SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.__)
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
- -------------------------------------------------------------------------------
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
P.O. BOX 1515
PARK 80 WEST, PLAZA TWO
SADDLE BROOK, NEW JERSEY 07663
(800) 526-0056
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 19, 1997
Notice is hereby given that a special meeting of the shareholders (the
"Meeting") of the Lexington Troika Dialog Russia Fund, Inc. (the "Fund"), a
Maryland corporation, will be held on December 19, 1997, at 10:00 a.m. Eastern
time, at the offices of the Fund, Park 80 West, Plaza Two, Saddle Brook, New
Jersey, for the following purposes:
1. To elect twelve (12) Directors to hold office until the election and
qualification of their successors;
2. To consider and act upon a proposal to approve an investment
sub-advisory agreement between Lexington Management Corporation and ZAO
Asset Management Company Troika Dialog (conducting business as "Troika
Dialog Asset Management") with respect to the Fund;
3. To consider and act upon a proposal to ratify or reject the selection of
KPMG Peat Marwick LLP as independent certified public accountants for
the Fund for the fiscal year ending December 31, 1997; and
4. To transact such other business as may properly come before the Meeting.
Shareholders of record at the close of business on October 24, 1997 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID RETURN
ENVELOPE ENCLOSED, SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF
SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN
YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.
By Order of the Board of Directors,
Lisa A. Curcio, Secretary
Dated: November 17, 1997
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
P.O. BOX 1515
PARK 80 WEST, PLAZA TWO
SADDLE BROOK, NEW JERSEY 07663
(800) 526-0056
PROXY STATEMENT
DATED NOVEMBER 17, 1997
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
DECEMBER 19, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Lexington Troika Dialog Russia Fund,
Inc. (the "Fund"), a Maryland corporation, for use at a special meeting of
shareholders (the "Meeting") to be held on December 19, 1997, at 10:00 a.m.
Eastern time, at the offices of the Fund, Park 80 West, Plaza Two, Saddle Brook,
New Jersey, and at any adjournment(s) thereof, and was first mailed to
shareholders on or about November 17, 1997. Even if you sign and return the
accompanying proxy, you may revoke it by giving written notice of such
revocation to the Secretary of the Fund prior to the Meeting or by delivering a
subsequently dated proxy or by attending and voting at the Meeting in person.
Management expects to solicit proxies principally by mail, but Management, or
agents appointed by Management, may also solicit proxies by telephone, telegraph
or personal interview. The costs of solicitation will be borne by the Fund.
The following are the Proposals for the Meeting:
1. Shareholders will be asked to elect twelve (12) Directors to hold office
until the election and qualification of their successors;
2. Shareholders will be asked to approve an amended investment sub-advisory
agreement (the "Sub-Advisory Agreement") between Lexington Management
Corporation (the "Adviser") and ZAO Asset Management Company Troika
Dialog (conducting business as "Troika Dialog Asset Management") with
respect to the Fund;
3. Shareholders will be asked to ratify or reject the selection of KPMG
Peat Marwick LLP as independent certified public accountants for the
Fund for the fiscal year ending December 31, 1997; and
4. Shareholders will be asked to transact such other business as may
properly come before the Meeting.
The Board of Directors has fixed the close of business on October 24, 1997
as the record date for the determination of the shareholders entitled to notice
of and to vote at the Meeting or any adjournment thereof. As of that date, there
were approximately 8,995,792 outstanding shares of the Fund, each share being
entitled to one vote on each matter to come before the Meeting. As of October
24, 1997, the Directors and executive officers of the Fund as a group
beneficially owned less than 1% of all issued and outstanding shares of the
Fund. As of October 24, 1997, the following shareholders each beneficially owned
5% or more of a Fund's shares:
Number of Percentage of
Name and Address Shares Owned Fund Outstanding
--------------- ------------ ---------------
Smith Richardson Foundation 503,752 5%
701 Green Valley Road
Greensboro, N.C. 27401
<PAGE>
A copy of the Fund's annual report and most recent semi-annual report
succeeding the annual report may be received, free of charge, by calling the
Fund, toll free, at 1-800-526-0056.
The favorable vote of the holders of a simple majority of the shares
represented at the Meeting is required for the election of Directors (Proposal
1, below) and the ratification of the selection of KPMG Peat Marwick LLP as
independent certified public accountants (Proposal 3, below). The favorable vote
of the holders of a majority of the outstanding voting securities of the Fund,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
is required to approve the Sub-Advisory Agreement (Proposal 2, below).
In addition to the solicitation of proxies by mail, the Fund may utilize the
services of officers and employees of the Fund, the Adviser, and Lexington Funds
Distributor, Inc., the Fund's distributor, none of whom receive any compensation
therefor, to solicit proxies by telephone, telegraph and personal interview, and
may also provide shareholders with a procedure for recording their votes by
telegraph, facsimile, telephone or other electronic means. The estimated costs
of solicitation of proxies are expected to be approximately $50,000 in the
aggregate for the Fund and will be borne by the Fund. The Fund may request
brokers, custodians, nominees and fiduciaries to forward proxy material to the
beneficial owners of shares of record. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses incurred in sending
soliciting material to their principals.
If a proxy represents a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the broker or nominee does not have discretionary power)
or marked with an abstention (collectively, "abstentions"), the shares
represented thereby will be considered to be present at the meeting for purposes
of determining the existence of a quorum for the transaction of business and
will have the effect of a vote against the proposal.
At the Meeting, the presence in person or by proxy of shareholders of
one-third of the outstanding shares entitled to vote at the Meeting shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that a quorum of shareholders is not represented at the Meeting,
the shareholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the Meeting to be held within a period
not exceeding 120 days after the date originally set for the Meeting, without
notice other than announcement at the Meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted at the meeting as originally
notified.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF SHARES
REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR, IN THE ABSENCE OF SUCH
DIRECTION, FOR APPROVAL OF EACH OF THE ABOVE PROPOSALS.
PROPOSAL 1
ELECTION OF DIRECTORS
---------------------
Twelve directors are to be elected at the Meeting as the entire Board of
Directors, to hold office until the next meeting and until their successors
shall have been elected and shall have qualified. If authority is granted on the
accompanying proxy to vote in the election of Directors, it is the intention of
the persons named in the proxy to vote at the Meeting for the election of the
nominees named below, each of whom has consented to serve if elected.
2
<PAGE>
If any of the nominees is unavailable to serve for any reason, the persons named
as proxies will vote for such other nominee or nominees selected by the Board of
Directors or the Board may reduce the number of Directors as provided in the
Fund's By-Laws. The Fund currently knows of no reason why any of the nominees
listed below will be unable to serve if elected.
<TABLE>
<CAPTION>
Shares Owned
Nominee's Name Year First Became Beneficially
and Age Principal Occupation for Past 5 Years A Director October 24, 1997**
- -------------- ------------------------------------- ----------------- ------------------
<S> <C> <C> <C>
S.M.S. Chadha (60) Director. Secretary, Ministry of 1996 0
External Affairs, New Delhi, India;
Head of Foreign Service Institute, New
Delhi, India; Special Envoy of the
Government of India; Director, Special
Unit for Technical Cooperation among
Developing Countries, United Nations
Development Program, New York.
Allen M. Stowe (60) Director. President, Shelter Service 1997 1,029
Company, Inc.; President, Dartmouth
Co-Operative Society Co., Inc.
*Robert M. DeMichele (52) President and Chairman of the Board. 1996 979
Chairman of the Board and Chief
Executive Officer, Lexington
Management Corporation; President and
Director, Lexington Global Asset
Managers, Inc.; Chairman and Chief
Executive Officer, Lexington Funds
Distributor, Inc.; Chairman of the
Board, Market Systems Research, Inc.
and Market Systems Research Advisors,
Inc. (registered investment advisors);
Director, Chartwell Re Corporation;
Director, Claredon National Insurance
Company; Director, Unione Italiana
Reinsurance; Director, Continental
National Corporation; Director, The
Navigator's Group, Inc.; Director,
Vanguard Cellular Systems, Inc.;
Director, Weeden & Co.
Beverley C. Duer (68) Director. Private Investor; Formerly, 1996 0
Manager of Operations Research
Department, CPC International, Inc.
*Barbara R. Evans (37) Director. Private Investor; Formerly, 1996 0
Assistant Vice President and
Securities Analyst, Lexington
Management Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares Owned
Nominee's Name Year First Became Beneficially
and Age Principal Occupation for Past 5 Years A Director October 24, 1997**
- -------------- ------------------------------------- ----------------- ------------------
<S> <C> <C> <C>
*Richard M. Hisey (39) Vice President, Portfolio Manager and 1996 3,269
Director. Managing Director, Director
and Chief Financial Officer, Lexington
Management Corporation; Chief
Financial Officer, Vice President and
Director, Lexington Funds Distributor,
Inc.; Chief Financial Officer, Market
Systems Research Advisers, Inc.;
Executive Vice President and Chief
Financial Officer, Lexington Global
Asset Managers, Inc.
*Lawrence Kantor (50) Vice President and Director. Managing 1996 5,979
Director, Executive Vice President and
Director, Lexington Management
Corporation; Executive Vice President
and Director, Lexington Funds
Distributor, Inc.; Executive Vice
President and General Manager--Mutual
Funds, Lexington Global Asset
Managers, Inc.
Jerard F. Maher (51) Director. General Counsel, Federal 1996 0
Business Centers; Counsel, Ribis,
Graham & Curtin.
Andrew M. McCosh (57) Director. Professor of the Organisation 1996 0
of Industry and Commerce, Department
of Business Studies, The University of
Edinburgh, Scotland.
Donald B. Miller (71) Director. Chairman, Horizon Media, Inc.; 1996 0
Trustee, Galaxy Funds (registered
investment companies); Director,
Maguire Group of Connecticut.
John G. Preston (65) Director. Associate Professor of Finance, 1996 0
Boston College.
Margaret W. Russell (77) Director. Private Investor. 1996 0
</TABLE>
- ----------
* An "interested person" as defined in Section 2(a)(19) of the 1940 Act.
** Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to vote
or dispose of shares, regardless of any economic interest therein.
All of the Directors hold similar offices with some or all of the other
registered investment companies advised and/or whose shares are distributed by
the Adviser and Lexington Funds Distributor, Inc.
There are no standing audit, nominating or compensation committees of the
Board of Directors, or any committees performing similar functions. The Board of
Directors met five times during the twelve months ended December 31, 1996, and
each of the Directors attended at least 75% of those meetings.
4
<PAGE>
SENIOR OFFICERS OF THE FUND
<TABLE>
<CAPTION>
Year First Shares Beneficially
Principal Occupation; Became an Owned
Name and Age Other Associations Officer October 24,1997**
- -------------- ------------------- --------- -------------------
<S> <C> <C> <C>
Robert M. DeMichele* (52) President and Chairman of the Board 1996 979
(see page 3).
Richard M. Hisey* (39) Vice President, Portfolio Manager and 1996 3,269
Director (see page 4).
Lawrence Kantor* (50) Vice President and Director (see page 4). 1996 5,979
Lisa Curcio* (38) Vice President and Secretary. Senior 1996 565
Vice President and Secretary,
Lexington Management Corporation; Vice
President and Secretary, Lexington
Funds Distributor, Inc.; Secretary,
Lexington Global Asset Managers, Inc.
Richard Lavery* (44) Vice President. Senior Vice President, 1996 1,616
Lexington Management Corporation; Vice
President, Lexington Funds
Distributor, Inc.
Janice Carnicelli* (38) Vice President. 1996 0
Christie Carr-Waldron* (30) Treasurer. Assistant Treasurer, Lexington 1996 0
Group of Investment Companies.
Nancy Herring (44) Vice President and Portfolio Manager. 1997 0
Managing Director, Troika Dialog Asset
Management; Formerly Portfolio
Manager, Dean Witter Intercapital.
Gavin Rankin (35) Vice President and Portfolio Manager. 1996 10,040
Director of Research, Troika Dialog
and Chief Investment Officer, Troika
Dialog Asset Management; Formerly
founder and Chief Executive Officer,
Lonpra A.S. (investment
bankers--Czechoslovakia).
Ruben Vardanian (29) Vice President. President and Chairman, 1996 0
Troika Dialog Asset Management;
President and Chief Executive Officer,
Troika Dialog.
</TABLE>
- ----------
* Messrs. DeMichele, Hisey, Kantor, Lavery and Mmes. Carr-Waldron, Curcio, and
Carnicelli hold similar offices with some or all of the other registered
investment companies advised and/or whose shares are distributed by the
Adviser and Lexington Funds Distributor, Inc.
** Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to vote or
dispose of shares, regardless of any economic interest therein.
5
<PAGE>
REMUNERATION OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof up to a maximum of $5,000 per
year. Each Director who is not an affiliate of the Adviser is compensated for
his or her services according to a fee schedule which recognizes the fact that
each Director also serves as a Director (or trustee) of other investment
companies advised by the Adviser. Each Director receives a fee, allocated among
all investment companies for which the Director serves. Each Director receives
an annualized compensation of $25,600.
Set forth below is information regarding compensation paid or accrued for
the fiscal year ended December 31, 1996 for each Director:
<TABLE>
<CAPTION>
Aggregate Total Compensation From Number of
Name of Director Compensation from Fund Fund and Fund Complex Directorships in Fund Complex
- -------------- ---------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
S.M.S. Chadha $856 $13,696 16
Robert M. DeMichele 0 0 17
Beverley C. Duer $1,080 $29,110 17
Barbara R. Evans 0 0 16
Richard M. Hisey 0 0 1
Lawrence Kantor 0 0 16
Jerard F. Maher $856 $16,046 17
Andrew M. McCosh $856 $13,696 16
Donald B. Miller $1,080 $26,760 16
Francis Olmsted* 0 $16,800 N/A
John G. Preston $1,080 $26,760 16
Margaret W. Russell $1,080 $25,048 16
Philip C. Smith* $1,080 $25,080 N/A
Francis A. Sunderland* $112 $18,928 N/A
</TABLE>
- -------
*Retired
RETIREMENT PLAN FOR ELIGIBLE DIRECTORS
Under the Retirement Plan for Eligible Directors (the "Plan"), each Director
who is not an employee of the Adviser, any of the funds managed by the Adviser,
the Fund's administrator, Lexington Funds Distributor, Inc., or any of their
affiliates may be entitled to certain benefits upon retirement from the Board.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible Director has attained age 65 and has completed at least ten years of
continuous and non-forfeited service with one or more of the investment
companies advised by the Adviser (or its affiliates) (collectively, the "Covered
Funds"). Each eligible Director is entitled to receive from the Covered Fund an
annual benefit commencing on the first day of the calendar quarter coincident
with or next following his date of retirement equal to 5% of his compensation
multiplied by the number of such Director's years of service (not in excess of
15 years) completed with respect to any of the Covered Funds. Such benefit is
payable to each eligible Director in quarterly installments for ten years
following the date of retirement or the life of the Director. The Plan
establishes age 72 as a mandatory retirement age for Directors; however,
Directors who were serving the Covered Funds as of September 12, 1995 are not
subject to such mandatory retirement. Directors who were serving the Covered
Funds as of September 12, 1995 who elected retirement under the Plan prior to
September 12, 1996 receive an annual retirement benefit at any increased
compensation level if compensation is increased prior to
6
<PAGE>
September 12, 1997 and receive spousal benefits (I.E., in the event the Director
dies prior to receiving full benefits under the Plan, the Director's spouse (if
any) will be entitled to receive the retirement benefit within the 10 year
period.)
Retiring Directors will be eligible to serve as Honorary Directors for one
year after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.
Set forth in the table below are the estimated annual benefits payable to an
eligible Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1996, the estimated credited years
of service for Directors Chadha, Duer, Maher, McCosh, Miller, Preston and
Russell are 1, 18, 1, 1, 22, 18 and 15, respectively. The following table refers
to retirement compensation for the trustees and directors of the entire
Lexington Fund Complex (the investment companies managed by the Adviser):
HIGHEST ANNUAL COMPENSATION PAID BY ALL FUNDS
---------------------------------------------
$20,000 $25,000 $30,000 $35,000
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
- ---------- ----------------------------------------
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
PROPOSAL 2
APPROVAL OF SUB-ADVISORY AGREEMENT
Introduction. The Fund has entered into an investment advisory agreement
with the Adviser, under which the Adviser 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. The Adviser has entered
into an investment sub-advisory agreement (the "Current Sub-Advisory Agreement")
with ZAO Asset Management Company Troika Dialog (conducting business as "Troika
Dialog Asset Management") (hereinafter referred to as "TDAM"), under which TDAM
provides the Fund with investment advice and management of the Fund's investment
program.
TDAM is a wholly-owned subsidiary of Troika Dialog. Peter Derby, the
Chairman of TDAM, indirectly controls approximately 80% of the voting shares of
Troika Dialog. The remaining 20% is beneficially owned by Ruben Vardanian, the
President of Troika Dialog. On October 3, 1997, Mr. Derby transferred control of
TDAM's parent, Troika Dialog, to the Bank of Moscow but retained control of
TDAM. Troika Dialog was founded in Moscow, Russia in 1991 by Dialog Bank and
Troika Capital Corporation. Mr. Derby has entered into an agreement to sell his
interest in TDAM to the Bank of Moscow. Shareholders are being asked to approve
this transaction.
Although Peter Derby has been the Chairman of TDAM, the business has been
managed and will continue to be managed by a group of employee/owners headed by
Mr. Vardanian.
The Board of Directors believes that the Bank of Moscow is an excellent
partner for TDAM. The Bank is majority-owned by the City of Moscow. It is now
one of the top twelve largest banks in Russia with over $1.4 billion in total
assets. The Bank is aggressively expanding its retail branch network and its
corporate banking relationships (Moscow Government departments, budget
organizations, tax inspectorate, joint stock companies,
7
<PAGE>
etc.). In 1996, the Bank began servicing the Federal and Local Road Funds. Its
commercial clients have grown from 38% of its business to close to 50% at the
end of 1996. Unlike many of the older banks in Russia, the amount of overdue
loans in the Bank's loan portfolio is relatively small at under 2%. Licensed by
the Central Bank of Russia as an official dealer, the Bank has been expanding
its activities in the Government securities market. The Bank has pursued its
growth while continuing to increase its profitability.
With its substantial asset and capital base, the Bank of Moscow has been
able to provide substantial equity and debt capital to Troika Dialog in this
transaction. The Bank's relationship with the City of Moscow places Troika
Dialog in an excellent investment banking position for the companies yet to be
privatized by the City of Moscow. The Bank has committed itself to maintaining
the independence of the management of TDAM.
As required by the 1940 Act, the Current Sub-Advisory Agreement provides for
its automatic termination upon its "assignment" (as defined in the 1940 Act).
The term "assignment" is defined in the 1940 Act to include a transfer of a
controlling block of the assignor's voting securities by a security holder of
the assignor. The term "control" is defined in the 1940 Act to include any
person who owns either directly or through one or more controlled companies,
more than 25% of the voting securities of a company. Such a person shall be
presumed to control such company. Under the defined terms of "control" and
"assignment," the Current Sub-Advisory Agreement between TDAM and the Adviser
may be construed to terminate upon the sale of Peter Derby's stake to the Bank
of Moscow. In anticipation of the consummation of the transaction and to provide
continuity in investment advisory services, at a meeting held on October 24,
1997, the Fund's Board of Directors, including a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund (the
"Disinterested Directors"), approved the proposed Sub-Advisory Agreement between
the Adviser and TDAM. The Board also directed that such agreement be submitted
to shareholders for approval at this meeting. THE SUB-ADVISORY AGREEMENT IS
MATERIALLY THE SAME AS THE CURRENT SUB-ADVISORY AGREEMENT.
Section 15(f) of the 1940 Act generally provides that in connection with the
sale of any interest in an investment adviser, such as TDAM, which results in
the "assignment" of an investment advisory contract, an investment adviser of a
registered investment company, such as the Fund, or an affiliated person of such
investment adviser, may receive any amount of benefit, if, among other things,
there is no "unfair burden" imposed upon the investment company as a result of
such sale. For this purpose, an "unfair burden" includes certain arrangements
during the two year period following the transaction that results in additional
compensation to the investment adviser or an affiliate for other than bona fide
services provided. In connection with the transfer of control of TDAM to the
Bank of Moscow, the Bank of Moscow has assured the Fund that no unfair burden
(as defined in section 15(f) of the 1940 Act) shall be imposed on the Fund as a
result of that transaction for a period of two years from that date.
THE SUB-ADVISORY AGREEMENT. The proposed Sub-Advisory Agreement is
materially the same as the Current Sub-Advisory Agreement between the Adviser
and TDAM and does not provide for any increase in the investment advisory fees
paid by the Fund. The Adviser is a wholly-owned subsidiary of Lexington Global
Asset Managers, Inc., a Delaware corporation with offices at Park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663. The investment advisory agreement and
Current Sub-Advisory Agreement of the Fund were approved by the Fund's Board of
Directors on December 2, 1996. If the proposed Sub-Advisory Agreement is
approved, the Adviser will continue to serve as investment adviser to the Fund
and TDAM will continue to serve as investment sub-adviser to the Fund.
The Fund is managed by a portfolio management team consisting of investment
professionals from the Adviser and TDAM. The lead manager from TDAM is Gavin
Rankin. Richard M. Hisey, CFA, of the Adviser is the Fund's portfolio strategist
and a portfolio manager. Other members of the portfolio management team are
Ruben Vardanian and Nancy Herring. Gavin Rankin is Head of Research for TDAM. He
is responsible, along with other members of the portfolio management team, for
the Fund's overall investment strategy. Mr. Rankin was appointed Head of
Research for Troika Dialog in November of 1995. Before joining Troika Dialog, he
was the Founder and Chief Executive Officer of Lonpra A.S., an investment
banking firm in Czechoslovakia in 1991. Mr. Rankin received a degree in law
(L.L.B.) from the
8
<PAGE>
University of Buckingham in England and also qualified as a Chartered Accountant
with Price Waterhouse. Mr. Rankin has extensive experience in East European
equity research and management.
Ms. Herring manages the Russian domestic mutual funds of Troika Dialog. She
was appointed Managing Director in 1996. Before joining TDAM, Ms. Herring, a
U.S. citizen, was a portfolio manager of a U.S. equity fund for Dean Witter
Intercapital. In all, she has over thirteen years of security industry
experience. Her Master's Degree in Business Administration was earned in
International Business and Finance at Columbia University Graduate School of
Business.
Mr.Vardanian is the Chairman of the Board of TDAM. Mr. Vardanian, a Russian
national, is a sitting member of the Moscow Times Index Composition Committee.
He is a Director and former Chairman of the Board of Directors of the Depository
Clearing Company. He is also Chairman of the Board of Directors of the Russian
capital markets self-regulatory organization (NAUFOR). Mr. Vardanian received a
Masters Degree with Distinction from the Finance Department of Moscow State
University. He received post-graduate training with Banca CRT in Italy and the
Emerging Markets Division of Merrill Lynch in New York.
The following persons are directors and/or senior officers of TDAM: Ruben
Vardanian, Chairman of the Board; Ravel Teplukhin, President; Gavin Rankin,
Chief Investment Officer. The business address of each of the directors and
officers listed above is 6/3 1st Kolobovsky Per, Moscow 103051, Russia.
ADVISORY FEES. As compensation for its services as investment adviser, the
Fund pays the Adviser a monthly advisory fee at the annual rate of 1.25% of the
average daily net assets of the Fund. The Adviser pays TDAM an annual investment
sub-advisory fee of 0.625% of the Fund's average daily net assets. The
investment sub-advisory fee is paid by the Adviser, not the Fund. For the fiscal
year ended December 31, 1996, the Fund paid the Adviser $65,149 in investment
advisory fees, after voluntary investment advisory fee reimbursements of
$145,137. For the same period, TDAM waived payment of its sub-advisory fee (TDAM
and its affiliates received no separate payments from the Fund). The investment
sub-advisory fee under the proposed Sub-Advisory Agreement will remain 0.625%,
and will be paid by the Adviser.
DIFFERENCES BETWEEN THE CURRENT AND PROPOSED SUB-ADVISORY AGREEMENTS. The
Current Sub-Advisory Agreement and proposed Sub-Advisory Agreement are identical
in all material respects.
BOARD CONSIDERATIONS. In considering whether to recommend that the proposed
Sub-Advisory Agreement be approved by shareholders, the Board of Directors
considered the nature and quality of services provided by TDAM to date and the
excellent work relationship it enjoys with the Adviser. The Board also requested
and evaluated such other information from TDAM which the Board deemed to be
relevant.
The Board also considered that the new arrangement does not require any
change in TDAM's investment management or operation of the Fund, the investment
personnel managing the Fund, the other business activities of the Fund, or the
investment objective of the Fund. TDAM has advised that, at present, aside from
the departure of Peter Derby and acquisition of his interest in TDAM by the Bank
of Moscow, it neither plans nor proposes to make any material changes in the
business, corporate structure, or composition of senior management or personnel
of TDAM, or in the manner in which TDAM renders investment sub-advisory services
to the Fund. If, after the approval of the proposed Sub-Advisory Agreement,
changes in TDAM are proposed that might materially affect its services to the
Fund, the Board will consider the effect of those changes and take such action
as it deems advisable under the circumstances. The Board noted that the
sub-advisory fees would remain the same and that the proposed Sub-Advisory
Agreement would be materially the same as the Current Sub-Advisory Agreement.
The Board also considered various alternatives, including internalization of
management, having the Adviser more fully assume the sub-advisory function or
retaining another sub-adviser.
Based on these considerations the Board, including a majority of the
Disinterested Directors, unanimously approved the proposed Sub-Advisory
Agreement at the meeting held on October 24, 1997.
REQUIRED VOTE AND BOARD RECOMMENDATION. Approval of the proposed
Sub-Advisory Agreement will require the affirmative vote of a "majority of the
outstanding voting securities" of the Fund, which, for this purpose, means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund, or (2) 67% or more of the shares of the Fund present at the meeting,
if more than 50% of the outstanding shares of the Fund are represented at the
meeting in person or by proxy. If the shareholders of the Fund do not approve
the proposed Sub-Advisory Agreement, the Board will take such further action as
it may deem to be in the best interests of the Fund's shareholders.
9
<PAGE>
The Board of Directors recommends that you vote FOR approval of the proposed
Sub-Advisory Agreement between the Adviser and TDAM with respect to the Fund.
PROPOSAL 3
RATIFICATION OR REJECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, including a majority of the Disinterested Directors,
unanimously appointed KPMG Peat Marwick LLP as independent certified public
accountants to examine and to report on the financial statements of the Fund for
the fiscal year ending December 31, 1997. Such appointment was expressly
conditioned upon the right of the Fund by a vote of the majority of the
outstanding voting securities at any meeting called for the purpose to terminate
such employment. Such firm has no direct or indirect interest in the Fund.
Representatives of KPMG Peat Marwick LLP are not expected to be present at
the Meeting.
The Board of Directors recommends that you vote FOR the ratification of the
selection of KPMG Peat Marwick LLP as independent certified public accountants
to examine and report on the financial statements of the Fund for the fiscal
year ending December 31, 1997.
PROPOSAL 4
OTHER MATTERS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this proxy statement. If any other business should
come before the meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
ADDITIONAL INFORMATION
THE PRINCIPAL UNDERWRITER. Lexington Funds Distributor, Inc. is the
principal underwriter of the Fund. The Adviser and Lexington Funds Distributor,
Inc. are wholly owned subsidiaries of Lexington Global Asset Managers, Inc.
Lexington Funds Distributor, Inc. has its principal offices at Park 80 West,
Plaza Two, Saddle Brook, New Jersey 07663.
THE ADMINISTRATOR. Lexington Management Corporation also acts as
administrator to the Fund and performs certain administrative and internal
accounting services, including but not limited to, maintaining general ledger
accounts, regulating compliance, preparation of financial information for
semi-annual and annual reports, preparing registration statements, calculating
net asset values, communicating with shareholders, supervising the custodian and
providing facilities for such services.
SUBMISSION OF PROPOSALS FOR THE NEXT ANNUAL MEETING OF THE FUND. Under the
Fund's Articles of Incorporation and By-Laws, annual meetings of shareholders
are not required to be held unless required under the 1940 Act (for example,
when fewer than a majority of the Directors have been elected by shareholders).
Therefore, the Fund does not hold shareholder meetings on an annual basis. A
shareholder proposal intended to be presented at any meeting hereafter called
should be sent to the Fund at P.O. Box 1515, Saddle Brook, New Jersey 07663, and
must be received by the Fund within a reasonable time before the solicitation
relating thereto is made in order to be included in the notice or proxy
statement related to such meeting. The submission by a shareholder of a proposal
for inclusion in a proxy statement does not guarantee that it will be included.
Shareholder proposals are subject to certain regulations under federal
securities law. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT
IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
November 17, 1997
By Order of the Board of Directors,
Lisa A. Curcio, Secretary
10
<PAGE>
EXHIBIT A
FORM OF
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this ------ day of ------ 1997 by and between
LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the "Adviser"), and
ZAOASSET MANAGEMENTCOMPANY TROIKA DIALOG, a Russian Closed Joint Stock Company
(the "Sub-Adviser"), with respect to the following recital of fact:
RECITAL
WHEREAS, Lexington Troika Dialog Russia Fund, Inc. (the "Fund") is
registered as an open-end, non-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 adviser under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment adviser; 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 adviser; 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
<PAGE>
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, federal, and foreign
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 or 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 suc-
A-2
<PAGE>
ceeding 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 1940 Act.
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
- ---------------------------------
ZAO ASSET MANAGEMENT COMPANY TROIKA DIALOG
Attest: By------------------------------------
Chairman of the Board
A-3
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of the Lexington Troika
Dialog Russia Fund, Inc. (the "Fund") for use at a Special Meeting of
Shareholders to be held at the offices of the Fund, Park 80 West, Plaza Two,
Saddle Brook, New Jersey, on December 19, 1997 at 10 a.m. Eastern time.
The undersigned hereby appoints Peter Corniotes and Richard J. Lavery, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Special Meeting, and at all adjournments thereof, all
shares of beneficial interest of the Fund that are held of record by the
undersigned on the record date for the Special Meeting, upon the following
matters:
Please mark box in blue or black ink.
ITEM 1. Votes on Proposal to elect directors to serve as members of the
Board of Directors of the Fund, the nominees are: S.M.S. Chadha,
Allen M. Stowe, Robert M. DeMichele, Beverley C. Duer, Barbara
R. Evans, Richard M. Hisey, Lawrence Kantor, Jerard F. Maher,
Andrew M. McCosh, Donald B. Miller, John G. Preston, and
Margaret W. Russell.
FOR ALL
FOR WITHHOLD EXCEPT
/b/ /b/ /b/
TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE,
MARK THE "FOR ALL EXCEPT" BOX,
AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST
ABOVE.
ITEM 2. Vote on Proposal to approve an investment sub-advisory agreement
between Lexington Management Corporation and ZAO Asset
Management Company Troika Dialog (conducting business as "Troika
Dialog Asset Management") for the Fund.
FOR AGAINST ABSTAIN
/b/ /b/ /b/
ITEM 3. Vote on Proposal to ratify the selection of KPMG Peat Marwick as
independent certified public accountants to the Fund.
FOR AGAINST ABSTAIN
/b/ /b/ /b/
ITEM 4. Vote on the transaction of such other business as may be
properly brought before the meeting.
FOR AGAINST ABSTAIN
/b/ /b/ /b/
- --------------------------------------------------------------------------------
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items.
Receipt of Notice of Special Meeting is hereby acknowledged.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
----------------------------------------------
Sign here exactly as name(s) appears hereon
----------------------------------------------
Dated:----------------------------------, 1997
IMPORTANT: Joint owners must EACH sign. When
signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please
give your full title as such.
<PAGE>
