to the Fund with respect to its investments and investment
policies. 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, Sub-Advisory Agreement or the Distribution Agreement or
"interested persons" of any such party) on February 27, 1996.
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's investment advisory fee will be reduced for any fiscal year by any
amount necessary to prevent Fund expenses from exceeding the most restrictive
expense limitations imposed by the securities laws or regulations of those
states or jurisdictions in which the Fund's shares are registered or qualified
for sale. Currently, the most restrictive of such expense limitation would
require LMC to reduce its fee so that ordinary expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) for any fiscal year do
not exceed 2.5% of the first $30 million of the Fund's average daily net assets,
plus 2.0% of the next $70 million, plus 1.5% of the Fund's average daily net
assets in excess of $100 million. LFD pays the advertising and sales expenses
related to 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, Sub-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, Sub-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. As compensation
for its services, the Fund pays LMC a monthly management fee at the annual rate
of 1.25% of the average daily net assets. This fee is higher than that paid by
most other investment companies. However, it is not necessarily greater than the
management fee of other investment companies with objectives and policies
similar to this Fund. LMC will pay Troika Dialog an annual sub-advisory fee of
0.625% of the Fund's average daily net assets. The sub-advisory fee will be paid
by LMC, not the Fund.
LMC as owner of the registered service mark "Lexington" will sublicense to
the Fund to include the word "Lexington" as part of its corporate name subject
to revocation by LMC in the event that the Fund ceases to engage LMC or its
affiliate as investment adviser or distributor. Troika Dialog has authorized the
Fund to include the word "Troika Dialog" as part of it's corporate name subject
to revocation by Troika Dialog in the event the Fund ceases to engage Troika
Dialog as Sub-adviser. In that event the Fund will be required upon demand of
LMC or Troika Dialog to change its name to delete the word "Lexington" or
"Troika Dialog" therefrom.
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.
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.
5
<PAGE>
Of the directors, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Lavery, Luehs, and Petruski
and Mmes. Carnicelli, Carr, Curcio, Gilfillan 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 and Troika Dialog 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. 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 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 Troika Dialog and its affiliates, in serving
other clients as well as the Fund. On the other hand, any research services
obtained by LMC and Troika Dialog or its affiliates from the placement of
portfolio brokerage of other clients might be useful and of value to LMC and
Troika Dialog in carrying out its obligations to the Fund. 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 Directors have adopted certain procedures incorporating the standards of
Rule 17e-1 under the Investment Company Act of 1940, as amended, which require
that the commissions paid to LFD or to broker-dealers affiliated with LFD must
be "reasonable and fair compared to the commission, fee or other remuneration
comparable transactions involving similar transactions and similar
securities...being purchased or sold on a securities...exchange during a
comparable period of time". Rule 17e-1 and the procedures require the Directors
to periodically review the transactions with affiliated broker-dealers and the
procedures themselves. The procedures also require LMC and Troika Dialog to
furnish reports to the Directors and to maintain records in connection with
commissions paid to affiliated broker-dealers.
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, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
See the Prospectus for the further discussion of net asset value.
TELEPHONE EXCHANGE PROVISIONS
Exchange instructions may be given in writing or by telephone. Telephone
exchanges may only be made if a Telephone Authorization form has been previously
executed and filed with LFD. Telephone exchanges are permitted only after a
minimum of seven (7) days have elapsed from the date of a previous exchange.
Exchanges may not be made until all checks in payment for the shares to be
exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at State Street
Bank and Trust Company (the "Agent"); shares held in certificate form by the
shareholder cannot be included. However, outstanding certificates can be
6
<PAGE>
returned to the Agent and qualify for these services. Any new account
established with the same registration will also have the privilege of exchange
by telephone in the Lexington Funds. All accounts involved in a telephonic
exchange must have the same registration and dividend option as the account from
which the shares were transferred and will also have the privilege of exchange
by telephone in the Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds, as the true and lawful attorney to
surrender for redemption or exchange any and all non-certificate shares held by
the Agent in account(s) designated, or in any other account with the Lexington
Funds, present or future which has the identical registration, with full power
of substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, or the Fund(s) will be liable for any loss,
expense or cost arising out of any requests effected in accordance with this
authorization which would include requests effected by impostors or persons
otherwise unauthorized to act on behalf of the account. LFD reserves the right
to cease to act as agent subject to the above appointment upon thirty (30) days
written notice to the address of record. If the shareholder is an entity other
than an individual, such entity may be required to certify that certain persons
have been duly elected and are now legally holding the titles given and that the
said corporation, trust, unincorporated association, etc. is duly organized and
existing and has the power to take action called for by this continuing
authorization.
Exchange Authorizations forms, Telephone Authorization forms and
prospectuses of the other funds may be obtained from LFD.
LFD has made arrangements with certain dealers to accept instructions by
telephone to exchange shares of the Fund or shares of one of the other Lexington
Funds at net asset value as described above. Under this procedure, the dealer
must agree to indemnify LFD and the funds from any loss or liability that any of
them might incur as a result of the acceptance of such telephone exchange
orders. A properly signed Exchange Authorization must be received by LFD within
5 days of the exchange request. LFD reserves the right to reject any telephone
exchange request. In each such exchange, the registration of the shares of the
Fund being acquired must be identical to the registration of the shares of the
Fund being exchanged. Any telephone exchange orders so rejected may be processed
by mail.
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 ("IRA"): Individuals may make tax deductible
contributions to their own Individual Retirement Accounts established under
Section 408 of the Internal Revenue Code (the "Code"). Married investors filing
a joint return neither of whom is an active participant in an employer sponsored
retirement plan, or who have an adjusted gross income of $40,000 or less
($25,000 or less for single taxpayers) may continue to make a $2,000 ($2,500 for
spousal IRAs) annual deductible IRA contribution. For adjusted gross incomes
above $40,000 ($25,000 for single taxpayers, the IRA deduction limit is
generally phased out ratably over the next $10,000 of adjusted gross income,
subject to a minimum $200 deductible contribution. Investors who are not able to
deduct a full $2,000 ($2,250 spousal) IRA contribution because of the
limitations may make a nondeductible contribution to their IRA to the extent a
deductible contribution is not allowed. Federal income tax on accumulations
earned on nondeductible contributions is deferred until such time as these
amounts are deemed distributed to an investor. Rollovers are also permitted
under the Plan. The disclosure statement required by the Internal Revenue
Service ("IRS") is provided by the Fund.
The minimum initial investment to establish a tax-sheltered plan is $250.
Subsequent investments are subject to a minimum of $50 for each account.
SELF-EMPLOYED RETIREMENT PLAN (HR-10): Self-employed individuals may make
tax deductible contributions to a prototype defined contribution pension plan or
profit sharing plan. There are, however, a number of special rules which apply
when self-employed individuals participate in such plans. Currently purchase
payments under a self-employed plan are deductible only to the extent of the
lesser of (i) $30,000 or (ii) 25% of the individuals earned annual income (as
defined in the Code) and in applying these limitations not more than $200,000 of
"earned income" may be taken into account.
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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.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of
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foreign currency itself, except for regulated futures contracts or non-equity
options subject to Code Section 1256 (unless the Fund elects otherwise), will
generally be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and 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 Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
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 the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable 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. A 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 IRS has held in several private rulings (and Treasury Regulations
now provide) that gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
The Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it may elect to
treat the PFIC as a qualifying electing fund (a "QEF") in which event the Fund
will each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earning or capital gain from
the PFIC. If the Fund does not (because it is unable to, chooses not to or
otherwise) elect to treat the PFIC as a QEF, then in general (1) any gain
recognized by the Fund upon sale or other disposition of its interest in the
PFIC or any excess distribution received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Fund level), (3) the Fund shall be liable for tax on the portions of such gain
or excess distribution so allocated to prior years in an amount equal to, for
each such prior year, (i) the amount of gain or excess distribution allocated to
such prior year multiplied by the highest tax rate (individual or corporate) in
effect for such prior year 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.
Under recently proposed Treasury Regulations the Fund can elect to recognize
as gain the excess, as of the last day of its taxable year, of the fair market
value of each share of PFIC stock over the Fund's adjusted tax basis in that
share ("mark to market gain"). Such mark to market gain will be included by the
Fund as ordinary income, such gain will not be subject to the Short-Short Gain
Test, and the Fund's holding period with respect to such PFIC stock commences on
the first day of the next taxable year. If the Fund makes such election in the
first taxable year it holds PFIC stock, the Fund will
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include ordinary income from any mark to market gain, if any, and will not incur
the tax described in the previous paragraph.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
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 which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they generally should not qualify for the 70%
dividends-received deduction for corporate shareholders.
A 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. 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.
Conversely, if the Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro
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rata share of tax paid by the Fund on the gain, and will increase the tax basis
for his shares by an amount equal to the deemed distribution less the tax
credit.
Ordinary income dividends paid by the Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4):
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such (or
substantially identical) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced (1) if the corporate
shareholder fails to satisfy the foregoing requirements with respect to its
shares of the Fund or (2) by application of Code Section 246(b) which in general
limits the dividends-received deduction to 70% of the shareholder's taxable
income (determined without regard to the dividends-received deduction and
certain other items). Since an insignificant portion of the Fund will be
invested in stock of domestic corporations, the ordinary dividends distributed
by the Fund will not qualify for the dividends-received deduction for corporate
shareholders.
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. In addition, under the Superfund Amendments and Reauthorization Act of
1986, a tax is imposed for taxable years beginning after 1986 and before 1996 at
the rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined
without regard to the deduction for this tax and the AMT net operating loss
deduction) over $2 million. For purposes of the corporate AMT and the
environmental superfund tax (which are discussed above), 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 will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.
Distributions by the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the
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shares received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of the Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions of
such amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding by the IRS for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Furthermore,
such a foreign shareholder may be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) on the gross income resulting from the Fund's
election to treat any foreign taxes paid by it as paid by its shareholders, but
may not be allowed a deduction against this gross income or a credit against
this U.S. withholding tax for the foreign shareholder's pro rata share of such
foreign taxes which it is treated as having paid. Such a foreign shareholder
would generally be exempt from U.S. federal income tax on gains realized on the
sale of shares of the Fund, capital gain dividends and amounts retained by the
Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of 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
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administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
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 Price Index, Dow Jones Industrial Average
Index, Morgan Stanley Capital International (EAFE) Index or, Russian Trading
System Index, Moscow Times Index, the Fund calculates its aggregate total return
for the specified periods of time assuming the investment of $10,000 in Fund
shares and assuming the reinvestment of each dividend or other distribution at
net asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value.
SHAREHOLDER REPORTS
Shareholders will receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders will receive annual
financial statements audited by KPMG Peat Marwick LLP, the Fund's independent
auditors.
13
<PAGE>
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
(a) Financial statements (Auditor's Report and
Statement of Assets and Liabilities) Filed Electronically
<PAGE>
Item 24. Financial Statements and Exhibits - List (cont'd)
(b) Exhibits:
1. Articles of Incorporation - Filed electronically
2. By-Laws - Filed electronically
3. Not Applicable
4. Stock Certificate Specimen - Filed electronically
5a. Form of Investment Advisory Agreement between
Registrant and Lexington Management Corporation - Filed electronically
5b. Form of Sub-Advisory Investment Management
Agreement between Lexington Management Corporation
and Troika Dialog - Filed electronically
6. Form of Distribution Agreement between Registrant
and Lexington Funds Distributor, Inc. - Filed electronically
7. Not Applicable
8. Form of Custodian Agreement between
Registrant and Chase Manhattan Bank, N.A. - Filed electronically
9a. Form of Transfer Agency Agreement between
Registrant and State Street Bank and Trust
Company - Filed electronically
9b. Form of Administrative Services Agreement between
Registrant and Lexington Management Corporation - Filed electronically
10. Opinion of Counsel as to Legality of Securities
being registered - Filed electronically
11. Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically
12. Not Applicable
13. Not Applicable
14. Retirement Plans - Filed electronically
15. Form of Distribution Plan under Rule 12b-1
and Related Agreements - Filed electronically
16. Not Applicable
<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 March 27, 1996:
Title of Class Number of Record Holders
-------------- ------------------------
Capital Stock 1
($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 Tax Free Money Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Natural Resources Trust
Lexington Corporate Leaders Trust Fund
Lexington Convertible Securities Fund
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Lexington SmallCap Value Fund, Inc.
<PAGE>
29 (b)
Position and Offices
Name and Principal with Principal Position and Offices
Business Address Underwriter With Registrant
- ------------------ ----------- ----------------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa A. 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 Chief Financial
and Director Officer and Vice Pres.
Lawrence Kantor* Executive Vice President, Director and Vice Pres.
General Manager & Director
Richard Lavery* Vice President Vice President
Janice Violette* 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 Troika Dialog Russia Fund, Inc., Park 80
West - Plaza Two, Saddle Brook, New Jersey 07663 will maintain physical
possession of such 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., 1211 Avenue of the Americas, New York New York 10036, or
Transfer Agent, State Street Bank and Trust Company, c/o National Financial
Data Services, City Center Square, 1100 Main, 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 Troika Dialog Russia 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 undertakes to file a post-effective amendment,
using reasonably current financial statements which need not be
certified, within four to six months from the effective date of
the Registrant's Registration Statement.
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.
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to this
filing:
Statement of Assets and Liabilities & Auditor's Report
Articles of Incorporation
By-Laws
Form of Specimen Stock Certificate
Form of Investment Advisory Agreement
Form of Sub-Advisory Agreement
Form of Distribution Agreement
Form of Custodian Agreement
Form of Transfer Agency Agreement
Form of Administrative Services Agreement
Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of KPMG Peat Marwick LLP
Form of Retirement Plans
Form of Distribution Plan under Rule 12b-1 and Related Agreements
Article 6 Financial Data Schedule
Cover Letter
<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 29th day of March, 1996.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
Robert M. DeMichele
_______________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated
Signature Title Date
Robert M. DeMichele
__________________________ Chairman of the Board March 29, 1996
Robert M. DeMichele Principal Executive
Officer
Richard M. Hisey
__________________________ Principal Financial March 29, 1996
Richard M. Hisey and Accounting
Officer and Director
Lisa Curcio
__________________________ Principal Compliance March 29, 1996
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director March 29, 1996
__________________________
Beverley C. Duer, P.E.
*Barbara R. Evans Director March 29, 1996
__________________________
Barbara R. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director March 29, 1996
__________________________
Lawrence Kantor
*Donald B. Miller Director March 29, 1996
__________________________
Donald B. Miller
*John G. Preston Director March 29, 1996
__________________________
John G. Preston
*Margaret W. Russell Director March 29, 1996
__________________________
Margaret W. Russell
*Philip C. Smith Director March 29, 1996
__________________________
Philip C. Smith
*Francis A. Sunderland Director March 29, 1996
__________________________
Francis A. Sunderland
Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Lawrence Kantor
_____________________________
Lawrence Kantor
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Beverley C. Duer
_____________________________
Beverley C. Duer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Donald B. Miller
_____________________________
Donald B. Miller
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
John G. Preston
_____________________________
John G. Preston
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Barbara R. Evans
_____________________________
Barbara R. Evans
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Margaret W. Russell
_____________________________
Margaret W. Russell
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Philip C. Smith
_____________________________
Philip C. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
TROIKA DIALOG RUSSIA FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 22nd day of March, 1996.
Francis A. Sunderland
_____________________________
Francis A. Sunderland
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
Statement of Assets and Liabilities
March 27, 1996
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .$100,000
Deferred organization and registration expenses
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . 75,000
-------
Total Assets. . . . . . . . . . . . . . . . . . . .$175,000
-------
LIABILITIES
Payable to Lexington Management Corporation
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . .$ 75,000
------
Total Liabilities . . . . . . . . . . . . . . . . .$ 75,000
------
NET ASSETS applicable to 10,000 outstanding shares of
common stock, $.001 par value per share, respectively . . .$100,000
=======
NET ASSETS consist of:
Common stock - at par value, $.001 per share, authorized
1,000,000,000 shares; issued and outstanding 10,000
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Additional Paid in Capital . . . . . . . . . . . . . . . . . 99,990
-------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$100,000
=======
NET ASSET VALUE offering and redemption price per share
($100,000/10,000 shares) . . . . . . . . . . . . . . . . . .$10.00
=====
NOTES:
(1) The Lexington Troika Dialog Russia Fund, Inc. (the "Fund") was
formed on November 22, 1995 as a Maryland Corporation and has
had no operations through March 27, 1996 other than matters
relating to its organization and registration as a diversified,
open-end investment company under the Investment Company Act of
1940 and the sale and issuance of 10,000 shares of its common
stock to the Lexington Management Corporation at an aggregate
purchase price of $100,000 to provide the initial capital of the
Fund.
(2) Organization and initial offering expenses will be borne by the
Fund and will be advanced by Lexington Management Corporation
(LMC). It is estimated that such expenses will not exceed
$75,000 and will be amortized from the date operations commence
over a period which it is expected that a benefit will be
realized, not to exceed five years. The Fund will reimburse LMC
for such expenses when the Fund s assets exceed $20 million or
when the Fund has completed one year of operations, whichever
occurs first. Lexington Management Corporation has agreed that
in the event that any of the initial 10,000 shares are redeemed
during the period of amortization of the Fund's organizational
expenses, the redemption proceeds will be reduced by any such
unamortized organizational expenses in the same proportion as
the number of initial shares being redeemed bears to the number
of initial shares (10,000) outstanding at the time of
redemption.
(3) The Fund intends to comply in its initial year and thereafter
with the requirements of the Internal Revenue Code necessary to
qualify as a regulated investment company and as such will not
be subject to federal income taxes on otherwise taxable income
(including net realized capital gains) which is distributed to
shareholders.
<PAGE>
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Report
To the Shareholders and Directors of
Lexington Troika Dialog Russia Fund, Inc.:
We have audited the accompanying statement of assets and liabilities
of Lexington Troika Dialog Russia Fund, Inc. (the "Fund") as of March
27, 1996. This financial statement is the responsibility of the
Fund's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statement of
assets and liabilities is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the statement of assets and liabilities. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above present fairly, in all material respects, the financial
position of Lexington Troika Dialog Russia Fund, Inc. as of March 27,
1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 27, 1996
LEXINGTON RUSSIA FUND, INC.
ARTICLES OF AMENDMENT
LEXINGTON RUSSIA FUND, INC. a Maryland corporation having its
principal office in Maryland in Baltimore City, Maryland (hereinafter
called the "corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The charter of the corporation is hereby amended by
striking out Article SECOND and inserting in lieu thereof the following:
SECOND: The name of the corporation is Lexington Troika
Dialog Russia Fund, Inc. (hereinafter called the "corporation").
SECOND: The charter of the Corporation is hereby further
amended by striking out Article FIFTH (1) and inserting in lieu thereof
the following:
FIFTH 1. The total number of shares of stock which the
corporation initially has authority to issue is one billion
(1,000,000,000) shares of common stock which are initially
designated by series as follows: five hundred million
(500,000,000) shares are designated "Lexington Troika Dialog
Russia Fund" series and of which five hundred million
(500,000,000) shares are unclassified. All of the shares of
common stock of each series are initially designated as one
class of shares. The par value of the shares of each class is
one tenth of one cent ($.001) per share.
THIRD: The charter of the corporation is hereby further
amended by striking out Article FIFTH(5)(a)(i) and inserting in lieu
thereof the following:
(5)(a)(i) All consideration received by the corporation
for the issuance or sale of shares of the class together with
all income, earnings, profits and proceeds thereof, shall
irrevocably belong to such class for all purposes, subject only
to the rights of creditors and to the effect of the conversion
of shares of any class of stock into another class of stock of
the corporation, and are herein referred to as "assets
belonging to" such class.
FOURTH: The charter of the corporation is further amended by
striking out Article EIGHTH and inserting in lieu thereof the following:
EIGHTH: (1) Any holder of shares of stock of the
corporation may require the corporation to redeem and the
corporation shall be obligated to redeem at the option of such
holder all or any part of the shares of the corporation owned
by said holder, at the redemption price, pursuant to the
method, upon the terms and subject to the conditions
hereinafter set forth:
(a) The redemption price per share shall be
the net asset value per share determined at such time or times
as the Board of Directors of the corporation shall designate in
accordance with any provision of the Investment Company Act of
1940, and rule or regulation thereunder or exemption or
exception therefrom, or any rule or regulation made or adopted
by any securities association registered under the Securities
Exchange Act of 1934.
(b) Net asset value per share of a class shall
be determined by dividing:
(i) The total value of the assets of such class,
or in the case of a series with more than one class, such
class's proportionate share of the total value of the assets of
the series, such value determined as provided in Subsection (c)
below less, to the extent determined by or pursuant to the
direction of the Board of Directors, all debts, obligations and
liabilities of such class (which debts, obligations and
liabilities shall include, without limitation of the generality
of the foregoing, any and all debts, obligations, liabilities,
or claims, of any and every kind and nature, fixed, accrued and
otherwise, including the estimated accrued expenses of
management and supervision, administration and distribution and
any reserves or charges for any or all of the foregoing,
whether for taxes, expenses or otherwise) but excluding such
class's liability upon its shares and its surplus, by
(ii) The total number of shares of such class
outstanding.
The Board of Directors is empowered, in its absolute discretion,
to establish other methods for determining such net asset value
whenever such other methods are deemed by it to be necessary in
order to enable the corporation to comply with, or are deemed
by it to be desirable provided they are not inconsistent with,
any provision of the Investment Company Act of 1940 or any rule
or regulation thereunder.
(c) In determining for the purposes of these Articles of
Incorporation the total value of the assets of the corporation
at any time, investment and any other assets of the corporation
shall be valued in such manner as may be determined from time
to time by the Board of Directors.
(d) Payment of the redemption price by the corporation
may be made either in cash or in securities or other assets
at the time owned by the corporation or partly in cash and
partly in securities or other assets at the time owned by the
corporation. The value of any part of such payment to be made
in securities or other assets of the corporation shall be the
value employed in determining the redemption price. Payment of
the redemption price shall be made on or before the seventh day
following the day on which the shares are properly presented
for redemption hereunder, except that delivery of any
securities included in any such payment shall be made as
promptly as any necessary transfer on the books of the issuers
whose securities are to be delivered may be made.
The corporation, pursuant to resolution of the Board of Directors,
may deduct from the payment made for any shares redeemed a
liquidating, redemption or similar charge as may be determined
by the Board of Directors from time to time.
(e) Redemption of shares of stock by the corporation is
conditional upon the corporation having funds or property
legally available therefor.
(2) The corporation, either directly or through an agent,
may repurchase its shares, out of funds legally available
therefor, upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable,
by agreement with the owner at a price not exceeding the net
asset value per share as determined by the corporation at such
time or times as the Board of Directors of the corporation
shall designate, less any liquidating, redemption or similar
charge as may be fixed by resolution of the Board of Directors
of the corporation from time to time, and take all other steps
deemed necessary or advisable in connection therewith.
(3) The corporation may cause the redemption, upon the
terms set forth in subsections (1)(a) through (e) and subsection
(4) of this Article EIGHTH, of shares of a class of stock held
by a stockholder if the net asset value of the shares of stock
is less than $500 or such other amount not exceeding $5000 as
may be fixed from time to time by the Board of Directors (the
"Minimum Amount") with respect to that class. The Board of
Directors may establish differing Minimum Amounts for each
class of the corporation's stock and for categories of holders
of stock based on such criteria as the Board of Directors may
deem appropriate. The corporation shall give the stockholder
notice which shall be in writing personally delivered or
deposited in the mail, at least 30 days (or such other number
of days as may be specified from time to time by the Board of
Directors) prior to such redemption.
Notwithstanding any other provision of this Article EIGHTH, if
certificates representing such shares have been issued, the
redemption price need not be paid by the corporation until such
certificates are presented in proper form for transfer to the
corporation or the agent of the corporation appointed for such
purpose; however, the redemption shall be effective, in
accordance with the resolution of the Board of Directors,
regardless of whether or not such presentation has been made.
(4) The obligations set forth in this Article EIGHTH may
be suspended or postponed as may be permissible under the
Investment Company Act of 1940 and the rules and regulations
thereunder.
(5) The Board of Directors may establish other terms and
conditions and procedures for redemption, including
requirements as to delivery of certificates evidencing shares,
if issued.
FIFTH: The board of directors of the corporation, by written
consent to such action signed by all the members thereof and filed with
the minutes of proceedings of the board, adopted a resolution approving
the foregoing amendment to the charter.
SIXTH: The amendment of the Articles of Incorporation of the
corporation, as hereinabove set forth, was approved by a majority of the
entire board of directors. No stock entitled to be voted on the matter
was outstanding or subscribed for at the time of approval.
IN WITNESS WHEREOF, the corporation has caused these presents to
be signed in its name and on its behalf by its Vice President and
witnessed by it Secretary as of the 2nd day of April, 1996.
The undersigned Vice President acknowledges these Articles of
Amendment to be the corporate act of the corporation and states that to
the best of his knowledge, information and belief, the matters and facts
set forth herein with respect to the authorization and approval hereof
are true in all material respects and that this statement is made under
the penalties of perjury.
LEXINGTON RUSSIA FUND, INC.
Lawrence Kantor
By______________________________
Lawrence Kantor, Vice President
WITNESS:
Lisa Curcio
______________________________
Lisa Curcio, Secretary
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ARTICLES OF INCORPORATION
OF
LEXINGTON RUSSIA FUND, INC.
FIRST: The undersigned, Peter O'Rourke, whose address is
919 Third Avenue, New York, New York, being at least eighteen years of
age, hereby forms a corporation under the Maryland General Corporation
Law.
SECOND: The name of the corporation is Lexington Russia
Fund, Inc. (hereinafter called the "corporation").
THIRD: The corporation is formed for the following purpose
or purposes:
(a) to conduct, operate and carry on the business of
an investment company;
(b) to subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, lend, write options on, exchange, distribute or
otherwise dispose of and deal in and with securities of
every nature, kind, character, type and form, including
without limitation of the generality of the foregoing, all
types of stocks, shares, futures contracts, bonds,
debentures, notes, bills and other negotiable or
non-negotiable instruments, obligations, evidences of
interest, certificates of interest, certificates of
participation, certificates, interests, evidences of
ownership, guarantees, warrants, options or evidences of
indebtedness issued or created by or guaranteed as to
principal and interest by any state or local government or
any agency or instrumentality thereof, by the United States
Government or any agency, instrumentality, territory,
district or possession thereof, by any foreign government or
any agency, instrumentality, territory, district or
possession thereof, by any corporation organized under the
laws of any state, the United States or any territory or
possession thereof or under the laws of any foreign country,
bank certificates of deposit, bank time deposits, bankers'
acceptances and commercial paper; to pay for the same in
cash or by the issue of stock, bonds or notes of the
corporation or otherwise; and to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including without limitation, the right to
consent and otherwise act with respect thereto, with power
to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and
privileges in respect of any said instruments;
(c) to borrow money or otherwise obtain credit and
to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the corporation;
(d) to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in, shares of stock of the
corporation, including shares of stock of the corporation in
fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or
acquisition of shares of stock of the corporation any funds
or property of the corporation whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by
the laws of the State of Maryland;
(e) to conduct its business, promote its purposes
and carry on its operations in any and all of its branches
and maintain offices both within and without the State of
Maryland, in any State of the United States of America, in
the District of Columbia and in any other parts of the
world; and
(f) to do all and everything necessary, suitable,
convenient, or proper for the conduct, promotion and
attainment of any of the businesses and purposes herein
specified or which at any time may be incidental thereto or
may appear conducive to or expedient for the accomplishment
of any of such businesses and purposes and which might be
engaged in or carried on by a corporation incorporated or
organized under the Maryland General Corporation Law, and to
have and exercise all of the powers conferred by the laws of
the State of Maryland upon corporations incorporated or
organized under the Maryland General Corporation Law.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent purpose
and power. The foregoing enumeration of specific purposes and powers
shall not be held to limit or restrict in any manner the purposes and
powers of the corporation, and the purposes and powers herein specified
shall, except when otherwise provided in this Article THIRD, be in no
wise limited or restricted by reference to, or inference from, the terms
of any provision of this or any other Article of these Articles of
Incorporation; provided, that the corporation shall not conduct any
business, promote any purpose, or exercise any power or privilege within
or without the State of Maryland which, under the laws thereof, the
corporation may not lawfully conduct, promote, or exercise.
FOURTH: The post office address of the principal office and
Resident Agent of the corporation within the State of Maryland is 11
East Chase Street, Suite 9E, c/o CSC-Lawyers Incorporating Service
Company, Baltimore, Maryland 21202. The name and address of the
Resident Agent of the corporation is CSC-Lawyers Incorporating Service
Company, 11 East Chase Street, suite 9E, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock which the
corporation initially has authority to issue is one billion
(1,000,000,000) shares of Common Stock which are initially designated by
series as follows: five hundred million (500,000,000) shares are
designated "Lexington Russia Fund" series and of which five hundred
million (500,000,000) shares are unclassified. All of the shares of
Common Stock of each series are initially designated as one class of
shares. The par value of the shares of each class is one tenth of one
cent ($.001) per share.
(2) The aggregate par value of all the authorized shares
of stock is one million dollars ($1,000,000.00).
(3) The Board of Directors of the corporation is
authorized, from time to time, to fix the price or the minimum price or
the consideration or minimum consideration for, and to authorize the
issuance of, the shares of stock of the corporation and securities
convertible into shares of stock of the corporation.
(4) The Board of Directors of the corporation is
authorized, from time to time, to further classify or to reclassify, as
the case may be, any unissued shares of stock of the corporation by
setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and
terms or conditions of redemption of the stock.
(5) Subject to the power of the Board of Directors to
classify and reclassify unissued shares, the shares of each class of
stock of the corporation shall have the following preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of redemption:
(a) (i) All consideration received by the corporation for
the issuance or sale of shares of the class together with all
income, earnings, profits and proceeds thereof, shall irrevocably
belong to such class for all purposes, subject only to the rights
of creditors and to affect the conversion of shares of any clas of
stock into another class of stock of the corporation, and are
herein referred to as "assets belonging to" such class.
(ii) The assets belonging to such class shall be
charged with the liabilities of the corporation in respect
of such class and with such class's share of the general
liabilities of the corporation, in the latter case in
proportion that the net asset value of such class bears to
the net asset value of all classes. The determination of
the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and
reserves, to a class.
(iii) Dividends or distributions on shares of each
class, whether payable in stock or cash, shall be paid only
out of earnings, surplus or other assets belonging to such
class.
(iv) In the event of the liquidation or dissolution
of the corporation, stockholders of each class shall be
entitled to receive, as a class, out of the assets of the
corporation available for distribution to stockholders, the
assets belonging to such class and the assets so
distributable to the stockholders of such class shall be
distributed among such stockholders in proportion to the
number of shares of such class held by them.
(b) A series of Common Stock may be further classified by
the Board of Directors into two or more classes of stock that may
be invested together in the common investment portfolio in which
the series is invested. Notwithstanding the provisions of
paragraph (5)(a) of this Article Fifth, if two or more classes are
invested in a common investment portfolio as a series, the shares
of each such class of stock of the corporation shall be subject to
the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption, and, if there are other
classes of stock of another series invested in a different
investment portfolio, shall also be subject to the provisions of
paragraph (5)(a) of this Article Fifth at the series level as if
the classes within the series were one class:
(i) The income and expenses of the series shall be
allocated among the classes in the series in accordance with
the number of shares outstanding of each such class or as
otherwise determined by the Board of Directors in a manner
consistent with subparagraph (iii) below.
(ii) As more fully set forth in this paragraph
(5)(b) of Article Fifth, the liabilities and expenses of the
classes in the series shall be determined separately from
those of each other and, accordingly, the net asset value,
the dividends and distributions payable to holders, and the
amounts distributable in the event of liquidation of the
corporation to holders of shares of the corporation's stock
may vary from class to class within the series. Except for
these differences and certain other differences set forth in
this paragraph (5) of Article Fifth or elsewhere in the
Articles of Incorporation, the classes in the same series
shall have the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption.
(iii) The dividends and distributions of investment
income and capital gains with respect to the classes in the
series shall be in such amounts as may be declared from time
to time by the Board of Directors, and such dividends and
distributions may vary among the classes in the series to
reflect differing allocations of the expenses of the
corporation among the classes and any resultant differences
among the net asset values per share of the classes, to such
extent and for such purposes as the Board of Directors may
deem appropriate. The allocation of investment income,
capital gains, expenses and liabilities of the corporation
among the classes in the series shall be determined by the
Board of Directors in a manner that is consistent with an
order, if any, obtained from the Securities and Exchange
Commission or any future amendment to such order or any rule
or interpretation under the Investment Company Act of 1940,
as amended.
(c) Except as provided below, on each matter
submitted to a vote of the stockholders, each holder of a
share of stock shall be entitled to one vote for each share
standing in his name on the books of the corporation
irrespective of the class or series thereof. All holders of
shares of stock shall vote as a single class except as may
otherwise be required by law pursuant to any applicable
order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, or except with respect to
any matter which affects only one or more classes or series
of stock, in which case only the holders of shares of
the class, classes or series affected shall be entitled
to vote.
(d) The proceeds of the redemption of shares of any class of
stock of the corporation may be reduced by the amount of any
contingent deferred sales charge or other charge (which charges
may vary within and among the classes) payable on such redemption
pursuant to the terms of issuance of such shares, all in
accordance with the Investment Company Act of 1940, applicable
rules and regulations thereunder, and applicable rules and
regulations of the National Association of Securities Dealers,
Inc. ("NASD").
(e) At such times as may be determined by the Board of
Directors (or with the authorization of the Board of Directors,
by the officers of the corporation) in accordance with the
Investment Company Act of 1940, applicable rules and regulations
thereunder, and applicable rules and regulations of the NASD and
reflected in the corporation's current registration statement,
shares of a particular class of stock of the corporation may be
automatically converted into shares of another class of stock of
the corporation based on the relative net asset values of such
classes at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors,
by the officers of the corporation) and reflected in the
corporation's current registration statement as aforesaid.
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the corporation shall apply to shares
of, and to the holders of, all classes of stock.
(6) Notwithstanding any provisions of the Maryland General
Corporation Law requiring a greater proportion than a majority of the
votes of stockholders of all classes or of any class of stock entitled
to be cast in order to take or authorize any action, any such action may
be taken or authorized upon the concurrence of a majority of the
aggregate number of votes entitled to be cast thereon.
(7) The presence in person or by proxy of the holders of
one-third of the shares of stock of the corporation entitled to vote
(without regard to class) shall constitute a quorum at any meeting of
the stockholders, except with respect to any matter which, under
applicable statutes or regulatory requirements, requires approval by a
separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the shares
of stock of each class required to vote as a class on the matter shall
constitute a quorum.
(8) The corporation may issue shares of stock in
fractional denominations to the same extent as its whole shares, and
shares in fractional denominations shall be shares of stock having
proportionately to the respective fractions represented
thereby all the rights of whole shares, including, without limitation,
the right to vote, the right to receive dividends and distributions and
the right to participate upon liquidation of the corporation, but
excluding the right to receive a stock certificate evidencing a
fractional share.
(9) No holder of any shares of any class of the
corporation shall be entitled as of right to subscribe for, purchase, or
otherwise acquire any shares of any class which the corporation proposes
to issue, or any rights or options which the corporation proposes to
issue or to grant for the purchase of shares of any class or for the
purchase of any shares, bonds, securities, or obligations of the
corporation which are convertible into or exchangeable for, or which
carry any rights to subscribe for, purchase, or otherwise acquire shares
of any class of the corporation; and any and all of such shares, bonds,
securities or obligations of the corporation, whether now or hereafter
authorized or created, may be issued, or may be reissued if the same
have been reacquired, and any and all of such rights and options may be
granted by the Board of Directors to such persons, firms, corporations
and associations, and for such lawful consideration, and on such terms,
as the Board of Directors in its discretion may determine, without first
offering the same, or any thereof, to any said holder.
SIXTH: (1) The initial number of directors of the
corporation is ten (10) and the names of those who will serve as such
until the first annual meeting or until their successors are duly
elected and qualify are as follows:
Robert M. DeMichele
Beverley C. Duer
Barbara R. Evans
Lawrence Kantor
Donald B. Miller
Francis Olmsted
John G. Preston
Margaret W. Russell
Philip C. Smith
Francis A. Sunderland
The By-Laws of the Corporation may fix the number of
directors at a number greater or less than that named in these Articles
of Incorporation and may authorize a majority of the entire Board of
Directors to increase or decrease the number of directors. The number
of directors shall never be less than the minimum number prescribed by
the Maryland General Corporation Law.
(2) The initial by-laws of the corporation shall be
adopted by the directors at their organizational meeting or by their
informal written action, as the case may be. Thereafter, the power to
make, alter, and repeal the by-laws of the corporation shall be vested
in the Board of Directors of the corporation.
(3) Any determination made in good faith by or pursuant to
the direction of the Board of Directors, as to: the amount of the
assets, debts, obligations, or liabilities of the corporation or
belonging to, or attributable to any class of shares of the corporation;
the amount of any reserves or charges set up and the propriety thereof;
the time of or purpose for creating such reserves or charges; the use,
alteration or cancellation of any reserves or charges (whether or not
any debt, obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged or shall be
then or thereafter required to be paid or discharged); the value of any
investment or fair value of any other asset of the corporation; the
amount of net investment income; the number of shares of stock
outstanding; the estimated expense in connection with purchases or
redemptions of the corporation's stock; the ability to liquidate
investments in an orderly fashion; the extent to which it is practicable
to deliver a cross-section of the portfolio of the corporation in
payment for any such shares, or as to any other matters relating to the
issue, sale, purchase, redemption and/or other acquisition or
disposition of investments or shares of the corporation, or the
determination of the net asset value of shares of the corporation shall
be final and conclusive, and shall be binding upon the corporation and
all holders of its shares, past, present and future, and shares of the
corporation are issued and sold on the condition and understanding that
any and all such determinations shall be binding as aforesaid.
SEVENTH: (1) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the corporation shall
have any liability to the corporation or its stockholders for damages.
This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the corporation whether or not
such person is a director or officer at the time of any proceeding in
which liability is asserted.
(2) The corporation shall indemnify and advance expenses
to its currently acting and its former directors to the fullest extent
that indemnification of directors and advance of espenses to directors
is permitted by the Maryland General Corporation Law. The corporation
shall indemnify and advance expenses to its officers to the same extent
as its directors and to such further extent as is consistent with law.
The Board of Directors may, through a by-law, resolution or agreement,
make further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland
General Corporation Law.
(3) No provision of this Article SEVENTH shall be
effective (i) to require a waiver of compliance with any provision of
the Securities Act of 1933, or of the Investment Company Act of 1940, or
of any valid rule, regulation or order of the Securities and Exchange
Commission thereunder or (ii) to protect or purport to protect any
director or officer of the corporation against any liability to the
corporation or its stockholders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(4) References to the Maryland General Corporation Law in
this Article SEVENTH are to the law as from time to time amended. No
amendment to the Articles of Incorporation of the corporation shall
affect any right of any person under this Article SEVENTH based on any
event, omission or proceeding prior to such amendment.
EIGHTH: Any holder of shares of stock of the corporation
may require the corporation to redeem and the corporation shall be
obligated to redeem at the option of such holder all or any part of the
shares of the corporation owned by said holder, at the redemption price,
pursuant to the method, upon the terms and subject to the conditions
hereinafter set forth:
a. The redemption price per share shall be the net asset
value per share determined at such time or times as the
Board of Directors of the corporation shall designate in
accordance with any provision of the Investment Company Act
of 1940, any rule or regulation thereunder or exemption or
exception therefrom, or any rule or regulation made or
adopted by any securities association registered under the
Securities Exchange Act of 1934.
b. Net asset value per share of a class shall be
determined by dividing:
i. The total value of the assets of belonging
to such class, or in the case of a series with more
than one class, such class's proportionate share of
the total value of the assets belonging to the series,
such value determined as provided in Subsection (c)
below less, to the extent determined by or pursuant to
the direction of the Board of Directors, all debts,
obligations and liabilities of such class (which
debts, obligations and liabilities shall include,
without limitation of the generality of the foregoing,
any and all debts, obligations, liabilities, or
claims, of any and every kind and nature, fixed,
accrued and otherwise, including the estimated accrued
expenses of management and supervision, administration
and distribution and any reserves or charges for any
or all of the foregoing, whether for taxes, expenses
or otherwise) but excluding such class's liability
upon its shares and its surplus, by
ii. The total number of shares of such class
outstanding.
The Board of Directors is empowered, in its absolute
discretion, to establish other methods for determining such
net asset value whenever such other methods are deemed by it
to be necessary in order to enable the corporation to comply
with, or are deemed by it to be desirable provided they are
not inconsistent with, any provision of the Investment
Company Act of 1940 or any rule or regulation thereunder.
c. In determining for the purposes of these Articles of
Incorporation the total value of the assets of the
corporation at any time, investments and any other assets of
the corporation shall be valued in such manner as may be
determined from time to time by the Board of Directors.
d. Payment of the redemption price by the corporation may
be made either in cash or in securities or other assets at
the time owned by the corporation or partly in cash and
partly in securities or other assets at the time owned by
the corporation. The value of any part of such payment to
be made in securities or other assets of the corporation
shall be the value employed in determining the redemption
price. Payment of the redemption price shall be made on or
before the seventh day following the day on which the shares
are properly presented for redemption hereunder, except that
delivery of any securities included in any such payment
shall be made as promptly as any necessary transfers on the
books of the issuers whose securities are to be delivered
may be made.
e. Redemption of shares of stock by the corporation is
conditional upon the corporation having funds or property
legally available therefor.
f. The corporation, either directly or through an agent,
may repurchase its shares, out of funds legally available
therefor, upon such terms and conditions and for such
consideration as the Board of Directors shall deem
advisable, by agreement with the owner at a price not
exceeding the net asset value per share as determined by the
corporation at such time or times as the Board of Directors
of the corporation shall designate, less a charge not to
exceed five percent (5%) of such net asset value, if and as
fixed by resolution of the Board of Directors of the
corporation from time to time, and take all other steps
deemed necessary or advisable in connection therewith.
g. The corporation may cause the redemption, upon the
terms set forth in subsections (a) through (e) and
subsection (h) of this Article EIGHTH, of shares of a class
of stock held by a stockholder if the net asset value of the
shares of stock is less than $500 or such other amount not
exceeding $5000 as may be fixed from time to time by the
Board of Directors (the "Minimum Amount") with respect to
that class. The Board of Directors may establish differing
Minimum Amounts for each class of the Corporation's stock
and for categories of holders of stock based on such
criteria as the Board of Directors may deem appropriate.
The Corporation shall give the stockholder notice which
shall be in writing personally delivered or deposited in the
mail, at least 30 days (or such other number of days as may
be specified from time to time by the Board of Directors)
prior to such redemption.
Notwithstanding any other provision of this Article
EIGHTH, if certificates representing such shares have been
issued, the redemption price need not be paid by the
corporation until such certificates are presented in proper
form for transfer to the corporation or the agent of the
corporation appointed for such purpose; however, the
redemption shall be effective, in accordance with the
resolution of the Board of Directors, regardless of whether
or not such presentation has been made.
h. The obligations set forth in this Article EIGHTH may
be suspended or postponed as may be permissible under the
Investment Company Act of 1940 and the rules and regulations
thereunder.
i. The Board of Directors may establish other terms and
conditions and procedures for redemption, including
requirements as to delivery of certificates evidencing
shares, if issued.
NINTH: All persons who shall acquire stock or other
securities of the corporation shall acquire the same subject to the
provisions of the corporation's Charter, as from time to time amended.
TENTH: From time to time any of the provisions of the
Charter of the corporation may be amended, altered or repealed,
including amendments which alter the contract rights of any class of
stock outstanding, and other provisions authorized by the Maryland
General Corporation Law at the time in force may be added or inserted in
the manner and at the time prescribed by said Law, and all rights at any
time conferred upon the stockholders of the corporation by its Charter
are granted subject to the provisions of this Article.
IN WITNESS WHEREOF, I have adopted and signed these Articles
of Incorporation and do hereby acknowledge that the adoption and signing
are my act.
Dated: November 20, 1995
Peter O'Rourke
_____________________________
FORM OF
BY-LAWS
OF
Lexington Troika Dialog Russia Fund, Inc.
(A Maryland Corporation)
______________________________
ARTICLE I
STOCKHOLDERS
1. Certificates Representing Stock. Certificates
representing shares of stock shall set forth thereon the statements
prescribed by Section 2-211 of the Maryland General Corporation Law
("General Corporation Law") and by any other applicable provision of law
and shall be signed by the Chairman of the Board or the President or a Vice
President and countersigned by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and may be sealed with the
corporate seal. The signatures of any such officers may be either manual
or facsimile signatures and the corporate seal may be either facsimile or
any other form of seal. In case any such officer who has signed manually
or by facsimile any such certificate ceases to be such officer before the
certificate is issued, it nevertheless may be issued by the corporation
with the same effect as if the officer had not ceased to be such officer
as of the date of its issue.
No certificate representing shares of stock shall be issued for
any share of stock until such share is fully paid, except as otherwise
authorized in Section 2-206 of the General Corporation Law.
The corporation may issue a new certificate of stock in place
of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Board of Directors may require, in its
discretion, the owner of any such certificate or his legal representative
to give bond, with sufficient surety, to the corporation to indemnify it
against any loss or claim that may arise by reason of the issuance of a new
certificate.
2. Share Transfers. Upon compliance with provisions
restricting the transferability of shares of stock, if any, transfers of
shares of stock of the corporation shall be made only on the stock transfer
books of the corporation by the record holder thereof or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation or with a transfer agent or a registrar, if
any, and on surrender of the certificate or certificates for such shares
of stock properly endorsed and the payment of all taxes due thereon.
3. Record Date for Stockholders. The Board of Directors may
fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of
stockholders, or stockholders entitled to receive payment of any dividend
or the allotment of any rights or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall
be not more than 90 days, and in case of a meeting of stockholders not less
than 10 days, prior to the date on which the meeting or particular action
requiring such determination of stockholders is to be held or taken. In
lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not to exceed
20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of, or to vote at, a meeting
of stockholders, such books shall be closed for at least 10 days
immediately preceding such meeting. If no record date is fixed and the
stock transfer books are not closed for the determination of stockholders:
(1) The record date for the determination of stockholders entitled to
notice of, or to vote at, a meeting of stockholders shall be at the close
of business on the day on which the notice of meeting is mailed or the day
30 days before the meeting, whichever is the closer date to the meeting;
and (2) The record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any rights shall be at the
close of business on the day on which the resolution of the Board of
Directors declaring the dividend or allotment of rights is adopted,
provided that the payment or allotment date shall not be more than 60 days
after the date on which the resolution is adopted.
4. Meaning of Certain Terms. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of
a meeting, as the case may be, the term "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share
or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class
of shares of stock and said reference also is intended to include any
outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class or series upon which or upon
whom the Articles of Incorporation confers such rights where there are two
or more classes or series of shares or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one class or series of shares of
stock, one or more of which are limited or denied such rights thereunder.
5. Stockholder Meetings.
Annual Meetings. If a meeting of the stockholders of the
corporation is required by the Investment Company Act of 1940, as amended,
to elect the directors, then there shall be submitted to the stockholders
at such meeting the question of the election of directors, and a meeting
called for that purpose shall be designated the annual meeting of
stockholders for that year. In other years in which no action by
stockholders is required for the aforesaid election of directors, no annual
meeting need be held.
Special Meetings. Special stockholder meetings for any purpose
may be called by the Chairman of the Board of Directors, if any, the Board
of Directors or the President and shall be called by the Secretary for the
purpose of removing a Director and for all other purposes whenever the
holders of shares entitled to at least ten percent (10%) of all the votes
entitled to be cast at such meeting shall make a duly authorized request
that such meeting be called. Such request shall state the purpose of such
meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. In addition,
the Directors will promptly call a meeting of shareholders for the purpose
of voting upon the question of removal of any Director when requested to do
so in writing by the recordholders of not less than ten percent (10%) of the
Company's outstanding shares. Notwithstanding the foregoing, unless
requested by stockholders entitled to cast a majority of the votes entitled
to be cast at the meeting, a special meeting of the stockholders need not be
called at the request of stockholders to consider any matter that is
substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve (12) months.
Place and Time. Stockholder meetings shall be held at such
place, either within the State of Maryland or at such other place within
the United States, and at such date or dates as the directors from time to
time may fix.
Notice or Actual or Constructive Waiver of Notice. Written
or printed notice of all meetings shall be given by the Secretary and shall
state the time and place of the meeting. The notice of a special meeting
shall state in all instances the purpose or purposes for which the meeting
is called. Written or printed notice of any meeting shall be given to each
stockholder either by mail or by presenting it to him personally or by
leaving it at his residence or usual place of business not less than ten
days and not more than ninety days before the date of the meeting, unless
any provisions of the General Corporation Law shall prescribe a different
elapsed period of time, to each stockholder at his address appearing on the
books of the corporation or the address supplied by him for the purpose of
notice. If mailed, notice shall be deemed to be given when deposited in
the United States mail addressed to the stockholder at his post office
address as it appears on the records of the corporation with postage
thereon prepaid. Whenever any notice of the time, place or purpose of any
meeting of stockholders is required to be given under the provisions of
these by-laws or of the General Corporation Law, a waiver thereof in
writing, signed by the stockholder and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance
or representation at the meeting shall be deemed equivalent to the giving
of such notice to such stockholder. The foregoing requirements of notice
also shall apply, whenever the corporation shall have any class of stock
which is not entitled to vote, to holders of stock who are not entitled to
vote at the meeting, but who are entitled to notice thereof and to dissent
from any action taken thereat.
Statement of Affairs. The President of the corporation or, if
the Board of Directors shall determine otherwise, some other executive
officer thereof, shall prepare or cause to be prepared annually a full and
correct statement of the affairs of the corporation, including a balance
sheet and a financial statement of operations for the preceding fiscal
year, which shall be filed at the principal office of the corporation in
the State of Maryland.
Conduct of Meeting. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority
and if present and acting: the Chairman of the Board, the President, a Vice
President or, if none of the foregoing is in office and present and acting,
by a chairman to be chosen by the stockholders. The Secretary of the
corporation or, in his absence, an Assistant Secretary, shall act as
secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the chairman of the meeting shall appoint a secretary
of the meeting.
Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether for the purposes of
determining his presence at a meeting, or whether by waiving notice of any
meeting, voting or participating at a meeting, expressing consent or
dissent without a meeting or otherwise. Every proxy shall be executed in
writing by the stockholder or by his duly authorized attorney-in-fact and
filed with the Secretary of the corporation. No unrevoked proxy shall be
valid after eleven months from the date of its execution, unless a longer
time is expressly provided therein.
Inspectors of Election. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by appointment
made by the directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall
determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots
or consents, determine the result and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On request of the
person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge,
question or matter determined by him or them and execute a certificate of
any fact found by him or them.
Voting. Each share of stock shall entitle the holder thereof
to one vote with respect to each matter on which he is entitled to vote
under the Articles of Incorporation, except in the election of directors,
at which each said vote may be cast for as many persons as there are
directors to be elected. Except for election of directors, a majority of
the votes cast at a meeting of stockholders, duly called and at which a
quorum is present, shall be sufficient to take or authorize action upon any
matter which may come before a meeting, unless more than a majority of
votes cast is required by the corporation's Articles of Incorporation or
by law. A plurality of all the votes cast at a meeting at which a quorum
is present shall be sufficient to elect a director.
Quorum. At any meeting of stockholders the presence in person
or by proxy of one-third of the shares of stock of the corporation entitled
to vote thereat shall constitute a quorum. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without
notice other than by announcement at the meeting, may adjourn the meeting
from time to time, but not for a period exceeding 120 days after the
original record date until a quorum shall attend.
Adjourned Meetings. A meeting of stockholders convened on the
date for which it is called (including one adjourned to achieve a quorum
as above provided) may be adjourned from time to time without further
notice to a date not more than 120 days after the original record date, and
any business may be transacted at any adjourned meeting which could have
been transacted at the meeting as originally called.
6. Informal Action. Any action required or permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders (but not to
vote thereat) have waived in writing any rights which they may have to
dissent from such action and such consent and waiver are filed with the
records of the corporation.
ARTICLE II
BOARD OF DIRECTORS
1. Functions and Definition. The business and affairs of
the corporation shall be managed under the direction of a Board of
Directors. The use of the phrase "entire board" herein refers to the total
number of directors which the corporation would have if there were no
vacancies.
2. Qualifications and Number. Each director shall be a
natural person being at least eighteen years of age. A director need not
be a stockholder, a citizen of the United States or a resident of the State
of Maryland. The initial Board of Directors shall consist of ten persons.
Thereafter, the number of directors constituting the entire board shall
never be less than three or the number of shareholders, whichever is less.
At any regular meeting or at any special meeting called for that purpose,
a majority of the entire Board of Directors may increase or decrease the
number of directors, provided that the number thereof shall never be less
than three or the number of shareholders, whichever is less, nor more than
twenty and further provided that the tenure of office of a director shall
not be affected by any decrease in the number of directors.
3. Election and Term. The first Board of Directors shall
consist of the directors named in the Articles of Incorporation and shall
hold office until the first meeting of stockholders or until their
successors have been elected and qualified. Thereafter, directors who are
elected at a meeting of stockholders, and directors who are elected in the
interim to fill vacancies and newly created directorships, shall hold
office until their successors have been elected and qualified. Newly
created directorships and any vacancies in the Board of Directors, other
than vacancies resulting from the removal of directors by the stockholders,
may be filled by the Board of Directors, subject to the provisions of the
Investment Company Act of 1940. Newly created directorships filled by the
Board of Directors shall be by action of a majority of the entire Board of
Directors prior to board expansion. All vacancies to be filled by the
Board of Directors may be filled by a majority of the remaining members of
the Board of Directors, although such majority is less than a quorum
thereof.
4. Meetings.
Time. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors conveniently may assemble.
Place. Meetings shall be held at such place within or without
the State of Maryland as shall be fixed by the Board.
Call. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or
at the direction of the President or of a majority of the directors in
office.
Notice or Actual or Constructive Waiver. Whenever any notice
of the time, place or purpose of any meeting of directors or any committee
thereof is required to be given under the provisions of the General
Corporation Law or of these by-laws, a waiver thereof in writing, signed
by the director or committee member entitled to such notice and filed with
the records of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting shall be deemed equivalent to the
giving of such notice to such director or such committee member.
Quorum and Action. One third of the entire Board of Directors
(but in no event less than two Directors unless there is only one Director)
shall constitute a quorum. A majority of the directors present, whether
or not a quorum is present, may adjourn a meeting to another time and
place. Except as otherwise specifically provided by the Articles of
Incorporation, the General Corporation Law, the Investment Company Act of
1940, as amended, or these by-laws, the action of a majority of the
directors present at a meeting at which a quorum is present shall be the
action of the Board of Directors.
Chairman of the Meeting. The Chairman of the Board, if any and
if present and acting, or the President or any other director chosen by the
Board, shall preside at all meetings.
5. Removal of Directors. Any or all of the directors may
be removed for cause or without cause by the stockholders, who may elect
a successor or successors to fill any resulting vacancy or vacancies for
the unexpired term of the removed director or directors.
6. Committees. The Board of Directors may appoint from
among its members an Executive Committee and other committees composed of
two or more directors and may delegate to such committee or committees, in
the intervals between meetings of the Board of Directors, any or all of the
powers of the Board of Directors in the management of the business and
affairs of the corporation to the extent permitted by law. In the absence
of any member of any such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such absent member.
7. Informal Action. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is
signed by all members of the Board of Directors or any such committee, as
the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or any such committee.
8. Telephone Meeting. Members of the Board of Directors or
any committee designated thereby may participate in a meeting of such Board
or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
ARTICLE III
OFFICERS
The corporation may have a Chairman of the Board and shall have
a President, a Secretary and a Treasurer, who shall be elected by the Board
of Directors, and may have such other officers, assistant officers and
agents as the Board of Directors shall authorize from time to time. Any
two or more offices, except those of President and Vice President, may be
held by the same person, but no person shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is required
by law to be executed, acknowledged or verified by two or more officers.
Any officer or agent may be removed by the Board of Directors
whenever, in its judgment, the best interests of the corporation will be
served thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation in the
State of Maryland is 11 East Chase Street, Suite 9E, c/o CSC-Lawyers
Incorporating Service Company, Baltimore, Maryland 21202. The name and
address of the resident agent in the State of Maryland are: CSC-Lawyers
Incorporating Service Company, 11 East Chase Street, Suite 9E, Baltimore,
Maryland 21202.
The corporation shall maintain, at its principal office in the
State of Maryland prescribed by the General Corporation Law or at the
business office or an agency of the corporation, an original or duplicate
stock ledger containing the names and addresses of all stockholders and the
number of shares of each class held by each stockholder. Such stock ledger
may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
The corporation shall keep at said principal office in the
State of Maryland the original or a certified copy of the by-laws,
including all amendments thereto, and shall duly file thereat the annual
statement of affairs of the corporation prescribed by Section 2-313 of the
General Corporation Law.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide a suitable corporate seal.
The corporate seal shall have inscribed thereon the name of the corporation
and shall be in such form and contain such other words and/or figures as
the Board of Directors shall determine or the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws is
vested in the Board of Directors of the corporation.
ARTICLE VIII
INDEMNIFICATION
1. Indemnification of Directors and Officers. The
corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the law. The corporation
shall indemnify its officers to the same extent as its directors and to
such further extent as is consistent with law. The corporation shall
indemnify its directors and officers who while serving as directors or
officers also serve at the request of the corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan to the same extent as its directors and, in the case
of officers, to such further extent as is consistent with law. The
indemnification and other rights provided by this Article shall continue
as to a person who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of such a person.
This Article shall not protect any such person against any liability to the
corporation or any stockholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office
("disabling conduct").
2. Advances. Any current or former director or officer of
the corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the corporation for payment of the
reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the General Corporation Law. The person seeking
indemnification shall provide to the corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the corporation has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to
the corporation for his undertaking; (b) the corporation is insured against
losses arising by reason of the advance; or (c) a majority of a quorum of
directors of the corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the corporation
at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found
to be entitled to indemnification.
3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
disabling conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by the Investment Company Act
of 1940, as amended.
5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advance of expenses
to directors, officers, employees and agents by resolution, agreement or
otherwise. The indemnification provided by this Article shall not be
deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of stockholders or disinterested
non-party directors or otherwise.
6. Amendments. References in this Article are to the
General Corporation Law and to the Investment Company Act of 1940 as from
time to time amended. No amendment of the by-laws shall affect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
Dated: March 29, 1996
- ------------------------------------------------------------------------
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
LEXINGTON TROIKA DIALOG RUSSIA FUND SERIES
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFIES that is the owner
of
*SEE REVERSE FOR CERTAIN DEFINITIONS
___________________________________
| CUSIP |
|___________________________________|
fully paid and non-assesable shares of COMMON STOCK of the par value of
$.001 each of Lexington Troika Dialog Fund a series of LEXINGTON TROIKA
DIALOG RUSSIA FUND, INC. transferable only on the books of the
Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
The Corporation is authorized to issue more than one class of capital
stock and to redeem shares of capital stock in certain circumstances
upon notice to the holder of record. The Corporation will furnish a full
statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of
each class which the Corporation is authorized to issue to any
stockholder on request and without charge.
This Certificate is not valid unless countersigned by the Transfer Agent
of the Corporation.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
COUNTERSIGNED: NATIONAL FINANCIAL DATA SERVICES
SERVICING AGENT FOR STATE STREET BANK AND TRUST COMPANY
P.O. BOX 419648 KANSAS CITY, MO 84141-6648
BY____________________________________________________
AUTHORIZED OFFICER
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
CORPORATE
SEAL
LISA CURCIO 1995 ROBERT M. DEMICHELE
SECRETARY MARYLAND PRESIDENT
- -----------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE DISCOVERED
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
NUMBER SHARES
KCK
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION IS INCORRECT OR MISSING,
PLEASE PRINT THE CORRECT INFORMATION BELOW, AND RETURN TO:
National Financial Data Services
Servicing Agent for State Street Bank and Trust Company
P.O. Box 419648
Kansas City, MO 64141-6648
_______________________________________________________
_______________________________________________________
_______________________________________________________
IDENT. OR SOC. SEC. NO.________________________________
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ______ Custodian______
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, I/We hereby sell, assign and transfer unto
PLEASE INSERT TAXPAYER IDENTIFICATION
NUMBER OF ASSIGNEE
_____________________________________
| |
|_____________________________________|
_________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________(________________)shares
of Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
___________________________________________________________________attorney,
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_______________________ Signature(s)_______________________________
SIGNATURE GUARANTEED
BY
_______________________________
(THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATSOEVER.)
This certificate is transferable
or redeemable at the offices of the
Transfer Agent.
The Signature Guarantee must be by a Trust Company or a Commercial Bank
that is a member firm of the F.D.I.C. or by a member firm of the New York,
Boston, Midwest or Pacific Stock Exchanges. NOTARIZATION BY A NOTARY PUBLIC
IS NOT ACCEPTABLE.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this __ day of _____________, 1996 by
and between LEXINGTON TROIKA DIALOG RUSSIA FUND, INC. a Maryland
Corporation having its principal place of business at Park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663 (the "Fund") and LEXINGTON MANAGEMENT
CORPORATION, a Delaware corporation having its principal place of business
at Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663 (the "Adviser"),
with respect to the following recital of fact:
RECITAL
The Fund and the Adviser desire to enter into an agreement to provide
for the management of the Fund's assets on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Management. The Adviser shall act as investment adviser for the
Fund and shall, in such capacity, supervise the investment and reinvestment
of the cash, securities or other properties comprising the Fund's assets
subject at all times to the policies and control of the Fund's Board of
Directors. The Adviser shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as investment
Advisor.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Adviser shall:
(a) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
portfolio of the Fund, the individual companies whose securities are
included in the Fund's portfolio or the industries in which they engage,
or with respect to securities which the Adviser considers desirable for
inclusion in the Fund's portfolio; and
(b) determine what industries and companies shall be represented
in the Fund's portfolio and regularly report them to the Fund's Board of
Directors; and
(c) formulate and implement programs for the purchases and sales
of the securities of such companies and regularly report thereon to the
Fund's Board of Directors; and
(d) provide the services of its personnel to the Fund; and
(e) take, on behalf of the Fund, all actions which appear to the
Fund necessary to carry into effect such purchase and sale programs and
supervisory functions as aforesaid, including the placing of orders for the
purchase and sale of portfolio securities.
3. Appointment of Sub-Adviser. Subject to the approval of the
Board and the shareholders of the Fund, the Adviser may enter into a
Sub-Advisory Agreement to engage a Sub-Adviser to the Adviser with respect to
the Fund. The Sub-Adviser shall render investment management services to
the Advisor in connection with the Adviser's responsibility to the Fund on
the terms and conditions hereinafter set forth.
a. Duties of Sub-Adviser.
Under a Sub-Advisory Agreement, the Sub-Adviser shall:
1. provide the Adviser with such economic research and
securities analysis as the Adviser may from time to time consider
necessary or advisable in connection with the Adviser's performance
of its duties hereunder;
2. obtain and evaluate pertinent information about
significant development and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy
generally or the Fund.
b. Duties of the Adviser.
In the event the Adviser delegates certain
responsibilities hereunder to a Sub-Adviser, the Adviser shall, among
other things:
1. monitor the investment program maintained by the Sub-Adviser
for the Fund to ensure that the Fund's assets are invested
in compliance with the Sub-Advisory Agreement and the Fund's
Registration Statement;
2. consult with and assist the Sub-Adviser in
maintaining appropriate policies, procedures and records so that the
Sub-Adviser operates its business and any investment program
hereunder in compliance with applicable laws;
3. establish and maintain periodic communications with
the Sub-Adviser to share information it obtains with the Sub-Adviser
concerning the effect of developments and data on the investment
program maintained by the Sub-Adviser; and
4. oversee matters relating to Fund promotion, marketing
materials and the Sub-Adviser's reports to the Board.
4. Broker Dealer Relationships.
a. Portfolio Trades. The Adviser, at its own expense, shall
place all orders for the purchase and sale of portfolio securities
for the Fund with brokers or dealers selected by the Adviser, which
may include brokers or dealers affiliated with the Adviser. The
Adviser shall use its best efforts to seek to execute portfolio
transactions at prices that are advantageous to the Fund and at
commission rates that are reasonable in relation to the benefits
received.
b. Selection of Broker-Dealers. In selecting broker-dealers
qualified to execute a particular transaction, brokers or dealers may
be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended) to the Fund and/or the other accounts which
the Adviser or its affiliates exercise investment discretion. The
Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a
portfolio transactions for the Fund that is in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities that the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Board shall periodically
review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable
in relation to the benefits received.
5. Control by Board of Directors. Any investment program
undertaken by the Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Adviser on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Adviser shall at all times conform
to:
(a) all applicable provisions of the Investment Company Act of 1940
(the "Act") and any rules and regulations adopted thereunder as amended;
and
(b) the provisions of the Registration Statement of the Fund under
the Securities Act of 1933 and the Investment Company Act of 1940, as
amended; and
(c) the provisions of the Articles of Incorporation of the Fund;
and
(d) the provisions of the By-Laws of the Fund; and
(e) any other applicable provisions of state and federal law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Adviser as follows:
(a) The Adviser shall maintain, at its expense and without cost to
the Fund, a trading function in order to carry out its obligations under
subparagraph (d) of paragraph 2 hereof to place orders for the purchase and
sale of portfolio securities for the Fund.
(b) The Adviser shall pay the Fund's expenses for office rent,
utilities, telephone, furniture and supplies utilized at the Fund's
principal office.
(c) The Adviser shall pay salaries and payroll expenses of persons
serving as officers or Directors of the Fund who are also employees of the
Adviser or any of its affiliates.
(d) Nothing in subparagraph (a) through (e) hereof shall be
construed to require the Adviser to bear other expenses.
(e) Any of the other expenses incurred in the operation of the Fund
shall be borne by the Fund, including, among other things, fees of its
custodian, transfer and shareholder servicing agent; cost of pricing and
calculating its daily net asset value and of maintaining its books and
accounts required by the Investment Company act of 1940; expenditures in
connection with meetings of the Fund's Directors and shareholders, except
those called to accommodate the Advisor; fees and expenses of Directors who
are not affiliated with or interested persons of the Advisor; in
maintaining registration of its shares under state securities laws or in
providing shareholder and dealer services; insurance premiums on property
or personnel of the Fund which inure to its benefit; costs of preparing and
printing reports, proxy statements and prospectuses of the Fund for
distribution to its shareholders; legal, auditing and accounting fees; fees
and expenses of registering and maintaining registration of its shares for
sales under Federal and applicable state securities laws; and all other
expenses in connection with issuance, registration and transfer of its
shares.
8. Compensation. The Fund shall pay the Adviser in full
compensation for services rendered hereunder an annual investment advisory
fee, payable monthly equal to 1.25% of the Fund's average daily net assets.
9. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Fund, including all investment advisory
fees but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority
of any jurisdiction in which the Fund's securities are offered as
determined in the manner described above as of the close of business on
each business day during such fiscal year, the aggregate of all such
investment management fees shall be reduced by the amount of such excess
but will not be required to reimburse the Fund for any ordinary business
expenses which exceed the amount of its advisory fee for the such fiscal
year. The amount of any such reduction to be borne by the Adviser shall
be deducted from the monthly investment advisory fee otherwise payable to
the Adviser during such fiscal year; and if such amount should exceed such
monthly fee, the Adviser agrees to repay to the Fund such amount of its
investment management fee previously received with respect to such fiscal
year as may be required to make up the deficiency no later than the last
day of the first month of the next succeeding fiscal year. For purposes
of this paragraph, the term "fiscal year" shall exclude the portion of the
current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
10. Additional Services. Upon the request of the Board, the
Adviser may perform certain accounting, shareholder servicing or other
administrative services on behalf of the Fund that are not required by this
Agreement. Such services will be performed on behalf of the Fund and the
Adviser may receive from the Fund such reimbursement for costs or
reasonable compensation for such services as may be agreed upon between the
Adviser and the Board on a finding by the Board that the provision of such
services by the Adviser is in the best interests of the Fund and its
shareholders. Payment or assumption by the Adviser of any Fund expense
that the Adviser is not otherwise required to pay or assume under this
Agreement shall not relieve the Adviser of any of its obligations to the
Fund nor obligate the Adviser to pay or assume any similar Fund expense on
any subsequent occasions. Such services may include, but are not limited
to, (a) the services of a principal financial officer of the Fund
(including applicable office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Fund, and the services (including applicable office space,
facilities and equipment) of any of the personnel operating under the
direction of such principal financial officer; (b) the services of staff
to respond to shareholder inquiries concerning the status of their
accounts; providing assistance to shareholders in exchanges among the
investment companies managed or advised by the Adviser; changing account
designations or changing addresses; assisting in the purchase or redemption
of shares; or otherwise providing services to shareholders of the Fund; and
(c) such other administrative services as may be furnished from time to
time by the Adviser to the Fund at the request of the Board.
11. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall remain in force and
effect for two years and shall thereafter continue in force and effect from
year to year provided that such continuance is specifically approved at
least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the Directors who are
not parties of this Agreement or interested persons of a party to the
Agreement (other than as Fund Directors), by votes cast in person at a
meeting specifically called for such purposes.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities or by the Advisor, on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(42) of the Investment Company Act of 1940.
13. Non-Exclusivity. The services of the Adviser to the Fund are
not to be deemed to be exclusive, and the Adviser shall be free to render
investment management and corporate administrative or other services to
others (including other investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby. It is understood and agreed that officers and directors of the
Adviser may serve as officers or Directors of the Fund, and that officers
or Directors of the Fund may serve as officers or Directors of the Adviser
to extent permitted by law; and that the officers and directors of the
Adviser are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, directors or Directors of any other firm or corporation,
including other investment companies.
14. Liability of Adviser and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser or any of its
officers, directors or employees, it shall not be subject to liability to
the Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of
the Adviser shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663, and that of the Fund for this purpose shall be Park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663.
16. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Investment Company Act
of 1940, as amended, shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of
a requirement of the Investment Company Act of 1940, as amended, reflected
in any provision of this Agreement is released by rules, regulations or
order of the Securities and Exchange Commission, such provisions shall be
deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
Attest: By_______________________________
President
_________________________
LEXINGTON MANAGEMENT CORPORATION
By______________________________
Executive Vice President
Attest:
_________________________
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this 3rd day of April, 1996 by and between
LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the "Adviser"),
and TROIKA DIALOG ASSET MANAGEMENT, ZAO, a Russian Open Joint Stock
Company (the "Sub-Adviser"), with respect to the following recital of fact:
R E C I T A L
WHEREAS, Lexington Troika Dialog Russia Fund, Inc. (the "Fund") is
registered as an open-end, diversified management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations promulgated thereunder; and
WHEREAS, the Adviser is registered as an investment advisor under
the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Sub-Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Fund is authorized to issue shares of common stock
$.001 par value; and
WHEREAS, the Fund and the Adviser have entered into an agreement of
even date herewith to provide for management services for the Fund on the
terms and conditions set forth therein (the "Investment Advisory
Agreement"); and
WHEREAS, the Sub-Adviser proposes to render investment management
services to the Adviser in connection with the Adviser's responsibilities
to the Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Duties. The Sub-Adviser shall:
(a) Provide the Adviser with such economic research and
securities analysis as the Adviser may from time to time
consider necessary.
(b) Obtain and evaluate pertinent information about
significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether
affecting the economy generally or the Fund.
2. Broker-Dealer Relationships.
a. Portfolio Trades. The Adviser and Sub-Adviser at their
own expense, shall place all orders for the purchase and sale of portfolio
securities for the Fund with brokers or dealers selected by the Adviser,
and Sub Adviser which may include brokers or dealers affiliated with the
Adviser or Sub-Adviser. The Adviser and Sub-Adviser shall use their best
efforts to seek to execute portfolio transactions at prices that are
advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received.
b. Selection of Broker-Dealers. In selecting broker-dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) to the Fund and/or the other accounts which the Adviser, Sub-Adviser
or its affiliates exercise investment discretion. The Adviser and
Sub-Adviser are authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall
responsibilities that the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Board shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in
relation to the benefits received.
3. Control by Board of Directors. Any investment program
undertaken by the Sub-Adviser pursuant to this Agreement, as well as any
other activities undertaken by the Sub-Adviser on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the
Board of Directors of the Fund.
4. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Adviser shall at all times
conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Fund under
the Securities Act of 1933 and the 1940 Act; and
(c) the provisions of the Fund's Investment Advisory Agreement and
Articles of Incorporation and
(d) the provisions of the By-Laws of the Fund; and
(e) any other applicable provisions of state and federal law.
5. Expenses. The expenses connected with the Fund shall be borne
by the Sub-Adviser as follows:
(a) The Sub-Adviser shall pay the salaries and payroll expenses of
persons serving as officers or Directors of the Fund who are also
employees of the Sub-Adviser or any of its affiliates.
6. Delegation of Responsibilities. Upon request of the Adviser
and with the approval of the Fund's Board of Directors the Sub-Adviser may
perform services on behalf of the Fund which are not required by this
Agreement. Such services will be performed on behalf of the Fund and the
Sub-Adviser's cost in rendering such services may be billed monthly to the
Adviser, subject to examination by the Adviser's independent accountants.
Payment or assumption by the Sub-Adviser of any Fund expense that the
Sub-Adviser is not required to pay or assume under this Agreement shall not
relieve the Adviser or the Sub-Adviser of any of their obligations to the
Fund or obligate the Sub-Adviser to pay or assume any similar Fund expense
on any subsequent occasions.
7. Compensation. For the services to be rendered and the
facilities furnished hereunder, the Adviser shall pay the Sub-Adviser
monthly compensation of the sum of the amount determined by applying the
following annual rate to the Fund's average daily net assets net of
reimbursement: 0.625% of the Fund's annual average daily net assets.
Compensation under this Agreement shall be paid monthly. If this
Agreement becomes effective subsequent to the first day of the month or
shall terminate before the last day of the month, compensation for that
part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation for the preceding month and shall
be made as promptly as possible after the end of each month.
8. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Fund, including all investment advisory
fees but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority
of any jurisdiction in which the Fund's securities are offered as
determined in the manner described above as of the close of business on
each business day during such fiscal year, the aggregate of all such
investment management fees shall be reduced by the amount of such excess.
The amount of any such reduction to be borne by the Sub-Adviser shall be
deducted from the monthly investment advisory fee otherwise payable to the
Sub-Adviser during such fiscal year; and if such amount should exceed such
monthly fee, the Sub-Adviser agrees to repay to the Adviser such amount of
its investment advisory fee previously received with respect to such
fiscal year as may be required to make up the deficiency no later than the
last day of the first month of the next succeeding fiscal year.
Management fee allocation is 50-50 between the adviser and Sub-Adviser
after netting out reimbursement, if any. The Sub-Adviser will not be
required to reimburse the Fund for any ordinary business expenses which
exceed the amount of its Sub-Advisory fee for said fiscal year. For
purposes of this paragraph, the term "fiscal year" shall exclude the
portion of the current fiscal year which shall have elapsed prior to the
date hereof and shall include the portion of the then current fiscal year
which shall have elapsed at the date of termination of this Agreement.
9. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect, subject
to Section 11 hereof for two years from the date hereof.
10. Renewal. Following the expiration of its initial two year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually.
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the Directors who are
not parties of this Agreement or interested persons of a party to the
Agreement (other than as a Director of the Fund), by votes cast in person
at a meeting specifically called for such purposes.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities or by the Sub-Adviser on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(42) of the Investment Company Act of 1940.
12. Liability of the Sub-Adviser. In the absence of willful
misfeasance, bad faith, gross negligence on the part of the Sub-Adviser or
its officers, directors or employees, or reckless disregard by the Sub-Adviser
of its duties under this Agreement, the Sub-Adviser shall not be
liable to the Adviser, the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security, provided the Sub-Adviser has acted in good faith.
13. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other party
at such address as such other party may designate for the receipt of such
notice. Until further notice to the other party, it is agreed that the
address of the Adviser shall be Park 80 West, Plaza Two, Saddle Brook, New
Jersey 07663, and that of the Sub-Adviser for this purpose shall be c/o
PX Post TDG 518, 208 East 51st Street #295, New York, N.Y. 10022.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
LEXINGTON MANAGEMENT CORPORATION
Attest: By
___________________________
Managing Director
____________________
TROIKA DIALOG ASSET MANAGEMENT, ZAO
Attest: By
___________________________
President
____________________
DISTRIBUTION AGREEMENT
between
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
and
LEXINGTON FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT made this _______ day of _______________ ,1996 by and
between LEXINGTON TROIKA DIALOG RUSSIA FUND, INC. , a Maryland Corporation
(hereinafter referred to as the "Fund"), and LEXINGTON FUNDS DISTRIBUTOR,
INC., a Delaware Corporation (hereinafter referred to as the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
FIRST: The Fund hereby appoints the Distributor as its exclusive
underwriter to promote the sale and to arrange for the sale of shares of
common stock of the Fund in jurisdictions wherein shares may legally be
offered for sale.
The Fund agrees to sell and deliver its unissued shares, as from time
to time shall be effectively registered under the Securities Act of 1933,
upon the terms hereinafter set forth.
SECOND: The Fund hereby authorizes the Distributor, subject to law
and the Articles of Incorporation of the Fund, to accept, for the account
of the Fund, orders for the purchase of its shares, satisfactory to the
Distributor, as of the time of receipt of such orders or as otherwise
described in the then current prospectus of the Fund.
THIRD: The public offering price of such shares shall be based on
the net asset value per share (as determined by the Fund) of the
outstanding shares of the Fund. The net asset value shall be regularly
determined on every business day as of the time of closing of the New York
Stock Exchange. It is expected that the New York Stock Exchange will be
closed on Saturdays and Sundays and on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas. The public offering price shall become effective as set
forth from time to time in the Fund's current prospectus; such net asset
value shall also be regularly determined, and the public offering price
based thereon shall become effective, as of such other times for the
regular determination of net asset value as may be required or permitted
by rules of the National Association of Securities Dealers, Inc. or of the
Securities and Exchange Commission. The Fund shall furnish the
Distributor, with all possible promptness, a statement of each computation
of net asset value, and of the details entering into such computation.
The Distributor may, and when requested by the Fund shall, suspend
its efforts to effectuate sales of the shares of common stock at any time
when in the opinion of the Distributor or of the Fund no sales should be
made because of market or other economic considerations or abnormal
circumstances of any kind.
The Fund may withdraw the offering of its common stock (i) at any
time with the consent of the Distributor, or (ii) without such consent when
so required by the provisions of any statute or of any order, rule or
regulation of any governmental body or securities exchange having
jurisdiction. It is mutually understood and agreed that the Distributor
does not undertake to sell all or any specific portion of the shares of
common stock of the Fund.
FOURTH: The Distributor agrees that it will use its best efforts
with reasonable promptness to promote and sell shares of the Fund; but so
long as it does so, nothing herein contained shall prevent the Distributor
from entering into similar arrangements with other funds and to engage in
other activities. The Fund reserves the right to issue shares in
connection with any merger or consolidation of the Fund with any other
investment company or any personal holding company or in connection with
offers of exchange exempted from Section 11(a) of the Investment Company
Act of 1940.
FIFTH: Upon a receipt by the Fund at its principal place of business
or other place designated by the Fund of an order from the Distributor,
together with delivery instructions, the Fund shall, as promptly as
practicable, cause the shareholder's account or certificates for the shares
called for in such order to be credited or delivered in such amount and in
such names as shall be specified by the Distributor, against payment
therefor in such manner as may be acceptable to the Fund.
SIXTH: All sales literature and advertisements used by the
Distributor in connection with sales of the shares of the Fund shall be
subject to the approval of the Fund. The Fund authorizes the Distributor
in connection with the sale or arranging for the sales of its shares to
give only such information and to make only such statements or
representations as are contained in the current prospectus and statement
of additional information or in sales literature or advertisements approved
by the Fund or in such financial statements and reports as are furnished
to the Distributor pursuant to this Agreement. The Fund shall not be
responsible in any way for any information, statements or representatives
given or made by the Distributor or its representatives or agents other
than such information, statements or representations contained in the then
current prospectus and statement of additional information or other
financial statements of the Fund.
SEVENTH: The Distributor as agent of the Fund is authorized, subject
to the direction of the Fund, to accept shares for redemption at their net
asset value, determined as prescribed in the then current prospectus of the
Fund. The Fund shall reimburse the Distributor monthly for its out-of-pocket
expenses reasonably incurred for carrying out the foregoing authorization,
but the Distributor shall not be entitled to any commissions or other
compensation in respect to such redemptions.
EIGHTH: The Fund shall bear:
(A) the expenses of qualification of the shares for sale in
connection with such public offerings in such states as shall be selected
by the Distributor and of continuing the qualification continued; and
(B) all legal expenses in connection with the foregoing.
NINTH: The Distributor shall bear:
(A) the expenses of printing and distributing prospectuses and
statements of additional information (other than those prospectuses and
statements of additional information required by applicable laws and
regulations to be distributed to the Fund's shareholders by the Fund) and
any other promotional or sales literature which are used by the Distributor
or furnished by the Distributor to purchasers or dealers in connection with
the Distributor's activities pursuant to this Agreement;
(B) expenses of any advertising used by the Distributor in connection
with such public offering; and
(C) all legal expenses in connection with the foregoing.
TENTH: The Distributor will accept orders for shares of the Fund
only to the extent of purchase orders actually received and not in excess
of such orders, and it will not avail itself of any opportunity of making
a profit by expediting or withholding orders.
ELEVENTH: The Fund shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy
of all financial statements, and a signed copy of each report, prepared by
independent public accountants, and with such reasonable number of printed
copies of each semi-annual and annual report of the Fund as the Distributor
may request, and shall cooperate fully in the efforts of the Distributor
to sell and arrange for the sale of its shares and in the performance by
the Distributor of all its duties under the Agreement.
TWELFTH: The Fund agrees to register, from time to time as
necessary, additional shares with the Securities and Exchange Commission,
state and other regulatory bodies and to pay the related filing fees
therefor and to file such amendments, reports and other documents as may
be necessary in order that there may be no untrue statement of a material
fact in the Registration Statement or prospectus or necessary in order that
there may be no omission to state a material fact therein necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the term
"Registration Statement" shall mean from time to time the Registration
Statement most recently filed by the Fund with the Securities and Exchange
Commission and effective under the Securities Act of 1933, as amended, as
such Registration Statement is amended at such time, and the terms
"Prospectus" shall mean for the purposes of this Agreement from time to
time the form of prospectus and statement of additional information
authorized by the Fund for use by Distributor and by dealers.
THIRTEENTH:
(A) The Fund and Distributor shall each comply with all applicable
provisions of the Investment Company Act of 1940, the Securities Act of
1933, and the rules and regulations of the National Association of
Securities Dealers, Inc. and of all other Federal and State laws, rules and
regulations governing the issuance and sale of shares of the Fund.
(B) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Distributor, the Fund agrees to indemnify the Distributor and
any controlling person of the Distributor against any and all claims,
demands, liabilities and expenses including reasonable costs of any alleged
litigation which the Distributor may incur under the Securities Act of
1933, or common law on otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in any registration
statement, statement of additional information or prospectus of the Fund,
or any omission to state a material fact therein, the omission of which
makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with written
information furnished to the Fund in connection with written information
furnished to the Fund in connection therewith by or on behalf of the
Distributor. The Distributor agrees to indemnify the Fund against any and
all claims, demands, liabilities and expenses which the Fund may incur
arising out of or based upon any act or deed of sales representatives of
the Distributor which is outside the scope of their authority under this
Agreement.
(C) The Distributor agrees to indemnify the Fund against any and all
claims, demands, liabilities and expenses which the Fund may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of material fact contained in any
registration statement, statement of additional information or prospectus
of the Fund, relating to the Fund, or any omission to state a material fact
therein if such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Fund in connection
therewith by or on behalf of the Distributor.
FOURTEENTH: Nothing herein contained shall require the Fund to take
any action contrary to any provision of its Declaration of Trust or to any
applicable statute or regulation.
FIFTEENTH: This Agreement has been approved by the Directors of the
Fund and shall become effective at the close of business on the date
hereof. This Agreement shall continue in force and effect for successive
annual periods, provided that such continuance is specifically approved at
least annually (a) (i) by the Board of Directors of the Fund, or (ii) by
vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2 (a) (42) of the Investment Company Act of 1940), and (b) by
vote of majority of the Fund's Directors who are not interested persons (as
defined in Section 2 (a) (19) of the Investment Company Act of 1940) of the
Distributor by votes cast in person at a meeting called for such purposes.
SIXTEENTH: The Distributor, as the owner of the registered service
mark "Lexington" (registration number 836-088), hereby sublicenses and
authorizes the Fund to include the word "Lexington" as part of its
corporate name, subject, however, to revocation by the Distributor in the
event that the Fund ceases to engage the Distributor or affiliates of the
Distributor as investment advisor or distributor. The Fund agrees upon
demand of the Distributor to change its corporate name to delete the word
"Lexington" therefrom.
SEVENTEENTH:
(A) This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of the Fund, or
by the Distributor, on sixty (60) days written notice of the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
EIGHTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at
such address as such other party may designate for the receipt of such
notices. Until further notice to the other party, it is agreed that the
address of the Fund shall be Park 80 West, Plaza Two, Saddle Brook, New
Jersey 07663 and Distributor shall be Park 80 West, Plaza Two, Saddle
Brook, New Jersey 07663.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
Attest: By
_________________________
President
_______________________
LEXINGTON FUNDS DISTRIBUTOR, INC.
Attest: By
_________________________
Executive Vice President
_______________________
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective __________, 19__, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and LEXINGTON TROIKA DIALOG RUSSIA FUND,
INC. (the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes,
mortgages or other obligations for the payment of money, bullion, coin and
any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar
property whether certificated or uncertificated as may be received by the
Bank or its Subcustodian (as defined in Section 3) for the account of the
Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the Bank or its
Subcustodian for the account of the Customer, which cash shall not be
subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable
to the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular
currency. To the extent Instructions are issued and the Bank can comply
with such Instructions, the Bank is authorized to maintain cash balances on
deposit for the Customer with itself or one of its affiliates at such
reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct, if
acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody
of an institution other than the established Subcustodians as defined in
Section 3 (or their securities depositories), such arrangement must be
authorized by a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and Subcustodians
are authorized to hold any of the Securities in their account with any
securities depository in which they participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of
any amendment to Schedule A. Upon request by the Customer, the Bank will
identify the name, address and principal place of business of any
Subcustodian of the Customer's Assets and the name and address of the
governmental agency or other regulatory authority that supervises or
regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit
of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be
subject only to the instructions of the Bank or its agent. Any Securities
held in a securities depository for the account of a Subcustodian will be
subject only to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for
holding its customer's assets shall provide that such assets will not be
subject to any right, charge, security interest, lien or claim of any kind
in favor of such Subcustodian except for safe custody or administration, and
that the beneficial ownership of such assets will be freely transferable
without the payment of money or value other than for safe custody or
administration. The foregoing shall not apply to the extent of any special
agreement or arrangement made by the Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the
Deposit Account upon receipt of Instructions which include all information
required by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be
deemed a loan payable on demand, bearing interest at the rate customarily
charged by the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If
the Customer does not promptly return any amount upon such notification, the
Bank shall be entitled, upon oral or written notification to the Customer,
to reverse such credit by debiting the Deposit Account for the amount
previously credited. The Bank or its Subcustodian shall have no duty or
obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for the Customer upon Instructions
after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the
Bank or its Subcustodian upon receipt by the Bank of Instructions which
include all information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the Custody
Account may be made in accordance with the customary or established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of Securities to a purchaser, dealer or their agents
against a receipt with the expectation of receiving later payment and free
delivery. Delivery of Securities out of the Custody Account may also be
made in any manner specifically required by Instructions acceptable to the
Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on
a contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions will
be credited or debited to the Accounts on the date cash or Securities are
actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to
settle within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of
the Assets. Unless the Customer sends the Bank a written exception or
objection to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In such event, or
where the Customer has otherwise approved any such statement, the Bank
shall, to the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where the Customer and all persons
having or claiming an interest in the Customer or the Customer's Accounts
were parties.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of
the Customer. The Bank shall have no liability for any loss occasioned by
delay in the actual receipt of notice by the Bank or by its Subcustodians of
any payment, redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to take any action
under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities
(other than a proxy), such as subscription rights, bonus issues, stock
repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to the extent
that the Bank's central corporate actions department has actual knowledge of
a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek Instructions,
the Bank is authorized to sell such rights entitlement or fractional
interest and to credit the Deposit Account with the proceeds or take any
other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and
where bearer Securities are involved, proxies will be delivered in
accordance with Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial
redemption by the issuer, the Bank may allot the called portion to the
respective beneficial holders of such class of security in any manner the
Bank deems to be fair and equitable. The Customer agrees to hold the Bank,
Subcustodians, and their respective nominees harmless from any liability
arising directly or indirectly from their status as a mere record holder of
Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means
employees or agents including investment managers as have been designated by
written notice from the Customer or its designated agent to act on behalf of
the Customer under this Agreement. Such persons shall continue to be
Authorized Persons until such time as the Bank receives Instructions from
the Customer or its designated agent that any such employee or agent is no
longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission,
bank wire or other teleprocess or electronic instruction or trade
information system acceptable to the Bank which the Bank believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized Person
to send such confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. The Customer
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which the Bank shall make available to the Customer
or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets.
The Bank shall be liable to the Customer for any loss which
shall occur as the result of the failure of a Subcustodian to
exercise reasonable care with respect to the safekeeping of such
Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In
the event of any loss to the Customer by reason of the failure
of the Bank or its Subcustodian to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of the
Customer's direct damages, to be determined based on the market
value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any
special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or
a Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability
to the Customer for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the scope
of this Agreement if such act or omission was in good faith,
without negligence. In performing its obligations under this
Agreement, the Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and any
related expenses with respect to income from or Assets in the
Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit
of the Customer.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any
loss due to forces beyond their control including, but not
limited to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation,
or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the
Customer or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made
pursuant to this Agreement;
(v) review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in
Section 10) issuing Instructions shall bear any responsibility
to review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have
a material interest in a transaction, or circumstances are such that the
Bank may have a potential conflict of duty or interest including the fact
that the Bank or any of its affiliates may provide brokerage services to
other customers, act as financial advisor to the issuer of Securities, act
as a lender to the issuer of Securities, act in the same transaction as
agent for more than one customer, have a material interest in the issue of
Securities, or earn profits from any of the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to, legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration
of the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or
an Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such
contracts but the Bank may establish rules or limitations concerning any
foreign exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the
Bank's obligations under this Agreement. The Customer will indemnify the
Bank against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination
of books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking
to permit the Customer's independent public accountants reasonable access to
the records of any Subcustodian which has physical possession of any Assets
as may be required in connection with the examination of the Customer's
books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
X MUTUAL FUND
X SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or
right under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a party
of any provision of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Notices. All notices under this Agreement shall be effective
when actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the following
addresses or such other addresses as may subsequently be given to the other
party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
Customer: Richard Hisey
Lexington Management Corp.
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
or telex:
(i) Termination. This Agreement may be terminated by the Customer
or the Bank by giving sixty (60) days written notice to the other, provided
that such notice to the Bank shall specify the names of the persons to whom
the Bank shall deliver the Assets in the Accounts. If notice of termination
is given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case
the Bank will deliver the Assets to the persons so specified, after
deducting any amounts which the Bank determines in good faith to be owed to
it under Section 13. If within sixty (60) days following receipt of a
notice of termination by the Bank, the Bank does not receive Instructions
from the Customer specifying the names of the persons to whom the Bank shall
deliver the Assets, the Bank, at its election, may deliver the Assets to a
bank or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold the Assets until Instructions are provided
to the Bank.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
By:____________________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By:____________________________________________
Title
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally
came , to me known, who being by me duly
sworn, did depose and say that he/she resides in at
;
that he/she is of
, the entity described in and which executed the
foregoing instrument; that he/she knows the seal of said entity, that the
seal affixed to said instrument is such seal, that it was so affixed by
order of said entity, and that he/she signed his/her name thereto by like
order.
Sworn to before me this
day of , 19 .
Notary
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,19 ,
before me personally came , to me known, who being by
me duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that he/she signed his/her name
thereto by like order.
Sworn to before me this
day of , 19 .
Notary
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Lexington Troika Dialog Russia Fund, Inc.
effective _____________, 19__
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the Act), as the same may
be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or
under the authority of the SEC or the Exemptive Order applicable to accounts
of this nature issued to the Bank (Investment Company Act of 1940, Release
No. 12053, November 20, 1981), as amended, or unless the Bank has otherwise
specifically agreed, the Customer shall be solely responsible to assure that
the maintenance of Assets under this Agreement complies with such rules,
regulations, interpretations or exemptive order promulgated by or under the
authority of the Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible
foreign custodian or an eligible foreign securities depository, which
are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country
other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders'
equity in excess of $200 million in U.S. currency (or a foreign
currency equivalent thereof), (ii) a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100
million in U.S. currency (or a foreign currency equivalent thereof)
(iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority
owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a
country other than the United States which has such other
qualifications as shall be specified in Instructions and approved by
the Bank; or (iv) any other entity that shall have been so qualified
by exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the
central system for handling securities or equivalent book-entries in
that country, or (ii) a transnational system for the central handling
of securities or equivalent book-entries.
The Customer represents that its Board of Directors has approved each
of the Subcustodians listed in Schedule A to this Agreement and the terms of
the subcustody agreements between the Bank and each Subcustodian, which are
attached as Exhibits I through of Schedule A, and further represents
that its Board has determined that the use of each Subcustodian and the
terms of each subcustody agreement are consistent with the best interests of
the Fund(s) and its (their) shareholders. The Bank will supply the Customer
with any amendment to Schedule A for approval. The Customer has supplied or
will supply the Bank with certified copies of its Board of Directors
resolution(s) with respect to the foregoing prior to placing Assets with any
Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made
pursuant to Section 5 and 6 of this Agreement may be made only for the
purposes listed below. Instructions must specify the purpose for
which any transaction is to be made and Customer shall be solely
responsible to assure that Instructions are in accord with any
limitations or restrictions applicable to the Customer by law or as
may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices
as confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise
become payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of
adequate collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the
Bank, its Subcustodian or the Customer's transfer agent, such shares
to be purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer
against delivery to the Bank, its Subcustodian or the Customer's
transfer agent of such shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Bank of monies for the premium due
and a receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, the Bank will receive from
brokers the Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the delivery of Securities
to be held in escrow and will have no responsibility or liability for
any such Securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement
of the purpose for which the delivery or payment is to be made, the
amount of the payment or specific Securities to be delivered, the name
of the person or persons to whom delivery or payment is to be made,
and a certification that the purpose is a proper purpose under the
instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section
14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each
of its branches, each branch of a qualified U.S. bank, each eligible
foreign custodian and each eligible foreign securities depository
holding the Customer's Securities pursuant to this Agreement afford
protection for such Securities at least equal to that afforded by the
Bank's established procedures with respect to similar securities held
by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal accounting controls applicable to the Bank's duties under
this Agreement. The Bank shall endeavor to obtain and furnish the
Customer with such similar reports as it may reasonably request with
respect to each Subcustodian and securities depository holding the
Customer's assets.
GLOBAL CUSTODY AGREEMENT
WITH: LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
DATE: ________, 19__
SPECIAL TERMS AND CONDITIONS RIDER
The parties have agreed to the following modifications to the Agreement:
Section 7
The last paragraph of Section 7 shall be reworded as follows:
"The collectibility of funds or other property paid or
distributed in respect of Securities, in the Custody
Account shall be made at the risk of the customer.
Subject to the Bank's of exercise of reasonable care the
Bank shall have no liability for any loss occasioned by
delay in the acutal receipt of notice by the Bank or by
its Subcustodians of any payment, redemption or other
transaction regarding Securities in in the Custody Account
in respect of which the Bank has agreed to take any action
under this Agreement."
Section 12(b)(iii)
Following the words: "as provided in Section 5(c)" insert the words:
"and 7(e)".
Section 13
Reword the last sentence as follows:
"Following invoice by the Bank, if any such amount is not
paid by the Customer (and rights with respect to such
amount remains disputed following good faith efforts to
resolve such dispute), the Bank shall have a lien on, and
is authorized to charge any accounts of the Customer for
any amount owing to the Bank under any provision of this
Agreement.
****************
AMENDMENT, dated__________, 1996 to the ___________, 1996 custody
agreement ("Agreement"), between Lexington Troika Dialog Russia Fund,
Inc. ("Customer"), having a place of business at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663, and The Chase Manhattan Bank, N.A.
( Bank ), having a place of business at One Chase Manhattan Plaza, New
York, N.Y. 10081
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed
in all respects. Capitalized terms used herein without definition shall
have the meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended as follows by adding the
following as new Section 15:
(a) "CMBI" shall mean Chase Manhattan Bank International,
an indirect wholly-owned subsidiary of Bank, located in Moscow, Russia,
and any nominee companies appointed by it.
(b) "International Financial Institution" shall mean any
bank in the top 1,000 (together with their affiliated companies) as
measured by "Tier 1" capital or any broker/dealer in the top 100 as
measured by capital.
(c) "Negligence" shall mean the failure to exercise
"Reasonable Care".
(d) "No-Action Letter" shall mean the response of the
Securities and Exchange Commission's Office of Chief Counsel of
Investment Management, dated April 18, 1995, in respect of the Templeton
Russia Fund, Inc. (SEC Ref. No. 95-151-CC, File No. 811-8788) providing
"no-action" relief under Section 17(f) of The Investment Company Act of
1940, as amended, and SEC Rule 17f-5 thereunder, in connection with
custody of such Templeton Russia Fund, Inc.'s investments in Russian
Securities.
(e) "Reasonable Care" shall mean the use of reasonable
custodial practices under the applicable circumstances as measured by
the custodial practices then prevailing in Russia of International
Financial Institutions acting as custodians for their institutional
investor clients in Russia.
(f) "Registrar Company" shall mean any entity providing
share registration services to an issuer of Russian Securities.
(g) "Registrar Contract" shall mean a contract between CMBI
and a Registrar Company (and as the same may be amended from time to
time) containing, inter alia, the contractual provisions described at
paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter.
(h) "Russian Security" shall mean a Security issued by a
Russian issuer.
(i) "Share Extract" shall mean: (i) an extract of its share
registration books issued by a Registrar Company indicating an
investor s ownership of a security; and (ii) a form prepared by CMBI or
its agent in those cases where a Registrar Company is unwilling to issue
a Share Extract.
Section 3. Section 6(a) of the Agreement is amended by adding the
following at the end thereof: With respect to Russia, payment for
Russian Securities shall not be made prior to the issuance of the Share
Extract relating to such Russian Security. Delivery of Russian
Securities may be made in accordance with the customary or established
securities trading or securities processing practices and procedures in
Russia. Delivery of Russian Securities may also be made in any manner
specifically required by Instructions acceptable to the Bank. Customer
shall promptly supply such transaction and settlement information as may
be requested by Bank or CMBI in connection with particular
transactions.
Section 4. Section 8 of the Agreement is amended by adding a new
paragraph to the end thereof as follows: "It is understood and agreed
that Bank need only use its reasonable efforts with respect to performing
the functions described in this Section 8 with respect to Russian
Securities."
Section 5. Section 12(a)(i) of the Agreement is amended with
respect to Russian custody by deleting the phrase reasonable care
wherever it appears and substituting, in lieu thereof, the phrase
Reasonable Care .
Section 6. Section 12(a)(i) of the Agreement is further amended
with respect to Russian custody by inserting the following at the end of
the first sentence thereof: "provided that, with respect to Russian
Securities, Bank's responsibilities shall be limited to safekeeping of
relevant Share Extracts."
Section 7. Section 12 (a)(i) of the Agreement is further amended
with respect to Russian custody by inserting the following after the
second sentence thereof: "In connection with the foregoing, neither Bank
nor CMBI shall assume responsibility for, and neither shall be liable
for, any action or inaction of any Registrar Company and no Registrar
Company shall be, or shall be deemed to be, Bank, CMBI, a Subcustodian,
a securities depository or the employee, agent or personnel of any of
the foregoing. To the extent that CMBI employs agents to perform any of
the functions to be performed by Bank or CMBI with respect to Russian
Securities, neither Bank nor CMBI shall be responsible for any act,
omission, default or for the solvency of any such agent unless the
appointment of such agent was made with Negligence or in bad faith,
except that where Bank or CMBI uses (i) an affiliated nominee or (ii) an
agent to perform the share registration or share confirmation functions
described in paragraphs (a)-(e) on pps. 5-6 of the No-Action Letter, and,
to the extent applicable to CMBI, the share registration functions
described on pps. 2-3 of the No-Action Letter, Bank and CMBI shall be
liable to Customer as if CMBI were responsible for performing such
services itself."
Section 8. Section 12(a)(ii) is amended with respect to Russian
custody by deleting the word "negligently" and substituting, in lieu
thereof, the word "Negligently".
Section 9. Section 12(a)(iii) is amended with respect to Russian
custody by deleting the word "negligence" and substituting, in lieu
thereof, the word "Negligence".
Section 10. Add a new Section 16 to the Agreement as follows:
(a) Bank will advise Customer (and will update such advice
from time to time as changes occur) of those Registrar Companies with
which CMBI has entered into a Registrar Contract. Bank shall cause CMBI
both to monitor each Registrar Company and to promptly advise Customer
when CMBI has actual knowledge of the occurrence of any one or more of
the events described in paragraphs (i)-(v) on pps. 8-9 of the No-Action
Letter with respect to a Registrar Company that serves in that capacity
for any issuer the shares of which are held by Customer.
(b) Where Customer is considering investing in the Russian
Securities of an issuer as to which CMBI does not have a Registrar
Contract with the issuer's Registrar Company, Customer may request that
Bank ask that CMBI both consider whether it would be willing to attempt
to enter into such a Registrar Contract and to advise Customer of its
willingness to do so. Where CMBI has agreed to make such an attempt,
Bank will advise Customer of the occurrence of any one or more of the
events described in paragraphs (i)-(iv) on pps. 8-9 of the No-Action
Letter of which CMBI has actual knowledge.
(c) Where Customer is considering investing in the Russian
Securities of an issuer as to which CMBI has a Registrar Contract with
the issuer s Registrar Company, Customer may advise Bank of its interest
in investing in such issuer and, in such event, Bank will advise
Customer of the occurrence of any one or more of the events described in
paragraphs (i)-(v) on pps. 8-9 of the No-Action Letter of which CMBI has
actual knowledge.
Section 11. Add a new Section 17 to the Agreement as follows:
"Customer shall pay for and hold Bank and CMBI harmless from any
liability or loss resulting from the imposition or assessment of any
taxes (including, but not limited to, state, stamp and other duties) or
other governmental charges, and any related expenses with respect to
income on Russian Securities."
Section 12. Add a new Section 18 to the Agreement as follows:
"Customer acknowledges and agrees that CMBI may not be able, in given
cases and despite its reasonable efforts, to obtain a Share Extract from
a Registrar Company and CMBI shall not be liable in any such event
including with respect to any losses resulting from such failure."
Section 13. Add a new Section 19 to the Agreement as follows:
"Customer acknowledges that it has received, reviewed and understands
the Chase market report for Russia, including, but not limited to, the
risks described therein."
Section 14. Add a new Section 20 to the Agreement as follows:
"Subject to the cooperation of a Registrar Company, for at least the
first two years following CMBI s first use of a Registrar Company, Bank
shall cause CMBI to conduct share confirmations on at least a quarterly
basis, although thereafter confirmations may be conducted on a less
frequent basis if Customer s Board of Directors, in consultation with
CMBI, determines it to be appropriate."
Section 15. Add a new Section 21 to the Agreement as follows:
"Bank shall cause CMBI to prepare for distribution to Customer s Board
of Directors a quarterly report identifying: (i) any concerns it has
regarding the Russian share registration system that should be brought
to the attention of the Board of Directors; and (ii) the steps CMBI has
taken during the reporting period to ensure that Customer's interests
continue to be appropriately recorded."
Section l6. Add a new Section 22 to the Agreement as follows:
"Except as provided in new Section 16(b), the services to be provided by
Bank hereunder will be provided only in relation to Russian Securities
for which CMBI has entered into a Registrar Contract with the relevant
Registrar Company."
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC. THE CHASE MANHATTAN BANK, N.A.
By:_________________________ By:_________________________
Name: Richard M. Hisey Name: Matthew D. Goad
Title: Vice President & Treasurer Title: Vice President
Date:______________,1996 Date:_____________,1996
TRANSFER AGENCY AND SERVICE AGREEMENT
between
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Bank
Article 2 Fees and Expenses
Article 3 Representations and Warranties of the Bank
Article 4 Representations and Warranties of the Fund
Article 5 Data Access and Proprietary Information
Article 6 Indemnification
Article 7 Standard of Care
Article 8 Covenants of the Fund and the Bank
Article 9 Termination of Agreement
Article 10 Assignment
Article 11 Amendment
Article 12 Massachusetts Law to Apply
Article 13 Force Majeure
Article 14 Consequential Damages
Article 15 Merger of Agreement
Article 16 Counterparts
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the __ day of ______________, by and between
Lexington Troika Dialog Russia Fund, Inc., a corporation, having its
principal office and place of business at Park 80 West Plaza Two, Saddle
Brook, New Jersey 07663, (the "Fund"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place
of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article l Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in
this Agreement, the Fund hereby employs and appoints the Bank to act as, and
the Bank agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $____ par value, ("Shares"), dividend
disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plans provided to
the shareholders of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund, including without limitation any periodic investment plan or
periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(viii)Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent, dividend disbursing
agent, custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the
Fund and the Bank per the attached service responsibility schedule. The Bank
may at times perform only a portion of these services and the Fund or its
agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section
2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but
not limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at least
seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases,
computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed Customer Data.
The Fund agrees to treat all Proprietary Information as proprietary to the
Bank and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the
rights of the Bank in Proprietary Information at common law,
under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for
the contents of such data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.03 If the transactions available to the Fund include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the
Fund shall indemnify and hold the Bank harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent
or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or
of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a claim for
which the Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party
upon one hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, the Bank reserves the
right to charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither
this Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or failure
to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
Article 16 Counterparts
16.01 This Agreement may be executed by the parties
hereto on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
BY:
___________________________________
Vice President
ATTEST:
_________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
____________________________________
Senior Vice President
ATTEST:
___________________________________
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms.
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
BY:
__________________________________
Vice President
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
___________________________________
Vice President
ATTEST:
__________________________________
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made by and between LEXINGTON TROIKA DIALOG RUSSIA
FUND, INC., a Maryland corporation (the "Fund"), and LEXINGTON MANAGEMENT
CORPORATION, a Delaware corporation (the Administrator ), with respect to
the following recital of facts:
RECITAL
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations promulgated thereunder;
WHEREAS, the Administrator is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the " Advisers Act"),
and engages in the business of acting as an investment adviser and an
administrator of investment companies;
WHEREAS, the Fund, and the Administrator desire to enter into an
agreement to provide for administrative services for the Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADMINISTRATOR
The Administrator is hereby appointed to serve as the Administrator
to the Fund, to provide the administrative services described herein and
assume the obligations set forth in Section II, subject to the terms of this
Agreement and the control of the Fund's Board of [Directors/Trustees] (the
"Board"). The administrator shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided
or authorized, no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADMINISTRATOR
In carrying out the terms of this Agreement, the Administrator shall:
A. provide office space, equipment and facilities (which may be
the Administrator's or its affiliates) for maintaining the
Fund s organization, for meetings of the Board and the
shareholders, and for performing administrative services
hereunder;
B. supervise and manage all aspects of the Fund's operations
(other than investment advisory activities), and supervise
relations with, and monitor the performance of, custodians,
depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and
other persons in any capacity deemed to be necessary and
desirable by the Board;
C. determine and arrange for the publication of the net asset
value of the Fund;
D. provide non-investment related statistical and research data
and such other reports, evaluations and information as the Fund
may request from time to time;
E. provide internal clerical, accounting and legal services, and
stationery and office supplies;
F. prepare, to the extent requested by the Fund, the Fund's
prospectus, statement of additional information, proxy
statements and annual and semi-annual reports to shareholders;
G. arrange for the printing and mailing (at the Fund's expense) of
proxy statements and other reports or other materials provided
to the Fund's shareholders;
H. prepare for execution and file all the Fund's federal and state
tax returns and required tax filings other than those required
to be made by the Fund's custodian and transfer agent;
I. prepare periodic reports to and filings with the Securities and
Exchange Commission (the "SEC") and state Blue Sky authorities
with the advice of the Fund's counsel;
J. maintain the Fund s existence, and during such times as the
shares of the Fund are publicly offered, maintain the
registration and qualification of the Fund's shares under the
federal and state law;
K. keep and maintain the financial accounts and records of the
Fund;
L. develop and implement, if appropriate, management and
shareholder services designed to enhance the value or
convenience of the Fund as an investment vehicle;
M. provide the Board on a regular basis with reports and analyses
of the Fund's operations and the operations of comparable
investment companies;
N. respond to inquiries from shareholders or participants of
employee benefit plans (for which the administrator or any
affiliate provides recordkeeping) relating to the Fund,
concerning, among other things, exchanges among Funds, or refer
any such inquiries to the Fund's officers or the Fund's
transfer agent;
O. provide participant recordkeeping services for participants in
employee benefit plans for which the Administrator or any
affiliate provides recordkeeping services; and
P. provide such information as may be reasonably requested by a
shareholder representative of or a participant in an employee
benefit plan to comply with applicable federal or state laws.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator hereby represents and warrants to the Fund as
follows:
1. Due Incorporation and Organization. The Administrator is
duly organized and is in good standing under the laws of the
State of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations hereunder.
2. Best Efforts. The Administrator at all times shall provide
its best judgment and effort to the Fund in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund hereby represents and warrants to the Administrator as
follows:
1. Organization. The Fund has been duly organized as a
corporation under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
terms.
2. Registration. The Fund is registered as an investment
company with the SEC under the 1940 Act and shares of the Fund
are registered or qualified for offer and sale to the public
under the Securities Act of 1933, as amended (the 1933 Act ),
and all applicable state securities laws. Such registrations
or qualifications will be kept in effect during the term of
this Agreement.
IV. CONTROL BY THE BOARD
Any activities undertaken by the administrator pursuant to this
Agreement on behalf of the Fund shall at all times be subject to any
directives of the Board.
V. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the
Administrator shall at all times conform to:
A. all applicable provisions of the 1940 Act;
B. the provisions of the registration statement of the Fund under
the 1933 Act and the 1940 Act;
C. the provisions of the Fund s chartering documents, as amended;
D. the provisions of the By-Laws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VI. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement
may be furnished by any directors, officers or employees of the
Administrator or by any affiliates of the Administrator under the
Administrator's supervision.
VII. COMPENSATION
For the services to be rendered, the facilities furnished and the
expenses assumed by the administrator, the Fund shall pay to the
Administrator an annual fee, payable monthly, equal to the pro-rata portion
of the Administrator's actual cost in providing such services, facilities
and expenses.
VIII. NON-EXCLUSIVITY
The services of the Administrator to the Fund are not to be deemed to
be exclusive, and the Administrator shall be free to render administrative
or other services to others (including other investment companies) and to
engage in other activities, so long as its services under this agreement are
not impaired thereby. It is understood and agreed that officers and
directors of the Administrator may serve as officers or [directors/trustees]
of the Fund, and that officers of [directors/trustees] of the Fund may serve
as officers or directors of the Administrator to the extent permitted by
law; and that the officers and directors of the Administrator are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers,
directors or trustees of any other firm or trust, including other investment
companies.
IX. TERM
This Agreement shall become effective at the close of business on the
date hereof and shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund s [directors/trustees] who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, or by
the vote of the holders of a majority (as so defined) of the outstanding
voting securities of the Fund and by such vote of the [directors/trustees].
X. TERMINATION
This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Fund s [directors/trustees] or by vote of a
majority of the Fund s outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Administrator, on sixty (60) days
written notice to the other party.
XI. LIABILITY OF ADMINISTRATOR AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator or its officers, directors
or employees, or reckless disregard by the Administrator of its duties
under this Agreement, the Administrator shall not be liable to the
Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
looses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder
on the part of the Administrator or any officer, director or employee
of the Administrator, to the extent permitted by applicable law, the
Fund hereby agrees to indemnify and hold the Administrator harmless
from and against all claims, actions, suits and proceedings at law or
in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating
to the sale, purchase, pledge of, advertisement of, or solicitation
of sales or purchases of any security (whether of the Fund or
otherwise) by the Fund, its officers, directors, employees or agents
in alleged violation of applicable federal, state or foreign laws,
rules or regulations.
XII. MATERIALS FOR DISTRIBUTION TO SHAREHOLDERS
During the term of this Agreement, the Fund shall furnish to the
Administrator at its principal office copies of all prospectuses, proxy
statements, reports to shareholders, sales literature and other material
referring to the Administrator that were prepared for distribution to
shareholders of the Fund and to participants in employee benefit plans
owning interests in the Fund (prior to the public distribution of such
materials). The Fund shall not use any such materials that refer to the
Administrator if the Administrator reasonably objects in writing within five
business days (or such other time as the parties may agree) after receipt
thereof, unless prior to such use the material is modified in a manner that
is satisfactory to the Administrator. Subsequent to the termination of this
Agreement, the Fund will continue to furnish to the Administrator copies of
such materials. The Fund shall also furnish or otherwise make available to
the Administrator other information relating to the business affairs of the
Fund as the Administrator reasonably requests from time to time.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the
Administrator and that of the Fund for this purpose shall be Park 80 West,
Plaza Two, Saddle Brook, New Jersey, 07663.
XIV. QUESTIONS OF INTERPRETATIONS
This Agreement shall be governed by the laws of the State of New
Jersey. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to
said Act. In addition, where the effect of a requirement of the 1940 Act
reflected in the provisions of this Agreement is revised by rule, regulation
or order of the SEC, such provisions shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the __ day of
_____________, 1996.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
Attest: By: _______________________________
Name Title
________________________
LEXINGTON MANAGEMENT CORPORATION
Attest: By: ______________________________
Name Title
________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 3, 1996
Lexington Troika Dialog Russia Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, N.J. 07663
Gentlemen:
We have acted as counsel for Lexington Troika Dialog Russia
Fund, Inc., a Maryland corporation (the "Fund"), in connection with the
proposed public offering of shares of common stock, $.001 par value of
its Lexington Troika Dialog Russia Fund series (the "Shares") pursuant
to a registration statement on Form N-1A (the "Registration Statement"),
to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended.
We have reviewed the Fund's Articles of Incorporation, its
By-Laws, resolutions of the Board of Directors of the Fund, and the
Registration Statement (including exhibits thereto). We have also made
such inquires and have examined originals, certified copies or copies
otherwise identified to our satisfaction of such documents, records and
other instruments as we have deemed necessary or appropriate for the
purposes of this opinion. For purposes of such examination, we have
assumed the genuineness of all signatures on original documents and the
conformity to the original documents of all copies submitted.
We are members of the Bar of the State of New York and do
not hold ourselves out as experts as to the law of any other state or
jurisdiction. We have received and relied upon an opinion from Ballard,
Spahr, Ingersoll & Andrews, Special Maryland Counsel, a copy of which is
attached herewith, concerning the organization of the Fund and the
authorization and issuance of the Shares.
Based upon and subject to the foregoing, we are of the
opinion, and so advise you as follows:
i. The Fund is duly organized and validly existing as a
corporation in good standing under the laws of the
State of Maryland.
ii. The Shares to be offered for sale pursuant to the
Prospectus are duly authorized and, when sold, issued
and paid for as contemplated by the Prospectus, will
have been validly and legally issued and will be fully
paid and nonassessable.
We consent to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
<PAGE>
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL PHILADELPHIA, PA
300 EAST LOMBARD STREET, 19TH FLOOR CAMDEN, NJ
BALTIMORE, MARYLAND 21202-3268 DENVER, CO
410-528-5600 SALT LAKE CITY, UT
FAX: 410-528-5650 WASHINGTON, DC
April 3, 1996
Kramer, Levin, Naftalis, Nessen,
Kamin, Frankel
919 Third Avenue
New York, New York 10022
RE: Lexington Troika Dialog Russia Fund, Inc., a Maryland
corporation (the "Fund") - Registration Statement on Form N-1A
pertaining to all of the authorized shares of Common Stock of the
Fund, par value $.001 per share, consisting of 1,000,000,000 shares
of Common Stock of which 500,000,000 shares are designated
Lexington Troika Dialog Russia Fund series and 500,000,000 shares
are unclassified (collectively the "Shares")
Ladies and Gentlemen:
In connection with the registration of the Shares under the
Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended, by the Fund on Form N-1A filed or to be filed with the
Securities and Exchange Commission on or about April 3, 1996 (the
Registration Statement ), you have requested our opinion to the matters
set forth below.
We have acted as special Maryland corporate counsel for the Fund
in connection with the matters described herein. In our capacity as
special Maryland corporate counsel to the Fund, we have reviewed and are
familiar with certain proceedings taken by the Fund in connection with
the authorization of the Shares. In addition, we have relied upon
certificates and advice from the officers of the Fund upon which we
believe we are justified in relying and on various certificates from,
and documents recorded with, the State Department of Assessments and
Taxation of Maryland (the Department ) including the charter of the
Fund ( Charter ), consisting of Articles of Incorporation of the Fund
filed with the Department on or about November 20, 1995 and Articles of
Amendment filed with the Department on or about April 3, 1996 and
resolutions of the Board of Directors adopted on or before the date
hereof and in full force and effect on the date hereof; and such laws,
records, documents, certificates, opinions and instruments as we deem
necessary to render this opinion.
We have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the
conformity to the originals of all documents submitted to us as
certified, photostatic or
<PAGE>
Lexington Troika Dialog Russia Fund, Inc.
April 3, 1996
Page 2
conformed copies. In addition, we have assumed that each person
executing any instrument, document or certificate referred to herein on
behalf of any party is duly authorized to do so.
Based upon the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that, as of the date
of this letter:
(1) The Fund is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Maryland;
and
(2) The Shares have been duly authorized for issuance by all
necessary corporate action on the part of Company and, when issued,
delivered and paid for as contemplated by the Prospectus included as
part of the Registration Statement, will be validly issued, fully paid
and non-assessable.
The opinions set forth herein are limited to the current corporate
laws of the State of Maryland and we express no opinion with respect to
laws of any other jurisdiction or with respect to laws of the State of
Maryland other than corporate laws. Furthermore, the opinions presented
in this letter are limited to the matters specifically set forth herein
and no other opinion shall be inferred beyond the matters expressly
stated.
We understand that you will be delivering an opinion to the Fund
as to, among other things, the legality of the Shares, which opinion
will be filed as an exhibit to the Registration Statement. This opinion
letter is solely for your use in connection with the delivery of your
opinion to the Fund, and we consent to the inclusion of this opinion,
with your opinion to the Fund, as an exhibit to the Registration
Statement. This opinion letter may not be relied upon by any other
person, or by you for any other purpose, without our prior written
consent.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 3, 1996
Lexington Troika Dialog Russia Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, N.J. 07663
Gentlemen:
We hereby consent to the reference of this Firm as counsel in the
Registration Statement on Form N-1A of the Lexington Troika Dialog Russia
Fund, Inc.
Very truly yours,
/s/Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel
Independent Auditors' Consent
To the Shareholders and Directors of the
Lexington Troika Dialog Russia Fund, Inc.:
We consent to the use of our report dated March 27, 1996, included in
the Registration Statement Form N-1A.
KPMG Peat Marwick LLP
New York, New York
March 29, 1996
LEXINGTON MANAGEMENT CORPORATION
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
BASIC DOCUMENT #01
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
TABLE OF CONTENTS
Section Page
ARTICLE 1
GENERAL
1.1 Purpose......................................... 1
1.2 Trust........................................... 1
ARTICLE 2
DEFINITIONS
2.1 Account......................................... 1
2.2 Adoption Agreement.............................. 1
2.3 Affiliated Employers............................ 1
2.4 Beneficiary..................................... 2
2.5 Break in Service................................ 2
2.6 Code............................................ 2
2.7 Compensation.................................... 2
2.8 Custodian....................................... 3
2.9 Determination Date.............................. 3
2.10 Early Retirement Date........................... 3
2.11 Earned Income................................... 3
2.12 Effective Date.................................. 3
2.13 Eligibility Computation Period.................. 3
2.14 Employee........................................ 4
2.15 Employer........................................ 4
2.16 Employer Contributions.......................... 4
2.17 Entry Dates..................................... 4
2.18 ERISA........................................... 4
2.19 Hour of Service................................. 4
2.20 Integration Level............................... 7
2.21 Key Employee.................................... 7
2.22 Leased Employee................................. 7
2.23 Maximum Disparity Rate.......................... 8
2.24 Maximum Profit Sharing Disparity Rate........... 9
2.25 Non-Key Employee................................ 9
2.26 Normal Retirement Age........................... 9
2.27 Owner-Employee.................................. 9
2.28 Participant..................................... 10
2.29 Plan............................................ 10
2.30 Plan Administrator.............................. 10
2.31 Plan Year....................................... 10
2.32 Self-Employed Individuals....................... 10
2.33 Shares.......................................... 10
2.34 Sponsor......................................... 10
2.35 Taxable Wage Base............................... 10
2.36 Total and Permanent Disability.................. 10
2.37 Trust........................................... 11
2.38 Trust Agreement................................. 11
2.39 Trustee......................................... 11
2.40 Valuation Date.................................. 11
2.41 Vesting Computation Period...................... 11
2.42 Year of Service................................. 11
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements........................ 11
3.2 Participation and Service Upon Reemployment..... 12
3.3 Predecessor Employers........................... 12
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions.......................... 13
4.2 Payment......................................... 13
4.3 Nondeductible Voluntary Contributions by
Participants.................................... 14
4.4 Rollovers....................................... 14
4.5 Direct Transfers................................ 14
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts............................. 15
5.2 Minimum Allocation.............................. 16
5.3 Allocation of Employer Contributions and
Forfeitures..................................... 17
5.4 Coordination of Social Security Integration..... 19
5.5 Withdrawals and Distributions................... 19
5.6 Determination of Value of Trust Fund and of Net
Earnings or Losses.............................. 19
5.7 Allocation of Net Earnings or Losses............ 20
5.8 Responsibilities of the Plan Administrator...... 21
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified
Plans........................................... 21
6.2 Employers Who Maintain Other Qualified Master
or Prototype Defined Contribution Plans......... 22
6.3 Employers Who, In Addition to This Plan,
Maintain Other Qualified Plans Which are
Defined Contribution Plans Other Than Master or
Prototype Plans................................. 24
6.4 Employers, Who In Addition To This Plan,
Maintain A Qualified Defined Benefit Plan....... 24
6.5 Definitions..................................... 24
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee............. 29
7.2 Investment Responsibility....................... 29
7.3 Investment Limitations.......................... 30
ARTICLE 8
VESTING
8.1 Nondeductible Voluntary Contributions and
Earnings........................................ 30
8.2 Rollovers, Transfers and Earnings............... 31
8.3 Employer Contributions and Earnings............. 31
8.4 Amendments to Vesting Schedule.................. 31
8.5 Determination of Years of Service............... 32
8.6 Forfeiture of Nonvested Amounts................. 33
8.7 Reinstatement of Benefit........................ 33
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General......................................... 34
9.2 Qualified Joint and Survivor Annuity............ 34
9.3 Qualified Preretirement Survivor Annuity........ 34
9.4 Definitions..................................... 34
9.5 Notice Requirements............................. 36
9.6 Safe Harbor Rules............................... 38
9.7 Transitional Rules.............................. 39
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service. 41
10.2 Restrictions on Immediate Distributions......... 42
10.3 Commencement of Benefits........................ 44
10.4 Early Retirement With Age and Service Require-
ment............................................ 44
10.5 Nontransferability of Annuities................. 44
10.6 Conflicts With Annuity Contracts................ 44
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules................................... 45
11.2 Required Beginning Date......................... 45
11.3 Limits on Distribution Periods.................. 45
11.4 Determination of Amount to be Distributed Each
Year............................................ 45
11.5 Death Distribution Provisions................... 46
11.6 Designation of Beneficiary...................... 48
11.7 Definitions..................................... 48
11.8 Transitional Rules.............................. 51
11.9 Optional Forms of Benefit....................... 52
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contribu-
tions........................................... 54
12.2 Hardship Withdrawals............................ 54
12.3 Manner of Making Withdrawals.................... 55
12.4 Limitations on Withdrawals...................... 55
ARTICLE 13
LOANS
13.1 General Provisions.............................. 55
13.2 Administration of Loan Program.................. 57
13.3 Amount of Loan.................................. 57
13.4 Manner of Making Loans.......................... 57
13.5 Terms of Loan................................... 58
13.6 Security for Loan............................... 58
13.7 Segregated Investment........................... 59
13.8 Repayment of Loan............................... 59
13.9 Default on Loan................................. 59
13.10Unpaid Amounts.................................. 59
ARTICLE 14
INSURANCE
14.1 Insurance....................................... 60
14.2 Policies........................................ 60
14.3 Beneficiary..................................... 60
14.4 Payment of Premiums............................. 60
14.5 Limitation on Insurance Premiums................ 61
14.6 Insurance Company............................... 62
14.7 Distribution of Policies........................ 62
14.8 Policy Features................................. 64
14.9 Changed Conditions.............................. 64
14.10Conflicts....................................... 64
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility.......... 64
15.2 Powers and Responsibilities of the Plan
Administrator................................... 65
15.3 Allocation of Duties and Responsibilities....... 67
15.4 Appointment of the Plan Administrator........... 67
15.5 Expenses........................................ 67
15.6 Liabilities..................................... 67
15.7 Claims Procedure................................ 68
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend........................ 69
16.2 Amendment by Adopting Employer.................. 69
16.3 Vesting Upon Plan Termination................... 70
16.4 Vesting Upon Complete Discontinuance of
Contributions................................... 70
16.5 Maintenance of Benefits Upon Merger............. 70
16.6 Special Amendments.............................. 70
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and
Beneficiaries................................... 70
17.2 Nonguarantee of Employment...................... 71
17.3 Rights to Trust Assets.......................... 71
17.4 Nonalienation of Benefits....................... 71
17.5 Aggregation Rules............................... 72
17.6 Failure of Qualification........................ 73
17.7 Applicable Law.................................. 73
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ARTICLE 1
GENERAL
1.1 Purpose. The Employer hereby establishes this Plan to provide
retirement, death and disability benefits for eligible employees and their
Beneficiaries. This Plan is a standardized prototype paired defined
contribution plan and is designed to permit adoption of profit sharing
provisions, money purchase pension provisions, or both. The provisions
herein and the selections made by the Employer by execution of the money
purchase pension or profit sharing Adoption Agreement or Agreements, shall
constitute the Plan. It is intended that the Plan and Trust qualify under
sections 401 and 501 of the Internal Revenue Code of 1986, as amended and
that it comply with the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to
receive, invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 Account. The aggregate of the individual bookkeeping
subaccounts established for each Participant, as provided in section 5.1.
2.2 Adoption_Agreement. The written agreement or agreements of
the Employer and the Trustee by which the Employer establishes this Plan
and adopts the Trust Agreement forming a part hereof, as the same may be
amended from time to time. The Adoption Agreement contains all the
options that may be selected by the Employer. The information set forth
in the Adoption Agreement executed by the Employer shall be deemed to be
a part of this Plan as if set forth in full herein.
2.3 Affiliated_Employers. The Employer and any corporation which
is a member of a controlled group of corporations (as defined in section
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414(b) of the Code) which includes the Employer, any trade or business
(whether or not incorporated) which is under common control (as defined
in section 414(c) of the Code) with the Employer, or any service
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in sections 414(m) and (o) of the
Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise)
designated by a Participant in accordance with section 11.6 to receive any
undistributed amounts credited to the Participant's Account under the Plan
at the time of the Participant's death.
2.5 Break_in_Service. An Eligibility Computation Period or
Vesting Computation Period in which an Employee fails to complete more
than five hundred (500) Hours of Service.
2.6 Code. The Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2
earnings.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) Compensation shall include only that Compensation that
is actually paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer
in the Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and
which is not includable in the gross income of the Employee under sections
125, 402(a)(8), 402(h) or 403(b) of the Code. The effective date of this
subsection shall be elected by the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into
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account under the Plan for any year shall not exceed two hundred thousand
dollars ($200,000), as adjusted by the Secretary at the same time and in
the same manner as under section 415(d) of the Code. In determining the
Compensation of a Participant for purposes of this limitation, the rules
of section 414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the Spouse of the Participant
and any lineal descendants of the Participant who have not attained age
nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted two hundred thousand dollar
($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the Integration Level to the
extent this Plan provides for permitted disparity), the limitation shall
be prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this section prior to the
application of this limitation.
(f) The effective date of this subsection shall be the
first Plan Year beginning on or after January 1, 1989.
2.8 Custodian. The custodian, if any, designated in the Adoption
Agreement.
2.9 Determination_Date. With respect to any Plan Year subsequent
to the first Plan Year, the last day of the preceding Plan Year. For the
first Plan Year of the Plan, the last day of that Plan Year.
2.10 Early_Retirement_Date. The first day of the month coincident
with or next following the date upon which the Participant satisfies the
early retirement age and service requirements in the Adoption Agreement;
provided, however, such requirements may not be less than age fifty- five
(55), nor more than fifteen (15) Years of Service.
2.11 Earned_Income. The net earnings from self- employment in the
trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items. Net
earnings are reduced by contributions to a qualified plan to the extent
deductible under section 404 of the Code. Net earnings shall be
determined with regard to the deduction allowed to the Employer by section
164(f) of the Code for taxable years beginning after December 31, 1989.
2.12 Effective_Date. The first day of the first Plan Year for
which the Plan is effective as specified in the Adoption Agreement.
2.13 Eligibility_Computation_Period. For purposes of determining
Years of Service and Breaks in Service for eligibility to participate, the
initial Eligibility Computation Period shall be the twelve (12)
consecutive month period beginning with the day the Employee first
performs an Hour of Service for the Employer (employment commencement
date). The succeeding twelve (12) consecutive month periods commence with
the first anniversary of the Employee's employment commencement date.
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2.14 Employee. Any person, including a Self-Employed Individual,
who is employed by the Employer maintaining the Plan or any other employer
required to be aggregated with such Employer under sections 414(b), (c),
(m) or (o) of the Code. The term "Employee" shall also include any Leased
Employee deemed to be an Employee of any Employer described above as
provided in sections 414(n) or (o) of the Code.
2.15 Employer. The corporation, proprietorship, partnership or
other organization that adopts the Plan by execution of an Adoption
Agreement.
2.16 Employer_Contributions. The contribution of the Employer to
the Plan and Trust as set forth in section 4.1 and the Adoption Agreement.
2.17 Entry_Dates. The Effective Date shall be the first Entry
Date. Thereafter, the Entry Dates shall be the first day of each Plan
Year and the first day of the seventh month of each Plan Year.
2.18 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
2.19 Hour_of_Service.
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These hours
shall be credited to the Employee only for the computation period or
periods in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence. No
more than five hundred one (501) Hours of Service shall be credited under
this paragraph to an Employee on account of any single, continuous period
during which the Employee performs no duties (whether or not such period
occurs in a single computation period). Hours under this paragraph will
be calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor regulations which are incorporated herein by this
reference.
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(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under paragraph (a) or
paragraph (b), as the case may be, and under this paragraph (c). These
hours shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement, or payment is made.
(d) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include an
uncompensated authorized leave of absence not in excess of two (2) years,
or military leave while the Employee's reemployment rights are protected
by law or such additional or other periods as granted by the Employer as
military leave (credited on the basis of forty (40) Hours of Service per
each week or eight (8) Hours of Service per working day), provided the
Employee returns to employment at the end of his leave of absence or
within ninety (90) days of the end of his military leave, whichever is
applicable.
(e) Hours of Service will be credited for employment with
other members of an affiliated service group (under section 414(m)), a
controlled group of corporations (under section 414(b)), or a group of
trades or businesses under common control (under section 414(c)) of which
the adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to section 414(o) and the
regulations thereunder. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under section
414(n) or section 414(o) and the regulations thereunder.
(f) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include absence from
work for maternity or paternity reasons, if the absence begins on or after
the first day of the first Plan Year beginning after 1984. During this
absence, the Employee shall be credited with the Hours of Service which
would have been credited but for the absence, or, if such hours cannot be
determined with eight (8) hours per day. An absence from work for
maternity or paternity reasons means an absence:
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(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the
Employee;
(iii) by reason of the placement of a child with the
Employee in connection with adoption; or
(iv) for purposes of caring for such a child for a
period immediately following such birth or placement.
These Hours of Service shall be credited in the computation period
following the computation period in which the absence begins, except as
necessary to prevent a Break in Service in the computation period in which
the absence begins. However, no more than five hundred one (501) Hours
of Service will be credited for purposes of any such maternity or
paternity absence from work.
(g) The Employer may elect to compute Hours of Service by
the use of one of the service equivalencies in the Adoption Agreement.
Only one method may be selected. If selected, the service equivalency
must be applied to all Employees covered under the Plan.
(h) If the Employer amends the method of crediting service
from the elapsed time method described in section 1.410(a)-7 of the
Treasury regulations to the Hours of Service computation method by the
adoption of this Plan, or an Employee transfers from a plan under which
service is determined on the basis of elapsed time, the following rules
shall apply for purposes of determining the Employee's service under this
Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date
of amendment or transfer, for a number of Years of Service equal to the
number of one (1) year periods of service credited to the Employee as of
the date of the amendment or transfer; and
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(ii) the Employee shall receive credit in the
applicable computation period which includes the date of amendment or
transfer, for a number of Hours of Service determined by applying the
weekly service equivalency specified in paragraph (g) to any fractional
part of a year credited to the Employee under this paragraph (h) as of the
date of amendment or transfer. The use of the weekly service equivalency
shall apply to all Employees who formerly were credited with service under
the elapsed time method.
2.20 Integration_Level. The Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
2.21 Key_Employee.
(a) Any Employee or former Employee (and the Beneficiaries
of such Employee) who at any time during the determination period was an
officer of the Employer if such individual's annual Compensation exceeds
fifty percent (50%) of the dollar limitation under section 415(b)(1)(A)
of the Code; an owner (or considered an owner under section 318 of the
Code) of one of the ten (10) largest interests in the Employer if such
individual's Compensation exceeds one hundred percent (100%) of the dollar
limitation under section 415(c)(1)(A) of the Code; a Five Percent (5%)
Owner of the Employer; or a one percent (1%) owner of the Employer who has
annual Compensation of more than one hundred fifty thousand dollars
($150,000).
(b) For purposes of this section, annual Compensation means
compensation as defined in section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under
sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
(c) For purposes of this section, determination period is
the Plan Year containing the Determination Date and the four (4) preceding
Plan Years.
2.22 Leased_Employee.
(a) Any person (other than an Employee of any of the
Affiliated Employers) who, pursuant to an agreement between any of the
Affiliated Employers and any other person ("leasing organization"), has
performed service for any of the Affiliated Employers (or for any of the
Affiliated Employers and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full-time basis for a
period of at least one (1) year and such services are of a type
historically performed by employees in the Affiliated Employer's business
field. Contributions or benefits provided a Leased Employee by the
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leasing organization which are attributable to services performed for the
Affiliated Employer shall be treated as provided by the Affiliated
Employer.
(b) A Leased Employee shall not be considered an Employee
of an Affiliated Employer if:
(i) such employee is covered by a money purchase
pension plan providing:
(1) a nonintegrated employer contribution rate
of at least ten percent (10%) of compensation (as defined in section
415(c)(3) of the Code), but including amounts contributed pursuant to a
salary reduction agreement which are excludable from the employee's gross
income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
and
(ii) Leased Employees do not constitute more than
twenty percent (20%) of the Affiliated Employer's non-Highly-Compensated
workforce.
(c) The determination of whether a person is a Leased
Employee will be made pursuant to section 414(n) of the Code.
2.23 Maximum_Disparity_Rate. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with
the table below:
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If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y **/ 5.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is five and seven-tenths percent (5.7%).
2.24 Maximum_Profit_Sharing_Disparity_Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with
the table below:
If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y **/ 2.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is two and seven-tenths percent (2.7%).
2.25 Non-Key_Employee. Any Employee or former Employee who is not
a Key Employee. In addition, any Beneficiary of a Non-Key Employee shall
be treated as a Non- Key Employee.
2.26 Normal_Retirement_Age. The age selected in the Adoption
Agreement, but not less than age fifty-five (55). If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the
lesser of that mandatory age or the age specified in the Adoption
Agreement.
2.27 Owner-Employee. An individual who is a sole proprietor, or
who is a partner owning more than ten percent (10%) of either the capital
or profits interest of a partnership.
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2.28 Participant. A person who has met the eligibility
requirements of section 3.1 and whose Account hereunder has been neither
completely forfeited nor completely distributed.
2.29 Plan. The prototype paired defined contribution profit
sharing and money purchase pension plan provided under this basic plan
document. References to the Plan shall refer to the profit sharing
provisions, the money purchase pension provisions, or both, as the context
may require.
2.30 Plan_Administrator. The person, persons or entity appointed
by the Employer pursuant to ARTICLE 15 to manage and administer the Plan.
2.31 Plan_Year. The twelve (12) consecutive month period
designated by the Employer in the Adoption Agreement.
2.32 Self-Employed_Individual. An individual who has Earned Income
for the taxable year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income for the
taxable year but for the fact that the trade or business had no net
profits for the taxable year.
2.33 Shares. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made
available for investment purposes as an investment option under this Plan.
2.34 Sponsor. The sponsor designated in the Adoption Agreement
which has made this Plan available to the Employer.
2.35 Taxable_Wage_Base. The maximum amount of earnings which may
be considered wages for a year under section 3121(a)(1) of the Code in
effect as of the beginning of the Plan Year.
2.36 Total_and_Permanent_Disability. The inability of the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment, which condition, in
the opinion of a physician chosen by the Plan Administrator, can be
expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
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2.37 Trust. The fund maintained by the Trustee for the investment
of Plan assets in accordance with the terms and conditions of the Trust
Agreement.
2.38 Trust_Agreement. The agreement between the Employer and the
Trustee under which the assets of the Plan are held, administered, and
managed. The provisions of the Trust Agreement shall be considered an
integral part of this Plan as if set forth fully herein.
2.39 Trustee. The individual or corporate Trustee or Trustees
under the Trust Agreement as they may be constituted from time to time.
2.40 Valuation_Date. The last day of each Plan Year and such other
dates as may be determined by the Plan Administrator, as provided in
section 5.6 for valuing the Trust assets.
2.41 Vesting_Computation_Period. The Plan Year.
2.42 Year_of_Service. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during which
an Employee has completed at least one thousand (1,000) Hours of Service
(whether or not continuous). The Employer may, in the Adoption Agreement,
specify a fewer number of hours.
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility_Requirements.
(a) Each Employee of the Affiliated Employers shall become
a Participant in the Plan as of the first Entry Date after the date on
which the Employee has satisfied the minimum age and service requirements
specified in the Adoption Agreement.
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(b) The Employer may elect in the Adoption Agreement to
exclude from participation:
(i) Employees included in a unit of employees covered
by a collective bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee representatives" does
not include any organization more than half of whose members are Employees
who are owners, officers, or executives of the Employer; and
(ii) nonresident aliens who receive no earned income
from the Employer which constitutes income from sources within the United
States.
3.2 Participation_and_Service_Upon_Reemployment. Upon the
reemployment of any Employee, the following rules shall determine his
eligibility to participate in the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a
Participant in the Plan during his prior period of employment, he shall
be eligible upon reemployment to resume participation in the Plan. If the
reemployed Employee was not a Participant in the Plan, he shall be
considered a new Employee and required to meet the requirements of section
3.1 in order to be eligible to participate in the Plan, subject to the
reinstatement of credit for prior service under paragraph (b) below.
(b) Credit_for_Prior_Service. In the case of any Employee
who is reemployed before or after incurring a Break in Service, any Hour
of Service and Year of Service credited to the Employee at the end of his
prior period of employment shall be reinstated as of the date of his
reemployment.
3.3 Predecessor_Employers. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated
as service for the Employer for eligibility purposes; provided, however,
if the Employer maintains the plan of a predecessor employer, Years of
Service with such employer will be treated as service with the Employer
without regard to any election.
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ARTICLE 4
CONTRIBUTIONS
4.1 Employer_Contributions.
(a) Money_Purchase_Pension_Contributions. For each Plan
Year, the Employer shall contribute to the Trust an amount equal to such
uniform percentage of Compensation of each eligible Participant as may be
determined by the Employer in accordance with the money purchase pension
contribution formula specified in the Adoption Agreement. Subject to the
limitations of section 5.4, the money purchase pension contribution
formula may be integrated with Social Security, as set forth in the
Adoption Agreement.
(b) Profit_Sharing_Contribution. For each Plan Year, the
Employer shall contribute to the Trust an amount as may be determined by
the Employer in accordance with the profit sharing formula set forth in
the Adoption Agreement.
(c) Eligible_Participants. Subject to the Minimum
Allocation rules of section 5.2 and the exclusions specified in this
section, each Participant shall be eligible to share in the Employer
Contribution. An Employer may elect in the Adoption Agreement that
Participants who terminate employment during the Plan Year with not more
than five hundred (500) Hours of Service and who are not Employees as of
the last day of the Plan Year (other than Participants who die, retire or
become totally and Permanently Disabled during the Plan Year) shall not
be eligible to share in the Employer Contribution. An Employer may
further elect in the Adoption Agreement to allocate a contribution on
behalf of a Participant who completes fewer than five hundred (500) Hours
of Service and is otherwise ineligible to share in the Employer
Contribution. If the Employer fails to specify in the Adoption Agreement
the number of Hours of Service required to share in the Employer
Contribution, the number shall be five hundred (500) Hours of Service.
(d) Contribution_Limitation. In no event shall any Employer
Contribution exceed the maximum amount deductible from the Employer's
income under section 404 of the Code, or the maximum limitations under
section 415 of the Code provided in ARTICLE 6.
4.2 Payment. All Employer Contributions to the Trust for any Plan
Year shall be made either in one lump-sum or in installments in U.S.
currency, by check, or in Shares within the time prescribed by law,
including extensions granted by the Internal Revenue Service, for filing
the Employer's federal income tax return for the taxable year with or
within which such Plan Year ends. All Employer Contributions to the Trust
for a money purchase pension plan for any Plan Year shall be made within
the time prescribed by regulations under section 412(c)(10) of the Code.
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4.3 Nondeductible_Voluntary_Contributions_by_Partici pants.
(a) This Plan will not accept nondeductible Employee
contributions for Plan Years beginning after the Plan Year in which this
Plan is adopted by the Employer. Employee contributions made with respect
to Plan years beginning after December 31, 1986 will be limited so as to
meet the nondiscrimination test of section 401(m).
(b) A separate account shall be maintained by the Trustee
for the nondeductible Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be
fully vested and nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee
contributions made prior to the first Plan Year after the Plan Year in
which the Employer adopts this Plan.
4.4 Rollovers.
(a) Subject to the approval of the Plan Administrator, a
participant who has participated in any other qualified plan described in
section 401(a) of the Code or in a qualified annuity plan described in
section 403(a) of the Code shall be permitted to make a rollover
contribution in the form of cash to the Trustee of an amount received by
the Participant that is attributable to participation in such other plan
(reduced by any nondeductible voluntary contributions he made to the
plan), provided that the rollover contribution complies with all
requirements of sections 402(a)(5) or 403(a)(4) of the Code, whichever is
applicable.
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any
documents which the Plan Administrator, in its discretion, deems necessary
for such rollover.
(c) Any rollover contribution to the Trust shall be credited
to the Participant's rollover subaccount established under section 5.1 and
separately accounted for.
4.5 Direct_Transfers.
(a) The Plan shall accept a transfer of assets directly from
another plan qualified under sections 401(a) or 403(a) of the Code only
if the Plan Administrator, in its sole discretion, agrees to accept such
a transfer. In determining whether to accept such a transfer the Plan
Administrator shall consider the administrative inconvenience engendered
by such a transfer and any risks to the continued qualification of the
Plan under section 401(a) of the Code. Acceptance of any such transfer
shall not preclude the Plan Administrator from refusing any subsequent
such transfers.
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(b) Any transfer of assets accepted under this section shall
be credited to the Participant's direct transfer subaccount and shall be
separately accounted for at all times and shall remain subject to the
provisions of the transferor plan (as it existed at the time of such
transfer) to the extent required by section 411(d)(6) of the Code
(including, but not limited to, any rights to Qualified Joint and Survivor
Annuities and qualified preretirement survivor annuities) as if such
provisions were part of the Plan. In all other respects, however, such
transferred assets will be subject to the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested
and nonforfeitable.
(d) Before approving such a direct transfer, the Plan
Administrator may request from the Participant or the Employer (or the
prior employer) any documents the Plan Administrator, in its discretion,
deems necessary for such direct transfer.
ARTICLE 5
ALLOCATIONS
5.1 Individual_Accounts. The Plan Administrator shall establish
and maintain an Account in the name of each Participant. The Account
shall contain the following subaccounts:
(a) A money purchase pension contribution subaccount to
which shall be credited each such Participant's share of (i) Employer
Contributions under section 4.1(a); (ii) the net earnings or net losses
on the investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(b) A profit sharing contribution subaccount to which shall
be credited each such Participant's share of (i) Employer Contributions
under section 4.1(b); (ii) forfeitures; (iii) the net earnings or net
losses on the investment of the assets of the trust; (iv) distributions;
and (v) dividends, capital gain distributions and other earnings received
on any Shares credited to the Participant's subaccount;
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(c) A nondeductible voluntary contribution subaccount to
which shall be credited (i) nondeductible voluntary contributions by the
Participant under section 4.3; (ii) the net earnings or net losses on the
investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.5(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount;
(e) A rollover subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.4(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount.
5.2 Minimum_Allocation.
(a) Except as otherwise provided in this section, the
Employer Contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the lesser
of three percent (3%) of such Participant's Compensation or in the case
where the Employer has no defined benefit plan which designates this Plan
to satisfy section 401 of the Code, the largest percentage of Employer
Contributions and forfeitures, as a percentage of the first two hundred
thousand dollars ($200,000) of the Key Employee's Compensation, allocated
on behalf of any Key Employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This
minimum allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an allocation,
or would have received a lesser allocation for the year because of (i) the
Participant's failure to complete one thousand (1,000) Hours of Service
(or any equivalent provided in the Plan); or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan; or
(iii) Compensation less than a stated amount. For purposes of this
subsection, all defined contribution plans required to be included in an
aggregation group under section 416(g)(2)(A)(i) shall be treated as a
single plan.
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(b) For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in section 6.5(b) of the
Plan.
(c) The provision in subsection (a) above shall not apply
to any Participant who was not employed by the Employer on the last day
of the Plan Year.
(d) The provision in subsection (a) above shall not apply
to any Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer has provided in the
Adoption Agreement that the minimum allocation or benefit requirement
applicable to top-heavy plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required
to be nonforfeitable under section 416(b)) may not be forfeited under
section 411(a)(3)(B) or 411(a)(3)(D).
5.3 Allocation_of_Employer_Contributions_and_Forfeitures.
(a) All money purchase pension contributions for a given
Plan Year shall be allocated to the Account of the Participant for whom
such contribution was made. Any forfeiture from a Participant's money
purchase pension contribution subaccount arising under the Plan for a
given Plan Year shall be applied as specified in the Adoption Agreement,
either: (i) to reduce the Employer Contribution in that year, or if in
excess of the Employer Contribution for such Plan Year, the excess amounts
shall be used to reduce the Employer Contribution in the next succeeding
Plan Year or Years or (ii) to be added to the Employer Contributions and
allocated accordingly.
(b) All profit sharing contributions and forfeitures from
a Participant's profit sharing contribution subaccount will be allocated
to the Account of each Participant in the ratio that such Participant's
Compensation bears to the Compensation of all Participants. However, if
the profit sharing contribution formula selected in the Adoption
Agreement is integrated with Social Security, profit sharing contributions
for the Plan Year plus any forfeitures will be allocated to Participants'
Accounts as follows:
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(i) Step_One. Contributions and forfeitures will be
allocated to each Participant's Account in the ratio that each
Participant's total Compensation bears to all Participants' total
Compensation, but not in excess of three percent (3%) of each
Participant's Compensation. (Step One is not applicable if the Employer
enters into the money purchase pension Adoption Agreement).
(ii) Step_Two. Any contributions and forfeitures
remaining after the allocation in Step One (if any) will be allocated to
each Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the Integration Level bears
to the excess Compensation of all Participants, but not in excess of three
percent (3%). (Step Two is not applicable if the Employer enters into the
money purchase pension Adoption Agreement).
(iii) Step_Three. Any contributions and forfeitures
remaining after the allocation in Step Two (if any) will be allocated to
each Participant's Account in the ratio that the sum of each Participant's
total Compensation and Compensation in excess of the Integration Level
bears to the sum of all Participants' total Compensation and Compensation
in excess of the Integration Level, but not in excess of whichever of the
following is applicable:
(i) if the Employer has not adopted the money
purchase pension Adoption Agreement, then the Maximum Profit Sharing
Disparity Rate; or
(ii) If the Employer has adopted the money purchase
pension Adoption Agreement, then the lesser of:
(1) the percentage of each Participant's
Compensation for the Plan Year up to the Integration Level determined by
dividing the allocation by such Compensation (the base contribution
percentage); or
(2) the Maximum Disparity Rate.
(iv) Step_Four. Any remaining contributions or
forfeitures will be allocated to each Participant's Account in the ratio
that each Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
(c) Notwithstanding anything in (a) or (b) above to the
contrary, forfeitures arising under a Participant's money purchase pension
contribution subaccount will only be used to reduce the contributions of
the Participant's Employer who adopted this Plan, and forfeitures arising
under a Participant's profit sharing contribution subaccount will be
reallocated only for the benefit of Employees of the Participant's
Employer who adopted this Plan.
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5.4 Coordination_of_Social_Security_Integration. If the Employer
maintains plans involving integration with Social Security other than this
Plan, and if any Participant is eligible to participate in more than one
of such plans, all such plans will be considered to be integrated if the
extent of the integration of all such plans does not exceed one hundred
percent (100%). For purposes of the preceding sentence, the extent of
integration of a plan is the ratio (expressed as a percentage) which the
actual benefits, benefit rate, offset rate, or Employer Contribution rate
under the plan bears to the integration limitation applicable to such
plan. If the Employer enters into both the money purchase pension
Adoption Agreement and the profit sharing Adoption Agreement under this
Plan, integration with Social Security may only be selected in one Adop-
tion Agreement.
5.5 Withdrawals_and_Distributions. Any distribution to a
Participant or his Beneficiary, any amount transferred from a
Participant's Account directly to the Trustee of any other qualified plan
described in section 401(a) of the Code or to a qualified annuity plan
described in section 403(a) of the Code, or any withdrawal by a
Participant shall be charged to the appropriate subaccount(s) of the
Participant as of the date of the distribution or the withdrawal.
5.6 Determination_of_Value_of_Trust_Fund_and_of_Net
Earnings_or_Losses. As of each Valuation Date the Trustee shall determine
for the period then ended the sum of the net earnings or losses of the
Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) receipts or income
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets) which shall reflect accrued but unpaid interest,
dividends, gains, or losses realized from the sale, exchange or collection
of assets, other income received, appreciation in the fair market value
of assets, depreciation in the fair market value of assets, administration
expenses, and taxes and other expenses paid. Gains or losses realized and
adjustments for appreciation or depreciation in fair market value shall
be computed with respect to the difference between such value as of the
preceding Valuation Date or date of purchase, whichever is applicable, and
the value as of the date of disposition or the current Valuation Date,
whichever is applicable.
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5.7 Allocation_of_Net_Earnings_or_Losses.
(a) As of each Valuation Date the net earnings or losses of
the Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) dividends or credits
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets, all of which shall be allocated to such Participant's
subaccount) for the valuation period then ending shall be allocated to the
Accounts of all Participants (or Beneficiaries) having credits in the fund
both on such date and at the beginning of such valuation period. Such
allocation shall be made by the application of a fraction, the numerator
of which is the value of the Account of a specific Participant (or
Beneficiary) as of the immediately preceding Valuation Date, reduced by
any distributions therefrom since such preceding Valuation Date, and the
denominator of which is the total value of all such Accounts as of the
preceding Valuation Date, reduced by any distributions therefrom since
such preceding Valuation Date.
(b) To the extent that Shares and other assets are
specifically allocated to a specific Participant's subaccount:
(i) dividends and capital gain distributions from Shares; (ii) dividends
or credits attributable to insurance policies; and (iii) income gains
and/or losses attributable to a Participant's loans made pursuant to
ARTICLE 13 or to any other assets, all shall be allocated to such Partici-
pant's subaccount.
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5.8 Responsibilities_of_the_Plan_Administrator. The Plan
Administrator shall maintain accurate records with respect to the
contributions made by or on behalf of Participants under the Plan, and
shall furnish the Trustee with written instructions directing the Trustee
to allocate all Plan contributions to the Trust among the separate
Accounts of Participants in accordance with section 5.1 above. In making
any such allocation, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no
duty to make any inquiry or investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers_Who_Do_Not_Maintain_Other_Qualified Plans.
(a) If the Participant does not participate in, and has
never participated in another qualified plan or a welfare benefit fund,
as defined in section 419(e) of the Code, maintained by the Employer, or
an individual medical account, as defined in section 415(l)(2) of the
Code, maintained by the Employer, which provides an Annual Addition as
defined in section 6.5(a), the amount of Annual Additions that may be
credited to the Participant's Account for any Limitation Year will not
exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer Contribution that
would otherwise be contributed or allocated to the Participant's Account
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated.
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the
allocation of forfeitures, there is an Excess Amount the excess will be
disposed of as follows:
(i) Any nondeductible voluntary Employee
contributions, to the extent they would reduce the Excess Amount, will be
returned to the Participant;
(ii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the Participant's
Account will be used to reduce Employer Contributions (including any
allocation of forfeitures) for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;
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(iii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is not covered by the Plan
at the end of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be applied
to reduce future Employer Contributions (including allocation of any
forfeitures) for all remaining Participants in the next Limitation Year,
and each succeeding Limitation Year if necessary;
(iv) If a suspense account is in existence at any time
during the Limitation Year pursuant to this section, it will not
participate in the allocation of the Trust's investment gains and losses.
If a suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts before any Employer or any Employee
contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants.
6.2 Employers_Who_Maintain_Other_Qualified_Master_or
Prototype_Defined_Contribution_Plans.
(a) This section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, a welfare benefit fund, as
defined in section 419(e) of the Code maintained by the Employer or an
individual medical account, as defined in section 415(l)(2) of the Code,
maintained by the Employer which provides an Annual Addition as defined
in section 6.5(a), during any Limitation Year. The Annual Additions that
may be credited to a Participant's Account under this Plan for any such
Limitation Year will not exceed the Maximum Permissible Amount reduced by
the Annual Additions credited to a Participant's Account under the other
plans and welfare benefit funds for the same Limitation Year. If the
Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the Participant's
Account under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed or
allocated will be reduced so that the Annual Additions under all such
plans and funds for the Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the Participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the Maximum Permissible Amount, no
amount will be contributed or allocated to the Participant's Account under
this Plan for the Limitation Year.
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(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described in
section 6.1(b).
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the
allocation of forfeitures, a Participant's Annual Additions under this
Plan and such other plans would result in an Excess Amount for a
Limitation Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated, except that Annual Additions attributable to a
welfare benefit fund or individual medical account will be deemed to have
been allocated first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with an allocation date
of another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such
date, times
(ii) the ratio of (1) the Annual Additions allocated
to the Participant for the Limitation Year as of such date under this Plan
to (2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other qualified
master or prototype defined contribution plans.
(f) Any Excess Amount attributed to this Plan will be
disposed of in the manner described in section 6.1(d).
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6.3 Employers_Who,_In_Addition_to_this_Plan,_Maintain
Other_Qualified_Plans_Which_Are_Defined_Contribution_Plans
Other_than_Master_or_Prototype_Plans. If the Participant is covered under
another qualified defined contribution plan maintained by the Employer
which is not a Master or Prototype Plan, Annual Additions which may be
credited to the Participant's Account under this Plan for any Limitation
Year will be limited in accordance with section 6.2 as though the other
plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers_Who,_In_Addition_to_This_Plan,_Maintain
A_Qualified_Defined_Benefit_Plan. If the Employer maintains, or at any
time maintained, a qualified defined benefit plan covering any Participant
in this Plan, the sum of the Participant's Defined Benefit Fraction and
Defined Contribution Fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
6.5 Definitions. Unless otherwise expressly provided herein, for
purposes of this ARTICLE only, the following definitions and rules of
interpretation shall apply:
(a) Annual_Additions. The sum of the following amounts
credited to a Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee contributions;
(iii) forfeitures; and
(iv) amounts allocated after March 31, 1984 to an
individual medical account, as defined in section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also, amounts
derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to post-
retirement medical benefits allocated to the separate account of a key
employee, as defined in section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in section 419(e) of the Code, maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or
6.2(f) in the Limitation Year to reduce Employer Contributions will be
considered Annual Additions for such Limitation Year.
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(b) Compensation. A Participant's earned income, wages,
salaries, and fees for professional services and other amounts received
for personal services actually rendered in the course of employment with
the Employer maintaining the Plan (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and
bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer Contributions under a
simplified employee pension plan to the extent such contributions are
excluded from the Employee's gross income, or any distributions from a
plan of deferred compensation;
(ii) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property) held by
the Employee either becomes freely transferable or is no longer subject
to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity described
in section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For purposes of applying the limitations of this
ARTICLE, Compensation for a Limitation Year is the Compensation actually
paid or includable in gross income during such year.
Notwithstanding the preceding sentence, Compensation for
a Participant in a defined contribution plan who is Totally and
Permanently Disabled (as defined in section 22(e)(3) of the Code) is the
Compensation such Participant would have received for the Limitation Year
if the Participant had been paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such imputed
Compensation for the disabled Participant may be taken into account only
if the Participant is not a Highly-Compensated Employee (as defined in
section 414(q) of the Code), and contributions made on behalf of such
Participant are nonforfeitable when made.
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(c) Defined_Benefit_Fraction. A fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits under all
the defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of one hundred
percent (100%) of the dollar limitation determined for the Limitation Year
under sections 415(b) and (d) of the Code or one hundred forty percent
(140%) of highest average compensation, including any adjustments under
section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than one hundred twenty-five percent
(125%) of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms
and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(d) Defined_Contribution_Dollar_Limitation. Thirty thousand
dollars ($30,000) or, if greater, one- fourth (1/4) of the defined benefit
dollar limitation set forth in section 415(b)(1) of the Code as in effect
for the Limitation Year.
(e) Defined_Contribution_Fraction. A fraction, the
numerator of which is the sum of the Annual Additions to the Participant's
Account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions attributable to the
Participant's nondeductible voluntary contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
Annual Additions attributable to all welfare benefit funds, as defined in
section 419(e) of the Code and individual medical accounts, as defined in
section 415(l)(2) of the Code, maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for the
current and all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any Limitation Year is the
lesser of one hundred percent (100%) of the dollar limitation in effect
under section 415(c)(1)(A) of the Code or thirty-five percent (35%) of the
Participant's Compensation for such year.
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If the Participant was a Participant as of the end of the
first day of the first Limitation Year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987. The Annual
Addition for any Limitation Year beginning before January 1, 1987, shall
not be recomputed to treat all Employee contributions as Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall
mean the employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code as
modified by section 415(h) of the Code), all commonly controlled trades
or businesses (as defined in section 414(c) of the Code as modified by
section 415(h) of the Code), or affiliated service groups (as defined in
section 414(m) of the Code) of which the adopting Employer is a part and
any other entity required to be aggregated with the Employer pursuant to
regulations under section 414(o) of the Code.
(g) Excess_Amount. The excess of the Participant's Annual
Addition for the Limitation Year over the Maximum Permissible Amount.
(h) Highest_Average_Compensation. The average compensation
for the three consecutive Plan Years that produce the highest average.
(i) Limitation_Year. A Plan Year, or the twelve (12)
consecutive month period elected by the Employer in the Adoption
Agreement. All qualified plans maintained by the Employer must use the
same Limitation Year. If the Limitation Year is amended to a different
twelve (12) consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year in which the amendment is made.
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(j) Master_or_Prototype_Plan. A plan the form of which is
the subject of a favorable opinion letter from the Internal Revenue
Service.
(k) Maximum_Permissible_Amount. The maximum Annual Addition
that may be contributed or allocated to a Participant's Account under the
Plan for any Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation;
or
(b) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to in subsection (b)
shall not apply to any contribution for medical benefits (within the
meaning of section 401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under section 415(l)(1) or section
419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month
period, the Maximum Permissible Amount will not exceed the Defined
Contribution Dollar Limitation multiplied by the following fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected_Annual_Benefit. The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or
Qualified Joint and Survivor Annuity) to which the Participant would be
entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until
Normal Retirement Age under the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
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ARTICLE 7
TRUST FUND
7.1 Receipt_of_Contributions_by_Trustee. All contributions to the
Trust that are received by the Trustee, together with any earnings
thereon, shall be held, managed and administered by the Trustee named in
the Adoption Agreement in accordance with the terms and conditions of the
Trust Agreement and the Plan. The Trustee may use a Custodian designated
by the Sponsor to perform recordkeeping and custodial functions. The
Trustee shall be subject to the proper directions of the Employer or the
Plan Administrator made in accordance with the terms of the Plan and
ERISA.
7.2 Investment_Responsibility.
(a) If the Employer elects in the Adoption Agreement to
exercise investment authority and responsibility, the selection of the
investments in which assets of the Trust are invested shall be the
responsibility of the Plan Administrator and each Participant will have
a ratable interest in all assets of the Trust.
(b) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, no person, including the Trustee and the Plan
Administrator, shall be liable for any loss or for any breach of fiduciary
duty which results from such Participant's or Beneficiary's exercise of
control.
(c) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, the Employer or the Plan Administrator must complete a
schedule of Participant designations.
(d) If Participants and Beneficiaries are permitted to
select the investment in their Accounts, all investment related expenses,
including administrative fees charged by brokerage houses, will be charged
against the Accounts of the Participants.
(e) The Plan Administrator may at any time change the
selection of investments in which the assets of the Trust are invested,
or subject to such reasonable restrictions as may be imposed by the
Sponsor for administrative convenience, may submit an amended schedule of
Participant designations. Such amended documents may provide for a
variance in the percentages of contributions to any particular investment
or a request that Shares in the Trust be reinvested in whole or in part
in other Shares.
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7.3 Investment_Limitations. The Sponsor may impose reasonable
investment limitations on the Employer and the Plan Administrator relating
to the type of permissible investments in the Trust or the minimum
percentage of Trust assets to be invested in Shares.
ARTICLE 8
VESTING
8.1 Nondeductible_Voluntary_Contributions_and Earnings. The
Participant's nondeductible voluntary contribution subaccount shall be
fully vested and nonforfeitable at all times and no forfeitures will occur
as a result of an Employee's withdrawal of nondeductible voluntary
contributions.
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8.2 Rollovers,_Transfers_and_Earnings. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 Employer_Contributions_and_Earnings. Notwithstanding the
vesting schedule elected by the Employer in the Adoption Agreement, the
Participant's money purchase pension contribution subaccount and profit
sharing contribution subaccount shall be fully vested and nonforfeitable
upon the Participant's death, disability, attainment of Normal Retirement
Age, or, if the Adoption Agreement provides for an Early Retirement Date,
attainment of the required age and completion of the required service.
In the absence of any of the preceding events, the Participant's money
purchase contribution subaccount and his profit sharing contribution
subaccount shall vest in accordance with a minimum vesting schedule
specified in the Adoption Agreement. The schedule must be at least as
favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years_of_Service Vested_Percentage
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(b) Full one hundred percent (100%) vesting after three (3)
Years of Service.
8.4 Amendments_to_Vesting_Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan
is amended in any way that directly or indirectly affects the computation
of the Participant's nonforfeitable percentage or if the Plan is deemed
amended by an automatic change to or from a top-heavy vesting schedule,
each Participant with at least three (3) Years of Service with the
Employer may elect, within a reasonable period after the adoption of the
amendment or change, to have the nonforfeitable percentage computed under
the Plan without regard to such amendment or change. For any Participants
who do not have at least one (1) Hour of Service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be applied
by substituting "five (5) Years of Service" for "three (3) Years of
Service" where such language appears.
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(b) The period during which the election may be made shall
commence with the date the amendment is adopted or deemed to be made and
shall end on the latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes
effective; or
(iii) sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or Plan Administrator.
(c) No amendment to the Plan shall be effective to the
extent that it has the effect of decreasing a Participant's accrued
benefit. Notwithstanding the preceding sentence, a Participant's Account
balance may be reduced to the extent permitted under section 412(c)(8) of
the Code. For purposes of this paragraph, a Plan amendment which has the
effect of decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits attributable to service
before the amendment shall be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the case of
an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
8.5 Determination_of_Years_of_Service. For purposes of
determining the vested and nonforfeitable percentage of the Participant's
Employer Contribution subaccounts, all of the Participant's Years of
Service with the Employer or an Affiliated Employer shall be taken into
account. If specified in the Adoption Agreement, Years of Service with
a predecessor employer will be treated as service for the Employer;
provided, however, if the Employer maintains the plan of a predecessor
employer, Years of Service with such predecessor employer will be treated
as service with the Employer without regard to any election.
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8.6 Forfeiture_of_Nonvested_Amounts.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him as of
the last day of the Plan Year in which a Break in Service occurs. For
Plan Years beginning after 1984, any portion of a Participant's Account
that is not vested shall be forfeited by him as of the last day of the
Plan Year in which his fifth consecutive Break in Service occurs. Any
amounts thus forfeited shall be reallocated as provided in ARTICLE 5 and
shall not be considered part of a Participant's Account in computing his
vested interest. The remaining portion of the Participant's Account will
be nonforfeitable.
(b) If a distribution is made at a time when a Participant
has a vested right to less than one hundred percent (100%) of the value
of the Participant's Account attributable to Employer Contributions and
forfeitures, as determined in accordance with the provisions of section
8.3, and the nonvested portion of the Participant's Account has not yet
been forfeited in accordance with paragraph (a) above:
(i) a separate remainder subaccount shall be
established for the Participant's interest in the Plan as of the time of
the distribution, and
(ii) at any relevant time the Participant's vested
portion of the separate remainder subaccount shall be equal to an amount
("X") determined by the following formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula: P is the vested
percentage at the relevant time; AB is the Account balance at the relevant
time; D is the amount of the distribution; and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
8.7 Reinstatement_of_Benefit. If a benefit is forfeited because
a Participant or Beneficiary cannot be found, such benefit will be
reinstated if a claim is made by the Participant or Beneficiary.
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ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General. The provisions of this ARTICLE shall apply to any
Participant who is credited with at least one (1) Hour of Service with the
Employer on or after August 23, 1984, and such other Participants as
provided in section 9.7.
9.2 Qualified_Joint_and_Survivor_Annuity. Unless an optional form
of benefit is selected pursuant to a Qualified Election within the ninety
(90) day period ending on the Annuity Starting Date, a married
Participant's Vested Account Balance will be paid in the form of a
Qualified Joint and Survivor Annuity and an unmarried Participant's Vested
Account Balance will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon attainment of
the Earliest Retirement Age under the Plan.
9.3 Qualified_Preretirement_Survivor_Annuity. Unless an optional
form of benefit has been selected within the Election Period pursuant to
a Qualified Election, if a Participant dies before the Annuity Starting
Date, then the Participant's Vested Account Balance shall be applied
toward the purchase of an annuity for the life of the Surviving Spouse.
The Surviving Spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
9.4 Definitions.
(a) Election_Period.
(i) The period which begins on the first day of the
Plan Year in which the Participant attains age thirty-five (35) and ends
on the date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age thirty-five
(35) is attained, with respect to the Account balance as of the date of
separation, the Election Period shall begin on the date of separation.
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(ii) A Participant who has not yet attained age
thirty-five (35) as of the end of any current Plan Year may make a special
Qualified Election to waive the qualified preretirement survivor annuity
for the period beginning on the date of such election and ending on the
first day of the Plan Year in which the Participant will attain age
thirty-five (35). Such election shall not be valid unless the Participant
receives a written explanation of the qualified preretirement survivor
annuity in such terms as are comparable to the explanation required under
section 9.5. Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in which the
Participant attains age thirty-five (35). Any new waiver on or after such
date shall be subject to the full requirements of this ARTICLE.
(b) Earliest_Retirement_Age. The earliest date on which,
under the Plan, the Participant could elect to receive retirement
benefits.
(c) Qualified_Election.
(i) A waiver of a Qualified Joint and Survivor
Annuity or a qualified preretirement survivor annuity. Any waiver of a
Qualified Joint and Survivor Annuity or a qualified preretirement survivor
annuity shall not be effective unless:
(1) the Participant's Spouse consents in
writing to the election;
(2) the election designates a specific
Beneficiary, including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Participant without any
further spousal consent);
(3) the Spouse's consent acknowledges the
effect of the election; and
(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a Participant's waiver of
the Qualified Joint and Survivor Annuity shall not be effective unless the
election designates a form of benefit payment which may not be changed
without spousal consent (or the Spouse expressly permits designations by
the participant without any further spousal consent). If it is
established to the satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a
Qualified Election.
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(ii) Any consent by a Spouse obtained under this
provision (or establishment that the consent of Spouse may not be
obtained) shall be effective only with respect to such Spouse. A consent
that permits designations by the Participant without any requirement of
further consent by such Spouse must acknowledge that the Spouse has the
right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior waiver
may be made by a Participant without the consent of the Spouse at any time
before the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in section 9.5.
(d) Qualified_Joint_and_Survivor_Annuity. An immediate
annuity for the life of the Participant with a survivor annuity for the
life of the Spouse which equals fifty percent (50%) of the amount of the
annuity which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with the
Participant's Vested Account Balance.
(e) Spouse_(Surviving_Spouse). The Spouse or Surviving
Spouse of the Participant, provided that a former spouse will be treated
as the Spouse or Surviving Spouse and a current Spouse will not be treated
as the Spouse or Surviving Spouse to the extent provided under a qualified
domestic relations order as described in section 414(p) of the Code.
(f) Annuity_Starting_Date. The first day of the first
period for which an amount is paid as an annuity or any other form.
(g) Vested_Account_Balance. The aggregate value of the
Participant's Vested Account Balances derived from Employer and Employee
contributions (including rollovers and direct transfers), whether vested
before or upon death, including the proceeds of insurance contracts if
any, on the Participant's life. The provisions of this ARTICLE shall
apply to a Participant who is vested in amounts attributable to Employer
Contributions, Employee contributions (or both) at the time of death or
distribution.
9.5 Notice_Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity,
the Plan Administrator shall no less than thirty (30) days and no more
than ninety (90) days prior to the Annuity Starting Date, provide each
Participant a written explanation of:
(i) the terms and conditions of a Qualified Joint and
Survivor Annuity;
(ii) the Participant's right to make and the effect
of an election to waive the Qualified Joint and Survivor Annuity form of
benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a
revocation of a previous election to waive the Qualified Joint and
Survivor Annuity.
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(b) In the case of a qualified preretirement survivor
annuity as described in section 9.3, the Plan Administrator shall provide
each Participant within the applicable period for such Participant a
written explanation of the qualified preretirement survivor annuity in
such terms and in such manner as would be comparable to the explanation
provided for meeting the requirements of subsection (a) applicable to a
Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of
the following periods ends last:
(i) the period beginning with the first day of the
Plan Year in which the Participant attains age thirty-two (32) and ending
with the close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
(ii) a reasonable period ending after the individual
becomes a Participant;
(iii) a reasonable period ending after subsection (e)
ceases to apply to the Participant;
(iv) a reasonable period ending after this ARTICLE
first applies to the Participant. Notwithstanding the foregoing, notice
must be provided within a reasonable period ending after separation from
service in the case of a Participant who separates from service before
attaining age thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable
period ending after the enumerated events described above in subsections
(ii), (iii) and (iv) is the end of the two-year period beginning one (1)
year prior to the date the applicable event occurs, and ending one (1)
year after that date. In the case of a Participant who separates from
service before the Plan Year in which age thirty-five (35) is attained,
notice shall be provided within the two (2) year period beginning one (1)
year prior to separation and ending one (1) year after separation. If
such a participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
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(e) Notwithstanding the other requirements of this section,
the respective notices prescribed by this section need not be given to a
Participant if:
(i) the Plan "fully subsidizes" the cost of a
Qualified Joint and Survivor Annuity or qualified preretirement survivor
annuity; and
(ii) the Plan does not allow the Participant to waive
the Qualified Joint and Survivor Annuity or qualified preretirement
survivor annuity and does not allow a married Participant to designate a
nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the
costs of a benefit if no increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure to elect another
benefit.
9.6 Safe_Harbor_Rules.
(a) This section shall apply to a Participant in a profit
sharing plan, and to any distribution, made on or after the first day of
the first Plan year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible Employee
contributions, as defined in section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money purchase pension plan
(including a target benefit plan) if the following conditions are
satisfied:
(i) the Participant does not or cannot elect payments
in the form of a life annuity; and
(ii) on the death of a Participant, the Participant's
Vested Account Balance will be paid to the Participant's Surviving Spouse,
but if there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to the
Participant's Designated Beneficiary.
(b) The Surviving Spouse may elect to have distribution of
the Vested Account Balance commence within the ninety (90) day period
following the date of the Participant's death. The Account balance shall
be adjusted for gains or losses occurring after the Participant's death
in accordance with the provisions of the Plan governing the adjustment of
Account balances for other types of distributions.
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(c) This section shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct or indirect
transferee of a defined benefit plan, money purchase plan, a target
benefit plan, stock bonus, or profit sharing plan which is subject to the
survivor annuity requirements of sections 401(a)(11) and 417 of the Code.
If this section is operative, then the provisions of this ARTICLE, other
than section 9.7, shall be inoperative.
(d) The Participant may waive the spousal death benefit
described in this section at any time provided that no such waiver shall
be effective unless it satisfies the conditions of section 9.4(c) (other
than the notification requirement referred to therein) that would apply
to the Participant's waiver of the qualified preretirement survivor
annuity.
(e) For purposes of this section, Vested Account Balance
shall mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate Account balance attributable
solely to accumulated deductible Employee contributions within the meaning
of section 72(o)(5)(B) of the Code. In the case of a profit sharing plan,
Vested Account Balance shall have the same meaning as provided in section
9.4(g).
9.7 Transitional_Rules.
(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits prescribed
by the previous sections of this ARTICLE must be given the opportunity to
elect to have the prior sections of this ARTICLE apply if such Participant
is credited with at least one (1) Hour of Service under this Plan or a
predecessor plan in a Plan Year beginning on or after January 1, 1976, and
such Participant had at least ten (10) years of vesting service when he
or she separated from service.
(b) Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one (1) Hour of Service
under this Plan or a predecessor plan on or after September 2, 1974, and
who is not otherwise credited with any service in a Plan Year beginning
on or after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with subsection (d).
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(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and ending
on the date benefits would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to subsection
(b) and any Participant who does not elect under subsection (a) or who
meets the requirements of subsection (a) except that such Participant does
not have at least ten (10) years of vesting service when he or she
separates from service, shall have his or her benefits distributed in
accordance with all of the following requirements if benefits would have
been payable in the form of a life annuity:
(i) Automatic_Joint_and_Survivor_Annuity. If
benefits in the form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan
on or after Normal Retirement Age; or
(2) dies on or after Normal Retirement Age
while still working for the Employer; or
(3) begins to receive payments on or after the
qualified early retirement age; or
(4) separates from service on or after
attaining Normal Retirement Age (or the qualified early retirement age)
and after satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to receive
such benefits;
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has elected
otherwise during the Election Period. The Election Period must begin at
least six (6) months before the Participant attains qualified early
retirement age and end not more than ninety (90) days before the
commencement of benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
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(ii) Election_of_Early_Survivor_Annuity. A
Participant who is employed after attaining the qualified early retirement
age will be given the opportunity to elect, during the Election Period,
to have a survivor annuity payable on death. If the Participant elects
the survivor annuity, payments under such annuity must not be less than
the payments which would have been made to the Spouse under the Qualified
Joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The Election
Period begins on the later of (1) the 90th day before the Participant
attains the qualified early retirement age; or (2) the date on which
participation begins, and ends on the date the Participant terminates
employment.
(e) The following terms shall have the meanings specified
herein:
(i) Qualified_Early_Retirement_Age. The latest of:
(1) the earliest date, under the Plan, on which
the Participant may elect to receive retirement benefits;
(2) the first day of the 120th month beginning
before the Participant reaches Normal Retirement Age; or
(3) the date the Participant begins
participation.
(ii) Qualified_Joint_and_Survivor_Annuity. An annuity
for the life of the Participant with a survivor annuity for the life of
the Spouse as described in section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting_on_Distribution_Before_Break_in_Service.
(a) If an Employee terminates service, and the value of the
Employee's Vested Account Balance derived from Employer and Employee
contributions is not greater than three thousand five hundred dollars
($3,500), the Employee will receive a distribution of the value of the
entire vested portion of such Account balance and the nonvested portion
will be treated as a forfeiture. For purposes of this section, if the
value of an Employee's Vested Account Balance is zero, the Employee shall
be deemed to have received a distribution of such Vested Account Balance.
A Participant's Vested Account Balance shall not include accumulated
deductible Employee contributions within the meaning of section
72(o)(5)(B) of the Code for Plan Years beginning prior to January 1, 1989.
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(b) If an Employee terminates service and elects, in
accordance with this ARTICLE, to receive the value of his Vested Account
Balance, the nonvested portion will be treated as a forfeiture. If the
Employee elects to have distributed less than the entire vested portion
of the Account balance derived from Employer Contributions, the part of
the nonvested portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Employer Contributions and the
denominator of which is the total value of the vested Employer derived
Account balance.
(c) If an Employee receives a distribution pursuant to this
section and the Employee resumes employment covered under this Plan, the
Employee's Employer- derived Account balance will be restored to the
amount on the date of distribution if the Employee repays to the Plan the
full amount of the distribution attributable to Employer Contributions
before the earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer, or the date the
Participant incurs five (5) consecutive one (1) year Breaks in Service
following the date of the distribution. If an Employee is deemed to
receive a distribution pursuant to this section, and the Employee resumes
employment covered under this Plan before the date the Participant incurs
five (5) consecutive one (1) year Breaks in Service, upon the reemployment
of such Employee, the Employer-derived Account balance of the Employee
will be restored to the amount on the date of such deemed distribution.
10.2 Restrictions_on_Immediate_Distributions.
(a) If the value of a Participant's Vested Account Balance
derived from Employer and Employee contributions exceeds (or at the time
of any prior distribution exceeded) three thousand five hundred dollars
($3,500) and the Account balance is immediately distributable, the
Participant and the Participant's Spouse (or where either the Participant
or the Spouse has died, the survivor) must consent to any distribution of
such Account balance. The consent of the Participant and the
Participant's Spouse shall be obtained in writing within the ninety (90)
day period ending on the Annuity Starting Date. The Annuity Starting Date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account balance is no longer
immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the relative
values of, the optional forms of benefit available under the Plan in a
manner that would satisfy the notice requirements of section 417(a)(3),
and shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the Annuity Starting Date.
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(b) Notwithstanding the provisions of subsection (a), only
the Participant need consent to the commencement of a distribution in the
form of a Qualified Joint and Survivor Annuity while the Account balance
is immediately distributable. (Furthermore, if payment in the form of a
Qualified Joint and Survivor Annuity is not required with respect to the
Participant pursuant to section 9.6 of the Plan, only the Participant need
consent to the distribution of an Account balance that is immediately
distributable). Neither the consent of the Participant nor the Partici-
pant's Spouse shall be required to the extent that a distribution is
required to satisfy section 401(a)(9) or section 415 of the Code. In
addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be distributed to
the Participant or transferred to another defined contribution plan (other
than an employee stock ownership plan as defined in section 4975(e)(7) of
the Code) within the same controlled group.
(c) An Account balance is immediately distributable if any
part of the Account balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains (or would have attained
if not deceased) the later of Normal Retirement Age or age sixty- two
(62).
(d) For purposes of determining the applicability of the
foregoing consent requirements to distributions made before the first day
of the first Plan Year beginning after December 31, 1988, the
Participant's Vested Account Balance shall not include amounts
attributable to accumulated deductible Employee contributions within the
meaning of section 72(o)(5)(B) of the Code.
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10.3 Commencement_of_Benefits.
(a) Unless the Participant elects otherwise, distribution
of benefits will begin no later than the 60th day after the latest of the
close of the Plan Year in which:
(i) the Participant attains age sixty-five (65) (or
Normal Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the
Participant commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the
Employer.
(b) Notwithstanding the foregoing, the failure of a
Participant and Spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of section 10.2 of the Plan,
shall be deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this section.
10.4 Early_Retirement_With_Age_and_Service_Require ment. If a
Participant separates from service before satisfying the age requirement
for early retirement, but has satisfied the service requirement, the
Participant will be entitled to elect an early retirement benefit upon
satisfaction of such age requirement.
10.5 Nontransferability_of_Annuities. Any annuity contract
distributed herefrom must be nontransferable.
10.6 Conflicts_With_Annuity_Contracts. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or Spouse
shall comply with the requirements of this Plan.
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ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General_Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE
shall apply to any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this ARTICLE apply to calendar
years beginning after December 31, 1984.
(b) All distributions required under this ARTICLE shall be
determined and made in accordance with the income tax regulations under
section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the proposed
regulations.
11.2 Required_Beginning_Date. The entire interest of a Participant
must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date.
11.3 Limits_on_Distribution_Periods. As of the first Distribution
Calendar Year, distributions, if not made in a single-sum, may only be
made over one of the following periods (or a combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated
Beneficiary;
(c) a period certain not extending beyond the Life
Expectancy of the Participant; or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
11.4 Determination_of_Amount_to_be_Distributed_Each Year.
(a) Individual_Account.
(i) If a Participant's Benefit is to be distributed
over (1) a period not extending beyond the Life Expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's Designated Beneficiary or (2) a period
not extending beyond the Life Expectancy of the Designated Beneficiary,
the amount required to be distributed for each calendar year, beginning
with distributions for the first Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's Benefit by the
Applicable Life Expectancy.
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(ii) For calendar years beginning before January 1,
1989, if the Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least fifty percent
(50%) of the present value of the amount available for distribution is
paid within the Life Expectancy of the Participant.
(iii) For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with distributions
for the first Distribution Calendar Year shall not be less than the
quotient obtained by dividing the Participant's Benefit by the lesser of
(1) the Applicable Life Expectancy or (2) if the Participant's Spouse is
not the Designated Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
regulations. Distributions after the death of the Participant shall be
distributed using the Applicable Life Expectancy in subsection (a)(i)
above as the relevant divisor without regard to proposed regulations
section 1.401(a)(9)-2.
(iv) The minimum distribution required for the
Participant's first Distribution Calendar Year must be made on or before
the Participant's Required Beginning Date. The minimum distribution for
other calendar years, including the minimum distribution for the
Distribution Calendar Year in which the Employee's Required Beginning Date
occurs, must be made on or before December 31 of that Distribution
Calendar Year.
(b) Other_Forms. If the Participant's Benefit is
distributed in the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the requirements
of section 401(a)(9) of the Code and the proposed regulations thereunder.
11.5 Death_Distribution_Provisions.
(a) Distribution_Beginning_Before_Death. If the Participant
dies after distribution of his or her interest has begun, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
(b) Distribution_Beginning_After_Death. If the Participant
dies before distribution of his or her interest begins, distribution of
the Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive distributions in
accordance with (i) or (ii) below:
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(i) if any portion of the Participant's interest is
payable to a Designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of the calendar
year immediately following the calendar year in which the Participant
died;
(ii) if the Designated Beneficiary is the
Participant's Surviving Spouse, the date distributions are required to
begin in accordance with (i) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the calendar
year in which the Participant died and (2) December 31 of the calendar
year in which the Participant would have attained age seventy and one-half
(70 1/2).
(c) If the Participant has not made an election pursuant to
this section by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this section; or (2) December 31 of the
calendar year which contains the fifth anniversary of the date of death
of the Participant. If the Participant has no Designated Beneficiary, or
if the Designated Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death.
(d) For purposes of subsection (b) above, if the Surviving
Spouse dies after the Participant, but before payments to such Spouse
begin, the provisions of subsection (b), with the exception of paragraph
(ii) therein, shall be applied as if the Surviving Spouse were the
Participant.
(e) For purposes of this section, any amount paid to a child
of the Participant will be treated as if it had been paid to the Surviving
Spouse if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(f) For the purposes of this section, distribution of a
Participant's interest is considered to begin on the Participant's
Required Beginning Date (or, if subsection (d) above is applicable, the
date distribution is required to begin to the Surviving Spouse pursuant
to subsection (b) above). If distribution in the form of an annuity
described in section 11.4(b) above irrevocably commences to the
Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
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11.6 Designation_of_Beneficiary. Subject to the rules of
ARTICLE 9, a Participant (or former Participant) may designate from time
to time any person or persons (who may be designated contingently or
successively and may be an entity other than a natural person) as his
Beneficiary who will be entitled to receive any undistributed amounts
credited to the Participant's separate Account under the Plan at the time
of the Participant's death. Any such Beneficiary designation by a
Participant shall be made in writing in the manner prescribed by the Plan
Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change
or revoke his Beneficiary designation at any time in the manner prescribed
by the Plan Administrator. If any portion of the Participant's Account
is invested in insurance pursuant to ARTICLE 14, the Beneficiary of the
benefits under the insurance policy shall be the person or persons
designated under the policy. If the Designated Beneficiary (or each of
the Designated Beneficiaries) predeceases the Participant, the Partici-
pant's Beneficiary designation shall be ineffective. If no Beneficiary
designation is in effect at the time of the Participant's death, his
Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable_Life_Expectancy. The Life Expectancy (or
joint and last survivor expectancy) calculated using the attained age of
the Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the applicable calendar year reduced
by one (1) for each calendar year which has elapsed since the date Life
Expectancy was first calculated. If Life Expectancy is being
recalculated, the Applicable Life Expectancy shall be the Life Expectancy
as so recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being recalculated
such succeeding calendar year. If annuity payments commence in accordance
with section 11.4(b) before the Required Beginning Date, the applicable
calendar year is the year such payments commence. If distribution is in
the form of an immediate annuity purchased after the Participant's death
with the Participant's remaining interest, the applicable calendar year
is the year of purchase.
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(b) Designated_Beneficiary. The individual who is
designated as the Beneficiary under the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) Distribution_Calendar_Year. A calendar year for which
a minimum distribution is required. For distributions beginning before
the Participant's death, the first Distribution Calendar Year is the
calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after
the Participant's death, the first Distribution Calendar Year is the
calendar year in which distributions are required to begin pursuant to
section 11.5 above.
(d) Life_Expectancy.
(i) Life Expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the income tax regulations.
(ii) Unless otherwise elected by the Participant (or
Spouse, in the case of distributions described in section 11.5(b)(ii)
above) by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Participant (or Spouse) and shall apply to all subsequent years. The
Life Expectancy of a non-Spouse Beneficiary may not be recalculated.
(e) Participant's_Benefit.
(i) The Account balance as of the last valuation date
in the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the Account balance as of dates in the valuation
calendar year after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date.
(ii) For purposes of subsection (i) above, if any
portion of the minimum distribution for the first Distribution Calendar
Year is made in the second Distribution Calendar Year on or before the
Required Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
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(f) Required_Beginning_Date.
(i) General_Rule. The Required Beginning Date of a
Participant is the first day of April of the calendar year following the
calendar year in which the Participant attains age seventy and one-half
(70 1/2).
(ii) Transitional_Rules. The Required Beginning Date
of a Participant who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (1) or (2) below:
(1) Non-Five-Percent_Owners. The Required
Beginning Date of a Participant who is not a Five Percent (5%) Owner is
the first day of April of the calendar year following the calendar year
in which the later of retirement or attainment of age seventy and one-
half (70 1/2) occurs.
(2) Five_Percent_Owners. The Required
Beginning Date of a Participant who is a Five Percent (5%) Owner during
any year beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the
Participant attains age seventy and one-half (70 1/2); or
(B) the earlier of the calendar year with
or within which ends the Plan Year in which the Participant becomes a Five
Percent (5%) Owner, or the calendar year in which the Participant retires.
The Required Beginning Date of a Participant who is not a Five Percent
(5%) Owner who attains age seventy and one- half (70 1/2) during 1988 and
who has not retired as of January 1, 1989, is April 1, 1990.
(iii) Five_Percent_Owner. A Participant is treated as
a Five Percent (5%) Owner for purposes of this section if such Participant
is a Five Percent (5%) Owner as defined in section 416(i) of the Code
(determined in accordance with section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age sixty-six and
one-half (66 1/2) or any subsequent year.
(iv) Once distributions have begun to a Five Percent
(5%) Owner under this section, they must continue to be distributed, even
if the Participant ceases to be a Five Percent (5%) Owner in a subsequent
year.
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11.8 Transitional_Rule.
(a) Notwithstanding the other requirements of this ARTICLE
and subject to the requirements of ARTICLE 9, distribution on behalf of
any Employee, including a Five Percent (5%) Owner, may be made in
accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust is one which would
not have disqualified such trust under section 401(a)(9) of the Internal
Revenue Code as in effect prior to amendment by the Deficit Reduction Act
of 1984.
(ii) The distribution is in accordance with a method
of distribution designated by the Employee whose interest in the Trust is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
(iii) Such designation was in writing, was signed by
the Employee or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan
as of December 31, 1983.
(v) The method of distribution designated by the
Employee or the Beneficiary specifies the time at which distributions will
be made, and in the case of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains the
required information described above with respect to the distributions to
be made upon the death of the Employee.
(c) For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be presumed to
have designated the method of distribution under which the distribution
is being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in subsections (a)(i) and
(a)(v).
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(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of section 401(a)(9) of the Code and the
proposed regulations thereunder. If a designation is revoked subsequent
to the date distributions are required to begin, the Trust must distribute
by the end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy section 401(a)(9) of the
Code and the regulations thereunder but for the section 242(b)(2)
election. For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the proposed regulations. Any
changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation will
not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or indirectly
(for example, by altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
11.9 Optional_Forms_of_Benefit.
(a) Except to the extent benefits are required to be paid
in the form of an automatic joint and survivor annuity under ARTICLE 9,
any amount which a Participant shall be entitled to receive under the Plan
shall be distributed in one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of
which shall be determined by redeeming all Shares credited to the
Participant's Account under the Plan as of the date of distribution;
(ii) in a lump-sum payment including a distribution
in kind of all Shares credited to the Participant's Account under the Plan
as of the date of distribution;
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(iii) in substantially equal monthly, quarterly, or
annual installment payments of cash, or the distribution of Shares in
kind, over a period certain not to exceed the Life Expectancy of the
Participant or the joint and last survivor Life Expectancy of the
Participant and his Beneficiary, determined in each case as of the earlier
of: (1) the end of the Plan Year in which occurs the event entitling the
Participant to a distribution of benefits, or (2) the date such
installments commence;
(iv) if permitted by the Sponsor, in monthly,
quarterly, or annual installment payments of cash, or the distribution of
Shares in kind, so that the amount distributed in each Plan Year equals
the quotient obtained by dividing the Participant's Account at the
beginning of that Plan Year by the joint and last survivor Life Expectancy
of the Participant and the Beneficiary for that Plan Year. The Life
Expectancy will be computed using the recomputation method described in
section 11.7(d). Unless the Spouse of the retired Participant is the
Beneficiary, the actuarial present value of all expected payments to the
retired Participant must be more than fifty percent (50%) of the actuarial
present value of payments to the retired Participant and the Beneficiary;
or
(v) by application of the Participant's vested
Account to the purchase of a nontransferable immediate or deferred annuity
contract, on an individual or group basis. Unless the Spouse of the
retired Participant is the Beneficiary, the actuarial present value of all
expected payments to the retired Participant must be more than fifty
percent (50%) of the actuarial present value of payments to the retired
Participant and the Beneficiary.
(b) If the Participant fails to select a method of
distribution, except as may be required by ARTICLE 9, all amounts which
he is entitled to receive under the Plan shall be distributed to him in
a lump-sum payment.
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ARTICLE 12
WITHDRAWALS
12.1 Withdrawal_of_Nondeductible_Voluntary_Contribu tions. Subject
to the Qualified Election requirements of ARTICLE 9 and section 12.3, any
Participant who has made nondeductible voluntary contributions may, upon
thirty (30) days notice in writing filed with the Plan Administrator, have
paid to him all or any portion of the fair market value of his
nondeductible voluntary contribution subaccount.
12.2 Hardship_Withdrawals. If the Adoption Agreement so provides
and the Employer elects, this section applies only to the profit sharing
contribution subaccount and only if the profit sharing allocation formula
selected in the Adoption Agreement is not integrated with Social Security.
(a) Demonstration_of_Need. Subject to the Qualified
Election requirements of ARTICLE 9 and section 12.3, if a Participant
establishes an immediate and heavy financial need for funds because of a
hardship resulting from the purchase or renovation of a primary residence,
the education of the Participant or a member of his immediate family
(including special education), the medical or personal expenses of the
Participant or a member of his immediate family, or other demonstrable
emergency as determined by the Plan Administrator on a uniform and
nondiscriminatory basis, the Participant shall be permitted, subject to
the limitations of subsection (b) below, to make a hardship withdrawal of
an amount credited to his profit sharing contribution subaccount under the
Plan.
(b) Amount_of_Hardship_Withdrawal. The amount of any
hardship withdrawal by a Participant under subsection (a) above shall not
exceed the amount required to meet the immediate financial need created
by the hardship and not reasonably available from other resources of the
Participant.
(c) Prior_Withdrawal_of_Nondeductible_Voluntary
Participant_Contributions. A Participant shall not be permitted to make
a hardship withdrawal under subsection (a) above unless he has already
withdrawn, in accordance with section 12.1, any amount credited to his
nondeductible voluntary contributions subaccount.
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12.3 Manner_of_Making_Withdrawals. Any withdrawal by a Participant
under the Plan shall be made only after the Participant files a written
request with the Plan Administrator specifying the nature of the
withdrawal (and the reasons therefor, if a hardship withdrawal), and the
amount of funds requested to be withdrawn. Upon approving any withdrawal,
the Plan Administrator shall furnish the Trustee with written instructions
directing the Trustee to make the withdrawal in a lump-sum payment of cash
to the Participant. In making any withdrawal payment, the Trustee shall
be fully entitled to rely on the instructions furnished by the Plan
Administrator, and shall be under no duty to make any inquiry or
investigation with respect thereto. Unless section 9.6 is applicable, if
the Participant is married, his Spouse must consent to the withdrawal
pursuant to a Qualified Election (as defined in section 9.4(c)) within the
ninety (90) day period ending on the date of the withdrawal.
12.4 Limitations_on_Withdrawals. The Plan Administrator may
prescribe uniform and nondiscriminatory rules and procedures limiting the
number of times a Participant may make a withdrawal under the Plan during
any Plan Year, and the minimum amount a Participant may withdraw on any
single occasion.
ARTICLE 13
LOANS
13.1 General_Provisions.
(a) If the Adoption Agreement so provides and the Employer
so elects, loans shall be made available to any Participant or Beneficiary
who is a party-in-interest (as defined in section 3(14) of ERISA) on a
reasonably equivalent basis. A Participant or Beneficiary who is not a
party-in-interest (as defined in section 3(14) of ERISA) shall not be
eligible to receive a loan under this ARTICLE.
(b) Loans shall not be made available to Highly- Compensated
Employees (as defined in section 414(q) of the Code) in an amount greater
than the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable
interest rate.
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(d) No Participant loan shall exceed the present value of
the Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must
obtain the consent of his or her Spouse, if any, to use of the Account
balance as security for the loan. Spousal consent shall be obtained no
earlier than the beginning of the ninety (90) day period that ends on the
date on which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must be witnessed
by a Plan representative or notary public. Such consent shall thereafter
be binding with respect to the consenting Spouse or any subsequent Spouse
with respect to that loan. A new consent shall be required if the Account
balance is used for renegotiation, extension, renewal or other revision
of the loan.
(f) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event occurs
under the Plan.
(g) Loans will not be made to any shareholder- employee or
Owner-Employee. For purposes of this requirement, a shareholder-employee
means an Employee or officer of an electing small business (subchapter S)
corporation who owns (or is considered as owning within the meaning of
section 318(a)(1) of the Code), on any day during the taxable year of such
corporation, more than five percent (5%) of the outstanding stock of the
corporation.
(h) If a valid spousal consent has been obtained in
accordance with subsection (e), then, notwithstanding any other provision
of this Plan, the portion of the Participant's Vested Account Balance used
as a security interest held by the Plan by reason of a loan outstanding
to the Participant shall be taken into account for purposes of determining
the amount of the Account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the loan.
If less than one hundred percent (100%) of the Participant's Vested
Account Balance (determined without regard to the preceding sentence) is
payable to the Surviving Spouse, then the Account balance shall be
adjusted by first reducing the Vested Account Balance by the amount of the
security used as repayment of the loan, and then determining the benefit
payable to the Surviving Spouse.
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13.2 Administration_of_Loan_Program.
(a) The Plan's loan program will be administered by the Plan
Administrator.
(b) Loan requests shall be made on a form prescribed by the
Plan Administrator and shall comply with section 13.4.
(c) Loan requests that comply with all the requirements of
this ARTICLE shall be approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be
determined under section 13.5.
(e) The only collateral that may be used as security for a
loan, and the limitations and requirements applicable, are determined
under section 13.6.
(f) The rules regarding defaults are set forth in section
13.9.
13.3 Amount_of_Loan. Loans to any Participant or Beneficiary will
not be made to the extent that such loan, when added to the outstanding
balance of all other loans to the Participant or Beneficiary, would exceed
the lesser of:
(a) fifty thousand dollars ($50,000) reduced by the excess
(if any) of the highest outstanding balance of loans during the one (1)
year period ending on the day before the loan is made, over the
outstanding balance of loans from the Plan on the date the loan is made;
or
(b) one-half (1/2) the present value of the nonforfeitable
accrued benefit of the Participant.
(c) For the purpose of the above limitation, all loans from
all plans of the Employer and other members of a group of employers
described in sections 414(b), 414(c) and 414(m) of the Code are
aggregated.
13.4 Manner_of_Making_Loans. A request by a Participant for a loan
shall be made in writing to the Plan Administrator and shall specify the
amount of the loan, and the subaccount(s) or Shares of the Participant
from which the loan should be made. The terms and conditions on which the
Plan Administrator shall approve loans under the Plan shall be applied on
a uniform and nondiscriminatory basis with respect to all Participants.
If a Participant's request for a loan is approved by the Plan
Administrator, the Plan Administrator shall furnish the Trustee with
written instructions directing the Trustee to make the loan in a lump-sum
payment of cash to the Participant. In making any loan payment under this
ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator and shall be under no duty to make any
inquiry or investigation with respect thereto.
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13.5 Terms_of_Loan. Loans shall be made on such terms and subject
to such limitations as the Plan Administrator may prescribe.
Furthermore, any loan shall, by its terms, require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five (5)
years from the date of the loan, unless such loan is used to acquire a
dwelling unit which, within a reasonable time (determined at the time the
loan is made) will be used as the principal residence of the Participant.
The rate of interest to be charged shall be determined by the Plan
Administrator in accordance with the rates quoted by representative
financial institutions in the local area for similar loans.
13.6 Security_for_Loan. Any loan to a Participant under the Plan
shall be secured by the pledge of all the Participant's right, title, and
interest in the Trust. Such pledge shall be evidenced by the execution
of a promissory note by the Participant which shall provide that, in the
event of any default by the Participant on a loan repayment, the Plan
Administrator shall be authorized (to the extent permitted by law) to
deduct the amount of the loan outstanding and any unpaid interest due
thereon from the Participant's wages or salary to be thereafter paid by
the Employer, and to take any and all other actions necessary and
appropriate to enforce collection of the unpaid loan. An assignment or
pledge of any portion of the Participant's interest in the Plan and a
loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this section.
In the event the value of the Participant's vested Account at any time is
less than one hundred twenty- five percent (125%) of the outstanding loan
balance, the Plan Administrator shall request additional collateral of
sufficient value to adequately secure the repayment of the loan. Failure
to provide such additional collateral upon a request of the Plan
Administrator shall constitute an event of default.
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13.7 Segregated_Investment. Loans shall be considered a
Participant directed investment and, for the limited purposes of
allocating earnings and losses pursuant to ARTICLE 5, shall not be
considered a part of the common fund under the Trust.
13.8 Repayment_of_Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan
repayments, and for notifying the Trustee in the event of any default by
the Participant on the loan. Each loan repayment shall be paid to the
Trustee and shall be accompanied by written instructions from the Plan
Administrator that identify the Participant on whose behalf the loan
repayment is being made.
13.9 Default_on_Loan.
(a) In the event of a termination of the Participant's
employment with the Affiliated Employers or a default by a Participant on
a loan repayment, all remaining payments on the loan shall be immediately
due and payable. The Employer shall, upon the direction of the Plan
Administrator, to the extent permitted by law, deduct the total amount of
the loan outstanding and any unpaid interest due thereon from the wages
or salaries payable to the Participant by the Employer in accordance with
the Participant's promissory note. In addition, the Plan Administrator
shall take any and all other actions necessary and appropriate to enforce
collection of the unpaid loan. However, attachment of the Participant's
Account pledged as security will not occur until a distributable event
occurs under the Plan.
(b) For purposes of this section, the term "default" shall
mean failure, by a period of at least ten (10) days, to make any loan
payment (whether principal or interest or both) that is due and payable.
Neither the Plan Administrator nor any other fiduciary is required to give
any written or oral notice of default.
13.10 Unpaid_Amounts. Upon the occurrence of a Participant's
retirement or death, or upon a Participant's fifth consecutive Break in
Service or earlier distribution, the unpaid balance of any loan, including
any unpaid interest, shall be deducted from any payment or distribution
from the Trust to which such Participant or his Beneficiary may be
entitled. If after charging the Participant's Account with the unpaid
balance of the loan, including any unpaid interest, there still remains
an unpaid balance of any such loan and interest, then the remaining unpaid
balance of such loan and interest shall be charged against any property
pledged as security with respect to such loan.
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ARTICLE 14
INSURANCE
14.1 Insurance. If the Adoption Agreement so provides and the
Employer elects to allocate or permit Participants to allocate a portion
of their Accounts to purchase life insurance, the ensuing subsections of
this ARTICLE shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee
to procure one or more life insurance policies on the Participant's life,
the terms of which shall conform to the requirements of the Plan and the
Code. The policies and the companies which write them shall be subject
to the approval of the Plan Administrator and the Trustee. The Trustee
shall procure and hold such policies in its name or the name of the
nominee. The Trustee shall be the sole owner of all contracts purchased
hereunder, and it shall be so designated in each policy and application
therefor.
14.3 Beneficiary. The Participant shall have the right to name the
Beneficiary and to choose the benefit option under the policy for the
Beneficiary. The Trustee shall designate the Beneficiary of all such
policies in accordance with the written directions of the Plan Adminis-
trator and the policy terms. Such designations may be outlined in the
original application as forwarded to the issuing company. However, the
Plan Administrator shall have available and shall furnish the Participant
with the necessary forms for any Beneficiary designation or change of
Beneficiary and it will keep a copy of all executed designations as part
of its records. Upon a Participant's death, the Plan Administrator will
promptly furnish the Trustee a copy of the last designation and shall
authorize the Trustee to complete such forms as the insurance company may
require in order to effect the benefit option.
14.4 Payment_of_Premiums. Subject to the provisions of sections
7.3 and 14.5, premium payments to the insurer may be made only by the
Trustee with respect to any insurance policy purchased on behalf of a
Participant and shall constitute first an investment of a portion of the
funds of the Participant's Employer Contribution subaccounts up to the
maximum amount of such subaccounts permitted to be applied toward such
premium payments, as provided in section 14.5. If a Participant's
subaccounts lack sufficient assets to pay premiums on a life insurance
policy due on his behalf, the Trustee, at the direction of the Plan
Administrator, acting upon the request of the Participant, shall borrow
under the policy loan provisions, if any, the amount necessary to pay such
premiums, using the cash value of the insurance as security, or the
Trustee may liquidate assets held in the Participant's Account, in the
same order, of sufficient value to pay such premiums. Any loans shall be
repaid by the application of earnings, contributions, or forfeitures to
the Account of the Participant insured by such policy. In the absence of
the Plan Administrator's direction to borrow or to liquidate assets to pay
premiums, the life insurance policy shall be put on a paid-up basis or,
if it has no cash value, cancelled.
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14.5 Limitation_on_Insurance_Premiums. The Trustee shall not pay,
nor shall anyone on behalf of the Trustee pay, any life insurance premium
for any Participant out of the Participant's Employer Contribution
subaccounts unless the amount of such payment, plus all premiums
previously so paid on behalf of the Participant, is less than fifty
percent (50%) of the Employer Contributions and forfeitures allocated to
the Participant's Employer Contribution subaccounts as determined on the
date such premium is paid with respect to reserve life insurance policies
and shall be less than twenty-five percent (25%) thereof with respect to
nonreserve (term) policies, or, if both reserve life and term insurance
are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half (1/2) of the reserve life premiums may not
exceed twenty- five percent (25%) of the Employer Contributions made on
behalf of such Participant. For purposes of these incidental insurance
provisions, reserve life insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing premiums. Dividends
received on life insurance policies shall be considered a reduction of
premiums paid in such computations.
If payment of premiums on a Participant's life insurance
policy is prohibited because of the limitation, the Trustee, as directed
by the Plan Administrator, shall permit the Participant to maintain that
part of the coverage made available by the prohibited premiums, either by
payment of the amount of the prohibited premium by the Participant from
sources other than the Trust or by distributing the policy to the extent
of the Participant's vested interest to the Participant and eliminating
it from the Trust.
Nothing contained in the foregoing provisions of section 14.4
and this section shall be deemed to authorize the payment of any premium
or premiums for any Participant which would result in a failure to
maintain any mandatory investment in Shares required by the Sponsor in the
Account or subaccounts of any such Participant.
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14.6 Insurance_Company. No insurance company which may issue any
policies for the purposes of this Plan shall be required to take or permit
any action contrary to the provisions of said policies, nor shall such
insurance company be deemed to be a party to, or responsible for the
validity of, this Plan for any purpose. No such insurance company shall
be required to look into the terms of this Plan or question any action of
the Trustee hereunder, nor be responsible to see that any action of the
Trustee is authorized by the terms of this Plan. Any such issuing
insurance company shall be fully discharged from any and all liability for
any amount paid to the Trustee or paid in accordance with the direction
of the Trustee, as the case may be, or for any change made or action taken
by such insurance company upon such direction and no such insurance
company shall be obliged to see to the distribution or further application
of any monies paid by it. The certificate of the Trustee signed by one
of its trust officers, assistant secretary, or other authorized
representative thereof, may be received by any insurance company as
conclusive evidence of any of the matters mentioned in this Plan and any
insurance company shall be fully protected in taking or permitting any
action on the faith thereof and shall incur no liability or responsibility
for so doing.
14.7 Distribution_of_Policies. Upon a Participant's death, the
Trustee, upon direction of the Plan Administrator, shall procure the
payment of the proceeds of any policy held by the Participant in
accordance with its terms and this Plan. The Trustee shall be required
to pay over all the proceeds of any policy to the Participant's Designated
Beneficiary in accordance with the distribution provisions of this Plan.
A Participant's Spouse will be the Designated Beneficiary unless a
Qualified Election has been made in accordance with section 9.4(c) of the
Plan. Under no circumstances shall the Trust retain any part of the
proceeds. Subject to the joint and survivor annuity requirements of
ARTICLE 9, the policies shall be converted or distributed upon
commencement of benefits in accordance with the provisions of this
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section. Upon a Participant's retirement at or after his Normal
Retirement Age, unless there is a single sum distribution in which case
any policy shall be distributed, any such policy shall be converted to a
paid-up contract and delivered to the Participant but the Plan
Administrator may, with the Participant's consent, direct that a portion
or all of such cash value of the policy be converted to provide retirement
income as permitted within the terms of the policy and this Plan. Upon
a Participant's retirement due to Total and Permanent Disability, any such
policy shall be held for his account and assigned or delivered to the
Participant in addition to any other benefits provided by this Plan. Upon
a Participant's termination of employment for reasons other than death,
Total and Permanent Disability, or retirement as stated above, to the
extent of life insurance purchased by Employer Contributions, he shall be
entitled to a vested interest in any policy held for his account as his
interest is vested in the remainder of his Employer Contribution
subaccounts (exclusive of any such policy). Whenever the Participant is
entitled to one hundred percent (100%) vesting, then such policy shall be
assigned and delivered to the Participant in accordance with its terms and
the terms of the Plan. Whenever the Participant is entitled to vesting
of less than one hundred percent (100%), then the Participant shall be
entitled to a vested interest of the cash surrender value of any such
policy equal to his percent of vested interest in his Employer
Contribution subaccounts, exclusive of the policy, and one of the
following distribution procedures shall apply:
(a) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account is less than the amount
of his vested termination benefit exclusive of the policies, then, such
policy shall be assigned to the Participant and the remainder of the
Participant's vested interest in the Participant's Employer Contribution
subaccounts shall be reduced by the cash surrender value of the nonvested
portion of all policies, after which it shall be paid or distributed to
the Participant in accordance with the terms of the Plan; or
(b) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account exceeds the Participant's
vested interest in the Employer Contribution subaccount exclusive of such
policies, the Participant shall be given the opportunity to purchase such
policies by paying to the Trustee the amount of such excess within thirty
(30) days after notice to him of the amount to be paid. Upon receipt of
such payment said policy shall be assigned and delivered to the Partici-
pant to the full satisfaction of all termination benefits under this Plan.
Any such policy not so purchased shall be surrendered by the Trustee for
its cash value and the proceeds thereof deposited in the Trust for
reallocation pursuant to ARTICLE 5.
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It is the intention hereof that the total termination benefit
of a Participant whose interest is not fully vested shall be equal to the
sum of the vested percentage of his Employer Contribution subaccounts
exclusive of all such policies and the same percentage of the cash value
of all such policies held for his Account. To the extent possible under
the foregoing provisions, such total termination benefits shall be
satisfied by the transfer and delivery to the Participant of one or more
such policies with the balance, if any, to be paid in cash or in kind.
14.8 Policy_Features. The Trustee shall arrange, where possible,
that all policies purchased for the benefit of a Participant shall have
the same dividend option which shall be on the premium reduction plan, and
as nearly as may be possible all policies issued under the Plan shall have
the same anniversary date. To the extent any dividends or credits earned
on insurance policies are not applied toward the next premiums due, they
shall be allocated to the Participant's Employer Contribution subaccount
in the same manner as a Participant's directed investment.
14.9 Changed_Conditions. From time to time because of changed
conditions, the Trustee, acting at the direction of the Plan Administrator
upon the election of the Participant concerned, shall obtain an additional
contract or policy or make such change in the contracts or policies
maintained by the Trustee on the life of the Participant as may be
required by such changed conditions, within the limits permitted by the
insurance company which issued or is requested to issue a contract and the
limits established by this Plan.
14.10 Conflicts. In the event of any conflict between the terms
of the Plan and the provisions of any contract issued hereunder, the terms
of the Plan shall control.
ARTICLE 15
ADMINISTRATION
15.1 Duties_and_Responsibilities_of_Fiduciaries;
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Allocation_of_Fiduciary_Responsibility. A fiduciary of the Plan shall
have only those specific powers, duties, responsibilities, and obligations
as are explicitly given him under the Plan and Trust Agreement. In
general, the Employer shall have the sole responsibility for making
contributions to the Plan required under ARTICLE 4; appointing the Trustee
and the Plan Administrator; and determining the funds available for
investment under the Plan. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, as more fully described
in section 15.2. It is intended that each fiduciary shall be responsible
only for the proper exercise of his own powers, duties, responsibilities,
and obligations under the Plan and Trust Agreement, and shall not be
responsible for any act or failure to act of another fiduciary. A
fiduciary may serve in more than one fiduciary capacity with respect to
the Plan.
15.2 Powers_and_Responsibilities_of_the_Plan_Adminis trator.
(a) Administration_of_the_Plan. The Plan Administrator
shall have all powers necessary to administer the Plan, including the
power to construe and interpret the Plan documents; to decide all
questions relating to an individual's eligibility to participate in the
Plan; to determine the amount, manner, and timing of any distribution of
benefits or withdrawal under the Plan; to approve and ensure the repayment
of any loan to a Participant under the Plan; to resolve any claim for
benefits in accordance with section 15.7; and to appoint or employ
advisors, including legal counsel; to render advice with respect to any
of the Plan Administrator's responsibilities under the Plan. Any
construction, interpretation, or application of the Plan by the Plan
Administrator shall be final, conclusive, and binding. All actions by the
Plan Administrator shall be taken pursuant to uniform standards applied
to all persons similarly situated. The Plan Administrator shall have no
power to add to, subtract from, or modify any of the terms of the Plan,
or to change or add to any benefits provided by the Plan, or to waive or
fail to apply any requirements of eligibility for a benefit under the
Plan.
(b) Records_and_Reports. The Plan Administrator shall be
responsible for maintaining sufficient records to reflect the Eligibility
Computation Periods in which an Employee is credited with one or more
Years of Service for purposes of determining his eligibility to
participate in the Plan, and the Compensation of each Participant for
purposes of determining the amount of contributions that may be made by
or on behalf of the Participant under the Plan. The Plan Administrator
shall be responsible for submitting all required reports and notifications
relating to the Plan to Participants or their Beneficiaries, the Internal
Revenue Service and the Department of Labor.
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(c) Furnishing_Trustee_with_Instructions. The Plan
Administrator shall be responsible for furnishing the Trustee with written
instructions regarding all contributions to the Trust, all distributions
to Participants in accordance with ARTICLE 10, all withdrawals by
Participants in accordance with ARTICLE 12, all loans to Participants in
accordance with ARTICLE 13 and all purchases of life insurance in
accordance with ARTICLE 14. In addition, the Plan Administrator shall be
responsible for furnishing the Trustee with any further information
respecting the Plan which the Trustee may request for the performance of
its duties or for the purpose of making any returns to the Internal
Revenue Service or Department of Labor as may be required of the Trustee.
(d) Rules_and_Decisions. The Plan Administrator may adopt
such rules as it deems necessary, desirable, or appropriate in the
administration of the Plan. All rules and decisions of the Plan
Administrator shall be applied uniformly and consistently to all
Participants in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, the Employer, the
legal counsel of the Employer, or the Trustee.
(e) Application_and_Forms_for_Benefits. The Plan
Administrator may require a Participant or Beneficiary to complete and
file with it an application for a benefit, and to furnish all pertinent
information requested by it. The Plan Administrator may rely upon all
such information so furnished to it, including the Participant's or
Beneficiary's current mailing address.
(f) Facility_of_Payment. Whenever, in the Plan
Administrator's opinion, a person entitled to receive a payment of a
benefit or installment thereof is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial
affairs, as determined by a court of competent jurisdiction, it may direct
the Trustee to make payments to such person or to the legal representative
or to a relative or friend of such person for that person's benefit, or
it may direct the Trustee to apply the payment for the benefit of such
person in such manner as it considers advisable.
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15.3 Allocation_of_Duties_and_Responsibilities. The Plan
Administrator may, by written instrument, allocate among its members or
employees any of its duties and responsibilities not already allocated
under the Plan or may designate persons other than members or employees
to carry out any of the Plan Administrator's duties and responsibilities
under the Plan. Any such duties or responsibilities thus allocated must
be described in the written instrument. If a person other than an
Employee of the Employer is so designated, such person must acknowledge
in writing his acceptance of the duties and responsibilities allocated to
him.
15.4 Appointment_of_the_Plan_Administrator. The Employer shall
designate in the Adoption Agreement the Plan Administrator who shall
administer the Employer's Plan. Such Plan Administrator may consist of
an individual, a committee of two or more individuals, whether or not, in
either such case, the individual or any of such individuals are Employees
of the Employer, a consulting firm or other independent agent, the Trustee
(with its consent), or the Employer itself. The Plan Administrator shall
be charged with the full power and the responsibility for administering
the Plan in all its details. If no Plan Administrator has been appointed
by the Employer, or if the person designated as Plan Administrator by the
Employer is not serving as such for any reason, the Employer shall be
deemed to be the Plan Administrator of the Plan. The Plan Administrator
may be removed by the Employer, or may resign by giving notice in writing
to the Employer, and in the event of the removal, resignation, or death,
or other termination of service by the Plan Administrator, the Employer
shall, as soon as practicable, appoint a successor Plan Administrator,
such successor thereafter to have all of the rights, privileges, duties,
and obligations of the predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and
incurred by the Plan Administrator in the administration of the Plan
except to the extent such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom
duties and responsibilities have been allocated pursuant to section 15.3
may be indemnified and held harmless by the Employer with respect to any
alleged breach of responsibilities performed or to be performed hereunder.
The Employer and each Affiliated Employer shall indemnify and hold
harmless the Sponsor against all claims, liabilities, fines, and
penalties, and all expenses reasonably incurred by or imposed upon him
(including, but not limited to, reasonable attorney's fees) which arise
as a result of actions or failure to act in connection with the operation
and administration of the Plan.
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15.7 Claims_Procedure.
(a) Filing_a_Claim. Any Participant or Beneficiary under
the Plan may file a written claim for a Plan benefit with the Plan
Administrator or with a person named by the Plan Administrator to receive
claims under the Plan.
(b) Notice_of_Denial_of_Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any
Participant or Beneficiary under the Plan ("claimant"), claimant shall be
given a written notification containing specific reasons for the denial
or limitation of his benefit. The written notification shall contain
specific reference to the pertinent Plan provisions on which the denial
or limitation of his benefit is based. In addition, it shall contain a
description of any other material or information necessary for the
claimant to perfect a claim, and an explanation of why such material or
information is necessary. The notification shall further provide
appropriate information as to the steps to be taken if the claimant wishes
to submit his claim for review. This written notification shall be given
to a claimant within ninety (90) days after receipt of his claim by the
Plan Administrator unless special circumstances require an extension of
time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished
to the claimant prior to the termination of said ninety (90) day period,
and such notice shall indicate the special circumstances which make the
postponement appropriate.
(c) Right_of_Review. In the event of a denial or limitation
of his benefit, the claimant or his duly authorized representative shall
be permitted to review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the claimant
or his duly authorized representative may make a written request for a
full and fair review of his claim and its denial by the Plan
Administrator; provided, however, that such written request must be
received by the Plan Administrator (or its delegate to receive such
requests) within sixty (60) days after receipt by the claimant of written
notification of the denial or limitation of the claim. The sixty (60) day
requirement may be waived by the Plan Administrator in appropriate cases.
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(d) Decision_on_Review. A decision shall be rendered by the
Plan Administrator within sixty (60) days after the receipt of the request
for review, provided that where special circumstances require an extension
of time for processing the decision, it may be postponed on written notice
to the claimant (prior to the expiration of the initial sixty (60) day
period) for an additional sixty (60) days, but in no event shall the
decision be rendered more than one hundred twenty (120) days after the
receipt of such request for review. Any decision by the Plan Adminis-
trator shall be furnished to the claimant in writing and shall set forth
the specific reasons for the decision and the specific Plan provisions on
which the decision is based.
(e) Court_Action. No Participant or Beneficiary shall have
the right to seek judicial review of a denial of benefits, or to bring any
action in any court to enforce a claim for benefits prior to filing a
claim for benefits or exhausting his rights to review under this section.
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's_Power_to_Amend. The Sponsor may amend any part of
the Plan. For purposes of Sponsor's amendments, the mass submitter shall
be recognized as the agent of the Sponsor. If the Sponsor does not adopt
the amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
16.2 Amendment_by_Adopting_Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption
Agreement;
(ii) add overriding language in the Adoption Agreement
when such language is necessary to satisfy section 415 or section 416 of
the Code because of the required aggregation of multiple plans; and
(iii) add certain model amendments published by the
Internal Revenue Service which specifically provide that their adoption
will not cause the Plan to be treated as individually designed.
(b) An Employer that amends the Plan for any other reason,
including a waiver of the minimum funding requirement under section 412(d)
of the Code, will no longer participate in this prototype plan and will
be considered to have an individually designed plan.
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16.3 Vesting_Upon_Plan_Termination. In the event of the
termination or partial termination of the Plan, the Account balance of
each affected Participant will be nonforfeitable.
16.4 Vesting_Upon_Complete_Discontinuance_of_Contribu tions. In
the event of a complete discontinuance of contributions under the Plan,
the Account balance of each affected Participant will be nonforfeitable.
16.5 Maintenance_of_Benefits_Upon_Merger. In the event of a merger
or consolidation with, or transfer of assets to any other plan, each
Participant will receive a benefit immediately after such merger,
consolidation or transfer (if the Plan then terminated) which is at least
equal to the benefit the Participant was entitled to immediately before
such merger, consolidation or transfer (if the Plan had been terminated).
16.6 Special_Amendments. The Employer may from time to time make
any amendment to the Plan that may be necessary to satisfy section 415 or
416 of the Code. Any such amendment will be adopted by the Employer by
completing overriding Plan language in the Adoption Agreement. In the
event of such an amendment, the Employer must obtain a separate
determination letter from the Internal Revenue Service to continue
reliance on the Plan's qualified status.
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive_Benefit_of_Participants_and_Beneficia ries.
(a) All assets of the Trust shall be retained for the
exclusive benefit of Participants and their Beneficiaries, and shall be
used only to pay benefits to such persons or to pay the fees and expenses
of the Trust. The assets of the Trust shall not revert to the benefit of
the Employer, except as otherwise specifically provided in section
17.1(b).
(b) To the extent permitted or required by ERISA and the
Code, contributions to the Trust under this Plan are subject to the
following conditions:
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(i) If a contribution or any part thereof is made to
the Trust by the Employer under a mistake of fact, such contribution or
part thereof shall be returned to the Employer within one (1) year after
the date the contribution is made.
(ii) In the event the Plan is determined not to meet
the initial qualification requirements of section 401 of the Code,
contributions made in respect of any period for which such requirements
are not met shall be returned to the Employer within one (1) year after
the Plan is determined not to meet such requirements, but only if the
application for the qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury may
prescribe.
(iii) Contributions to the Trust are specifically
conditioned on their deductibility under the Code and, to the extent a
deduction is disallowed for any such contribution, such amount shall be
returned to the Employer within one (1) year after the date of the
disallowance of the deduction.
17.2 Nonguarantee_of_Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Employer and
any Employee, or as a right of any Employee to be continued in the
employment of the Employer, or as a limitation of the right of the
Employer to discharge any of its Employees, with or without cause.
17.3 Rights_to_Trust_Assets. No Employee, Participant, or
Beneficiary shall have any right to, or interest in, any assets of the
Trust upon termination of employment or otherwise, except as provided
under the Plan. All payments of benefits under the Plan shall be made
solely out of the assets of the Trust.
17.4 Nonalienation_of_Benefits. No benefit or interest available
hereunder will be subject to assignment or alienation, either voluntarily
or involuntarily. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations
order, as defined in section 414(p) of the Code, or any domestic relations
order entered before January 1, 1985.
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17.5 Aggregation_Rules.
(a) Except as provided in ARTICLE 6, all Employees of the
Employer or any Affiliated Employer will be treated as employed by a
single employer.
(b) If this Plan provides contributions or benefits for one
or more Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, this Plan and
the plan established for other trades or businesses must, when looked at
as a single plan, satisfy sections 401(a) and (d) of the Code for the
Employees of this and all other trades or businesses.
(c) If the Plan provides contributions or benefits for one
or more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be
included in a plan which satisfies sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable than provided
for Owner-Employees under this Plan.
(d) If an individual is covered as an Owner- Employee under
the plans of two or more trades or businesses which are not controlled and
the individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses which
are controlled must be as favorable as those provided for him under the
most favorable plan of the trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-
Employee, or two or more Owner-Employees, will be considered to control
a trade or business if the Owner- Employee, or two or more Owner-Employees
together:
(i) own the entire interest in an unincorporated
trade or business; or
(ii) in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
the partnership.
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For purposes of the preceding sentence, an Owner- Employee,
or two or more Owner-Employees shall be treated as owning an interest in
a partnership which is owned, directly or indirectly, by a partnership
which such Owner- Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
17.6 Failure_of_Qualification. If the Employer's plan fails to
attain or retain qualification, such plan will no longer participate in
this master/prototype plan and will be considered an individually designed
plan.
17.7 Applicable_Law. Except to the extent otherwise required by
ERISA, as amended, this Plan shall be construed and enforced in accordance
with the laws of the state in which the Employer's principal place of
business is located, as specified in the Adoption Agreement.
-73-
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
DISTRIBUTION PLAN
Distribution Plan (the "Plan") of Lexington Troika Dialog Russia Fund,
Inc., a Maryland Corporation (the "Fund), an open-end, management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act"), adopted pursuant to Section 12(b) of the act and Rule 12b-1
promulgated thereunder ("Rule 12b-1").
1. Principal Underwriter and Investment Adviser. Lexington Funds
Distributor, Inc., a Delaware corporation ("the Distributor"), acts as the
principal underwriter of the Fund's shares pursuant to a Distribution
Agreement. Lexington Management Corporation, a Delaware corporation (the
"Adviser"), acts as the Fund's investment adviser pursuant to an Investment
Advisory Agreement.
2. Distribution Payments. (a) 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
the compensation of the sales personnel of the Distributor; payments of no
more than an effective annual rate of 0.25%, or such lesser amounts as the
Distributor determines appropriate.
(b) The schedule of such fees and the basis upon which such
fees will be paid shall be determined from time to time by the Distributor
and the Adviser, subject to approval by the Directors of the Fund.
(c) Payments may also be made for any advertising and
promotional expenses relating to selling efforts, 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;
3. Reports. 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.
4. Approval of Plan. This Plan shall become effective upon
approval of the Plan, the form is 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 in Section 6), 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 Act.
5. Term. This 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 by 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 in accordance with Section 4 hereof. 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.
6. Termination. This 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 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 a majority of the
outstanding voting securities of the Fund, as defined in Section 2(a)(42)
of the Act.
7. Nomination of "Non-Interested" Directors. 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 non-interested
Directors then in office.
8. Miscellaneous. (a) Any termination or non-continuance of (i)
a Selected Dealer Agreement between the Distributor and a particular broker
or (ii) a Shareholder Service agreement between the adviser or the Fund and
a particular person or organization, shall have no effect on any similar
agreements between brokers or other persons and the Fund, the Adviser or the
Distributor pursuant to this Plan.
(b) The Distributor, the Adviser, or the Fund shall not be
under any obligation because of this Plan to execute any Selected Dealer
Agreement with any broker or any Shareholder Service Agreement with any
person or organization.
(c) All Agreements with any person or organization relating to
the implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Section 6 hereof.
Dated: ___________________________
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from its
Statement of Assets and Liabilities dated March 27, 1996 and is qualified
in its entirety by reference to such Statement of Assets and Liabilities.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-27-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 175,000
<TOTAL-ASSETS> 175,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 75,000
<TOTAL-LIABILITIES> 75,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
