As filed with the Securities and Exchange Commission on May 26, 2000
Registration No. 2-57547
811-2701
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 26 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21 [X]
(Check appropriate box or boxes.)
LEXINGTON MONEY MARKET TRUST
--------------------------------------------------
(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
----------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Money Market Trust
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
------------------------------------------------------
(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue, New York, New York 10022
Approximate date of proposed public offering
It is proposed that this filing will become effective July 26, 2000
pursuant to Paragraph (a)(1) of Rule 485.
The Registrant has registered an indefinite number of shares pursuant to Section
24(f) of the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ending December 31, 1999 was filed on March 31, 2000.
================================================================================
<PAGE>
PILGRIM(SM)
- ---------------------------
FUNDS FOR SERIOUS INVESTORS
Prospectus
Class: A
July 26, 2000
LEXINGTON MONEY MARKET TRUST
A Pilgrim Fund
This prospectus contains important information about
investing in the Lexington Money Market Fund. You should
read it carefully before you invest, and keep it for future
reference. Please note that your investment: is not a bank
deposit, is not insured or guaranteed by the FDIC, the
Federal Reserve Board or any other government agency and is
affected by market fluctuations. The Securities and Exchange
Commission (SEC) has not approved or disapproved these
securities nor has the SEC judged whether the information in
this prospectus is accurate or adequate. Any representation
to the contrary is a criminal offense.
<PAGE>
[GRAPHIC]
These pages contain a description of the Lexington Money Market Trust (the
"Fund"), including its objective, investment strategy and risks.
OBJECTIVE
You'll also find:
[GRAPHIC]
HOW THE FUND HAS PERFORMED. A chart that shows the Fund's financial performance
for the past ten years.
INVESTMENT STRATEGY
[GRAPHIC]
WHAT YOU PAY TO INVEST. A list of the fees and expenses you pay-- both directly
and indirectly-- when you invest in the Fund.
RISKS
[GRAPHIC]
HOW THE FUND HAS PERFORMED
WHAT'S INSIDE
An Introduction to the Lexington Money Market 1
Lexington Money Market 2
What you pay to invest 4
Shareholder guide 5
Management of the Fund 11
Dividends, distributions and taxes 12
More information about risks 12
Financial highlights 13
Where to go for more information Backcover
<PAGE>
INTRODUCTION TO THE FUND
Risk is the potential that your investment will lose money or not earn as much
as you hope. All mutual funds have varying degrees of risk, depending on the
securities they invest in. Please read this prospectus carefully to be sure you
understand the principal risks and strategies associated with the Fund. You
should consult the Statement of Additional Information (SAI) for a complete list
of the risks and strategies.
[GRAPHIC]
If you have any questions about the Fund, please call your financial consultant
or us at 1-800-992-0180.
This prospectus is designed to help you make informed decisions about your
investments.
1
<PAGE>
LEXINGTON MONEY MARKET FUND
OBJECTIVE
The Fund's investment objective is to seek as high a level of current income
from short-term investments as is consistent with the preservation of capital
and liquidity. The Fund seeks to maintain a stable net asset value of $1 per
share.
INVESTMENT STRATEGY
The Fund will invest in short-term money market instruments that have been rated
in one of the two highest rating categories by both S&P and Moody's, both major
rating agencies. The Fund invests in short-term money market instruments (those
with a remaining maturity of 397 days or less) that offer attractive yields and
are considered to be undervalued relative to issues of similar credit quality
and interest rate sensitivity.
The Fund will also insure that its money market instruments average weighted
maturities do not exceed 90 days.
RISKS
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
CHANGES IN INTEREST RATES -- money market funds like the Fund are subject to
less interest rate risk than other income funds because they invest in debt
securities with a remaining maturity of not greater than 397 days. Still, the
value of the Fund's investment may fall when interest rates rise.
CREDIT RISK -- money market funds like the Fund are subject to less credit risk
than other income funds because they invest in short-term debt securities of the
highest quality. Still, the Fund could lose money if the issuer of a debt
security is unable to meet its financial obligations or goes bankrupt.
2
<PAGE>
HOW THE FUND HAS PERFORMED
The bar chart and table below show the Fund's annual returns and long-term
performance, and illustrate the variability of the Fund's returns. The Fund's
past performance is not an indication of future performance.
The bar chart below provides some indication of the risks of investing in the
Fund by showing the changes in the performance of the Fund's shares from year to
year.
Year by Year Total Returns (%) (1)(2)
95 [ _____ ]%
96 [ _____ ]%
97 [ _____ ]%
98 [ _____ ]%
99 [ _____ ]%
- ----------
(1) These figures are as of December 31 of each year.
(2) Prior to July 26, 2000, Lexington Management Corporation served as the
adviser to the Fund.
Best and worst quarterly performance during this period:
[___ quarter 199__: _____%]
[___ quarter 199__: _____%]
For information on the Fund's 7-day yield, please call the Fund at
1-800-992-0180. You should remember that past performance is not an indication
of future performance.
WHAT YOU PAY TO INVEST
There are two types of fees and expenses when you invest in mutual funds: fees,
including sales charges, you pay directly when you buy or sell shares, and
operating expenses paid each year by the Fund. The tables that follow show the
fees and expenses for the Fund.
Fees you pay directly
CLASS A
-------
MAXIMUM SALES CHARGE ON YOUR INVESTMENT
(AS A % OF OFFERING PRICE) %
Lexington Money Market None
MAXIMUM DEFERRED SALES CHARGE (AS A % OF PURCHASE OR SALES
PRICE, WHICHEVER IS LESS)
Lexington Money Market None
3
<PAGE>
OPERATING EXPENSES PAID EACH YEAR BY THE FUND(1) (as a % of average net assets)
CLASS A
<TABLE>
<CAPTION>
DISTRIBUTION
AND SERVICE TOTAL FUND
MANAGEMENT (12B-1) OTHER OPERATING FEE WAIVER NET
FUND FEE FEES EXPENSES EXPENSES BY ADVISER(2) EXPENSES
---- --- ---- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Lexington Money Market 0.50 0.00 -- -- -- --
</TABLE>
- ----------
(1) These tables show the estimated operating expenses for the Fund as a ratio
of expenses to average daily net assets. These estimates are based on the
Fund's actual operating expenses for its most recent complete fiscal year
and fee waivers to which the adviser has agreed.
(2) Pilgrim Investments has entered into an expense limitation agreements with
the Fund [CONFIRM] under which it will limit expenses of the Fund,
excluding interest, taxes, brokerage and extraordinary expenses, subject to
possible reimbursement to Pilgrim Investments within [three] years.
WHAT YOU PAY TO INVEST
EXAMPLE
The example that follows is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invested $10,000, reinvested all your dividends, the Fund
earned an average annual return of 5%, and annual operating expenses remained at
the current level. Keep in mind that this is only an estimate -- actual expenses
and performance may vary.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Lexington Money Market
4
<PAGE>
SHAREHOLDER GUIDE -- HOW TO PURCHASE SHARES
The minimum initial investment amounts are as follows:
* Non-retirement accounts: $1,000
* Retirement accounts: $250
* Pre-Authorized Investment Plan: $100 to open; you must invest at least
$100 a month
The minimum additional investment is $100.
Make your investment using the table on the right.
The Fund and the Distributor reserve the right to reject any purchase order.
Please note that cash, travelers checks, third party checks, money orders and
checks drawn on non-US banks (even if payment may be effected through a US bank)
will not be accepted. Pilgrim reserves the right to waive minimum investment
amounts. The Fund reserves the right to liquidate sufficient shares to recover
annual transfer agent fees or to close your account and redeem your shares
should you fail to maintain your account value at a minimum of $1,000.00
($250.00 for IRA's).
RETIREMENT PLANS
The Fund has available prototype qualified retirement plans for both
corporations and for self-employed individuals. The Fund also has available
prototype IRA, Roth IRA and Simple IRA plans (for both individuals and
employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans
and Tax Sheltered Retirement Plans for employees of public educational
institutions and certain non-profit, tax-exempt organizations. Investors
Fiduciary Fund Company (IFTC) acts as the custodian under these plans. For
further information, contact the Shareholder Servicing Agent at (800) 992-0180.
IFTC currently receives a $12 custodial fee annually for the maintenance of such
accounts.
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
METHOD INVESTMENT INVESTMENT
------ ---------- ----------
<S> <C> <C>
By Contacting Your A financial consultant with an Visit or consult a financial
Financial Consultant authorized firm can help you consultant.
establish and maintain your
account.
By Mail Visit or consult with a Fill out the Account Additions
financial consultant. Make form included on the bottom of
your check payable to the your account statement along
Pilgrim Funds and mail it, with your check payable to the
along with a completed Fund and mail them to the
Application. Please indicate address on the account
your financial consultant on statement. Remember to write
the New Account Application your account number on the
check.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
By Wire Call the Pilgrim Operations Wire the funds in the same
Department at (800) 336-3436 manner described under
to obtain an account number "Initial Investment."
and indicate your financial
consultant on the account.
Instruct your bank to wire
funds to the Fund in the care
of: Investors Fiduciary Trust
Co. ABA #101003621 Kansas
City, MO credit to:
___________ (the Fund) A/C
#751-8315; for further credit
to: _________________
Shareholder A/C
#_________________ (A/C # you
received over the telephone)
Shareholder Name:
--------------------------------
(Your Name Here) After wiring
funds you must complete the
Account Application and send
it to: Pilgrim Funds P.O. Box
219368 Kansas City, MO 64121-6368
</TABLE>
6
<PAGE>
SHAREHOLDER GUIDE -- HOW TO REDEEM SHARES
You may redeem shares using the table on the right.
Under unusual circumstances, the Fund may suspend the right of redemption as
allowed by federal securities laws.
Systematic Withdrawal Plan
You may elect to make periodic withdrawals from your account on a regular basis.
* Your account must have a current value of at least $10,000.
* Minimum withdrawal amount is $100.
* You may choose from monthly, quarterly, semi-annual or annual
payments.
For additional information, contact the Shareholder Servicing Agent, see the
Account Application or the Statement of Additional Information.
PAYMENTS
Normally, payment for shares redeemed will be made within three days after
receipt by the Transfer Agent of a written request in good order. When you place
a request to redeem shares for which the purchase money has not yet been
collected, the request will be executed at the next determined net asset value,
but the Fund will not release the proceeds until your purchase payment clears.
This may take up to 15 days or more. To reduce such delay, purchases should be
made by bank wire or federal funds.
The Fund normally intends to pay in cash for all shares redeemed, but under
abnormal conditions that make payment in cash unwise, the Fund may make payment
wholly or partly in securities at their then current market value equal to the
redemption price. In such case, the Fund could elect to make payment in
securities for redemptions in excess of $250,000 or 1% of its net assets during
any 90-day period for any one shareholder. An investor may incur brokerage costs
in converting such securities to cash.
METHOD PROCEDURES
By Contacting Your You may redeem by contacting your financial
Financial Consultant consultant who may charge for their services in
connection with your redemption request, but
neither the Fund nor the Distributor imposes any
such charge.
By Mail Send a written request specifying the Fund name and
share class, your account number, the name(s) in
which the account is registered, and the dollar
value or number of shares you wish to redeem to:
Pilgrim Funds
P.O. Box 219368
Kansas City, MO 64121-6368
If certificated shares have been issued, the
certificate must accompany the written request.
Corporate investors and other associations must
have an appropriate certification on file
authorizing redemptions. A suggested form of such
certification is provided on the Account
Application. A signature guarantee may be
required.
7
<PAGE>
By Telephone -- You may redeem shares by telephone on all accounts
Expedited Redemption other than retirement accounts, unless you check
the box on the Account Application which signifies
that you do not wish to use telephone redemptions.
To redeem by telephone, call the Shareholder
Servicing Agent at (800) 992-0180.
Receiving Proceeds By Check:
You may have redemption proceeds (up to a maximum
of $100,000) mailed to an address which has been
on record with Pilgrim Funds for at least 30 days.
Receiving Proceeds By Wire:
You may have redemption proceeds (subject to a
minimum of $5,000) wired to your pre-designated
bank account. You will not be able to receive
redemption proceeds by wire unless you check the
box on the Account Application which signifies
that you wish to receive redemption proceeds by
wire and attach a voided check. Under normal
circumstances, proceeds will be transmitted to
your bank on the business day following receipt of
your instructions, provided redemptions may be
made. In the event that share certificates have
been issued, you may not request a wire redemption
by telephone.
8
<PAGE>
SHAREHOLDER GUIDE -- TRANSACTION POLICIES
NET ASSET VALUE
The net asset value (NAV) per share for the Fund is determined each
business day as of the close of regular trading on the New York Stock Exchange
(usually at 4:00 p.m. Eastern Time). The NAV per share of the Fund is calculated
by taking the value of the Fund's assets, subtracting the Fund's liabilities,
and dividing by the number of shares are outstanding.
The Fund tries to maintain a stable NAV of $1.00 per share. Because the Fund
uses the amortized cost method of valuing the securities held by it and rounds
its per share net asset value to the nearest whole cent, it is anticipated that
the net asset value of the Fund will remain constant at $1.00 per share.
However, the Fund makes no assurance that it can maintain a $1.00 net asset
value per share.
PRICE OF SHARES
When you buy shares, you pay the NAV. When you sell shares, you receive the NAV.
Exchange orders are effected at NAV.
EXECUTION OF REQUESTS
Purchase and sale requests are executed at the next NAV determined after the
order is received in proper form by the Transfer Agent or Distributor. A
purchase order will be deemed to be in proper form when all of the required
steps set forth above under "How to Purchase Shares" have been completed. If you
purchase by wire, however, the order will be deemed to be in proper form after
the telephone notification and the federal funds wire have been received. If you
purchase by wire, you must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not
be credited until the next business day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You may
rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Fund will not be issued
unless you request them in writing.
TELEPHONE ORDERS
The Fund and its transfer agent will not be responsible for the authenticity of
phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if they reasonably believe that such instructions were genuine. The
Fund and its transfer agent have established reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include recording telephone instructions for exchanges and expedited
redemptions, requiring the caller to give certain specific identifying
information, and providing written confirmation to shareholders of record not
later than five days following any such telephone transactions. If the Fund and
its transfer agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
9
<PAGE>
SHAREHOLDER GUIDE -- TRANSACTION POLICIES
EXCHANGES
You may exchange shares of the Fund for Class A shares of any other Pilgrim
Fund. [CONFIRM] Class A shares of the Fund for which no sales charge was paid
must pay the applicable sales load on an exchange into Class A shares of another
Pilgrim Fund.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Pilgrim Fund into which they are being exchanged.
Exchanges of shares are sales and may result in a gain or loss for federal and
state income tax purposes. There is no specific limit on exchange frequency;
however, the Fund is intended for long term investment and not as a short-term
trading vehicle. The adviser may prohibit excessive exchanges (more than four
per year). The adviser also may, on 60 days' prior notice, restrict the
frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges.
You will automatically have the ability to request an exchange by calling the
Shareholder Service Agent unless you mark the box on the Account Application
that indicates that you do not wish to have the telephone exchange privilege.
The Fund may change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
SYSTEMATIC EXCHANGE PRIVILEGE
With an initial account balance of at least $5,000 and subject to the
information and limitations outlined above, you may elect to have a specified
dollar amount of shares systematically exchanged, monthly, quarterly,
semi-annually or annually (on or about the 10th of the applicable month), from
your account to an identically registered account in the same class of any other
open-end Pilgrim Fund. This exchange privilege may be modified at any time or
terminated upon 60 days' written notice to shareholders.
SMALL ACCOUNTS
Due to the relatively high cost of handling small investments, the Fund reserves
the right upon 30 days' written notice to redeem, at NAV, the shares of any
shareholder whose account (except for IRAs) has a value of less than $1,000,
other than as a result of a decline in the NAV per share.
10
<PAGE>
MANAGEMENT OF THE FUND ADVISER
Pilgrim Investments, Inc. ("Pilgrim") serves as the investment adviser to the
Fund. Pilgrim has overall responsibility for the management of the Fund. Pilgrim
provides or oversees all investment advisory and portfolio management services
for the Fund, and assists in managing and supervising all aspects of the general
day-to-day business activities and operations of the Fund, including custodial,
transfer agency, dividend disbursing, accounting, auditing, compliance and
related services.
Organized in December 1994, Pilgrim is registered as an investment adviser. As
of ___________, 2000, Pilgrim managed over $____ billion in assets. Pilgrim
acquired certain assets of previous advisers to certain Pilgrim Funds, including
the Fund, in separate transactions that closed on April 7, 1995, May 21, 1999
and July 26, 2000. Pilgrim is an indirect wholly-owned subsidiary of ReliaStar
Financial Corp. ("ReliaStar") (NYSE: RLR). Through its subsidiaries, ReliaStar
offers individuals and institutions life insurance and annuities, employee
benefits, products and services, life and health reinsurance, retirement plans,
mutual funds, bank products, and personal finance education.
Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as
investment adviser to the Fund. On July 26, 2000, ReliaStar acquired Lexington
Global Asset Managers, Inc., the parent company of Lexington, and it was
merged into Pilgrim's parent company, Pilgrim Capital Corporation.
Pilgrim's principal address is 40 North Central Avenue, Suite 1200, Phoenix,
Arizona 85004.
Pilgrim receives a monthly fee for its services based on the average daily net
assets of the Fund.
The aggregate annual advisory fee paid by the Fund for the most recent fiscal
year as a percentage of the Fund's average daily net assets was ____%:
The portfolio managers for the Fund are:
DENIS P. JAMISON, CFA. Mr. Jamison manages the Fund. Mr. Jamison is Senior Vice
President and Director of Fixed Income Strategy of LMC. Mr. Jamison is
responsible for fixed-income portfolio management. He is a Chartered Financial
Analyst and a member of the New York Society of Security Analysts. Prior to
joining LMC in 1981, Mr. Jamison spent nine years at Arnold Bernhard & Company,
an investment counseling and financial services organization. At Bernhard, he
was a Vice President supervising the security analyst staff and managing
investment portfolios. He is a specialist in government, corporate and municipal
bonds. Mr. Jamison graduated from the City College of New York with a B.A. in
Economics.
ROSEANN G. MCCARTHY. Ms. McCarthy co-manages the Fund. Ms. McCarthy is an
Assistant Vice President of LMC. Prior to joining the Fixed Income Department in
1997, she was Mutual Fund Marketing and Research Coordinator. Prior to 1995, Ms.
McCarthy was Fund Statistician and a Shareholder Service Representative for the
Lexington Funds. Ms. McCarthy is a graduate of Hofstra University with a B.B.A.
in Marketing and has an M.B.A. in Finance from Seton Hall University.
11
<PAGE>
DIVIDENDS, DISTRIBUTIONS DIVIDENDS/TAXES AND TAXES
DIVIDENDS
The Fund generally distributes most or all of its net earnings in the form of
dividends. The Fund declares dividends daily and pays them monthly.
Distributions from dividends are normally expected to consist primarily of
ordinary income. The Fund distributes capital gains, if any, annually.
DIVIDEND REINVESTMENT
Unless you instruct the Fund to pay you dividends in cash, dividends and
distributions paid by the Fund will be reinvested in additional shares of the
Fund. You may, upon written request or by completing the appropriate section of
the Account Application, elect to have all dividends and other distributions
paid on shares invested in Class A shares of another Pilgrim Fund.
TAXES
The following information is meant as a general summary for U.S. shareholders.
Please see the Statement of Additional Information for additional information.
You should rely your own tax adviser for advice about the particular federal,
state and local tax consequences to you of investing in the Fund.
The Fund will distribute most of its net investment income and net capital gains
to its shareholders each year. Although the Fund will not be taxed on amounts
they distribute, most shareholders will be taxed on amounts they receive. A
particular distribution generally will be taxable as either ordinary income or
long-term capital gains. It does not matter how long you have held Fund shares
or whether you elect to receive your distributions in cash or reinvest them in
additional Fund shares. For example, if the Fund designates a particular
distribution as a long-term capital gains distribution, it will be taxable to
you at your long-term capital gains rate.
Dividends declared by the Fund in October, November or December and paid during
the following January may be treated as having been received by shareholders in
the year the distributions were declared.
You will receive an annual statement summarizing your dividend and capital gains
distributions.
If you invest through a tax-deferred account, such as a retirement plan, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you sell or redeem Fund shares. You will
generally have a capital gain or loss, which will be long-term or short-term,
generally depending on how long you hold those shares. If you exchange shares,
you may be treated as if you sold them. You are responsible for any tax
liabilities generated by your transactions.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
MORE INFORMATION ABOUT RISKS
All mutual funds involve risk -- some more than others -- and there is always
the chance that you could lose money or not earn as much as you hope. The Fund's
risk profile is largely a factor of the principal securities in which it invests
and investment techniques that it uses. For more information about the types of
securities and investment techniques that may be used by the Fund, see the SAI.
Many of the investment techniques and strategies discussed in this prospectus
and in the Statement of Additional Information are discretionary, which means
that the adviser can decide whether to use them or not. The adviser may also use
investment techniques or make investments in securities that are not a part of
the Fund's principal investment strategy.
12
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the tables represent
the rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). A report of the
Fund's independent auditor, along with the Fund's financial statements, are
included in the Fund's annual report, which is available upon request.
MONEY MARKET
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.0455 0.0458 0.0441 0.0495
Net realized and unrealized gain (loss) from
investment operations -- -- -- --
Total income (loss) from investment operations 0.0455 0.0458 0.0441 0.0495
Less distributions:
Distributions from net investment income (0.0455) (0.0458) (0.0441) (0.0495)
Distributions in excess of net investment income -- -- -- --
Distributions from net realized gains -- -- -- --
Distributions in excess of net realized gains -- -- -- --
Total distributions (0.0455) (0.0458) (0.0441) (0.0495)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
TOTAL RETURN 4.64% 4.68% 4.50% 5.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 87,488 $ 95,149 $ 97,526 $ 88,786
Ratio of expenses to average net assets, before
reimbursement or waiver 1.05% 1.04% 1.04% 1.08%
Ratio of expenses to average net assets, net of
reimbursement or waiver 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average
net assets, before reimbursement or waiver 4.51% 4.55% 4.37% 4.87%
Ratio of net investment income (loss) to average
net assets, net of reimbursement or waiver 4.56% 4.58% 4.41% 4.95%
Portfolio Turnover Rate -- -- -- --
</TABLE>
13
<PAGE>
WHERE TO GO FOR MORE INFORMATION
You'll find more information about the Fund in the:
ANNUAL/SEMIANNUAL REPORTS
Include a discussion of recent market conditions and investment strategies that
significantly affected performance, the financial statements and the auditor's
reports (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains more detailed information about the Fund. The SAI is legally
part of this prospectus (it is incorporated by reference). A copy has been filed
with the Securities and Exchange Commission (SEC).
Please write or call for a free copy of the current Annual/semiannual reports,
the SAI or other Fund information, or to make shareholder inquiries:
The Pilgrim Funds, 40 North Central Avenue, Suite 1200 Phoenix, AZ 85004
1-800-992-0180
Or visit our website at www.pilgrimfunds.com.
This information may also be reviewed or obtained from the SEC. In order to
review the information in person, you will need to visit the SEC's Public
Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may
obtain the information for a fee by contacting the SEC at:
Securities and Exchange Commission Public Reference Section Washington, D.C.
20549-0102
or at the e-mail address: [email protected]
or obtain the information at no cost by visiting the SEC's Internet website at
http://www.sec.gov.
When contacting the SEC, you will want to refer to the Fund's SEC file number.
The file numbers is as follows:
Lexington Money Market Trust 811-2701
<PAGE>
LEXINGTON MONEY MARKET TRUST
40 NORTH CENTRAL AVENUE, SUITE 1200
PHOENIX, ARIZONA 85004
(800) 992-0180
STATEMENT OF ADDITIONAL INFORMATION
JULY 26, 2000
A Prospectus for the Lexington Money Market Trust (the "Fund"), dated July 26,
2000, which provides the basic information you should know before investing in
the Fund, may be obtained without charge from the Fund or the Fund's Principal
Underwriter, Pilgrim Securities, Inc. ("Pilgrim Securities" or the
"Distributor"), at the address listed above. This Statement of Additional
Information is not a prospectus and it should be read in conjunction with the
Prospectus, dated July 26, 2000, which has been filed with the Securities and
Exchange Commission ("SEC"). In addition, the financial statements from the
Fund's December 31, 1999 Annual Report are incorporated herein by reference.
Copies of the Fund's Prospectus and Annual or Semi-Annual Report may be obtained
without charge by contacting the Pilgrim Funds at the address and phone number
written above.
TABLE OF CONTENTS
HISTORY OF THE FUND.........................................................
MANAGEMENT OF THE FUND......................................................
ADMINISTRATOR...............................................................
EXPENSE LIMITATION AGREEMENT................................................
INVESTMENT STRATEGIES AND RISKS OF THE FUND.................................
INVESTMENT RESTRICTIONS.....................................................
PORTFOLIO TRANSACTIONS......................................................
YIELD CALCULATION...........................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..............................
DETERMINATION OF SHARE PRICE................................................
SHAREHOLDER INFORMATION.....................................................
SHAREHOLDER SERVICES AND PRIVILEGES.........................................
DISTRIBUTIONS...............................................................
TAX CONSIDERATIONS..........................................................
CALCULATION OF PERFORMANCE DATA.............................................
GENERAL INFORMATION.........................................................
FINANCIAL STATEMENTS........................................................
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HISTORY OF THE FUND
Lexington Money Market Fund (the "Fund") is an organization commonly referred to
as a business trust formed under the laws of the Commonwealth of Massachusetts
on June 30, 1977 under the name of Banner Redi-Resources Trust. The name of the
Fund was changed on March 2, 1979 from Banner Redi-Resources Trust to "Lexington
Money Market Trust".
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Fund is managed by its Directors ("Board of Directors"). The Directors and
Officers of the Fund are listed below. An asterisk (*) has been placed next to
the name of each Director who is an "interested person," as that term is defined
in the Investment Company Act of 1940 Act ("1940 Act"), by virtue of that
person's affiliation with the Fund, or the Fund's Adviser ("Pilgrim Investments"
or the "Adviser"). Unless otherwise noted, the mailing address of the Directors
and Officers is 40 North Central Avenue, Suite 1200, Phoenix, Arizona 85004. The
Board of Directors governs the Fund and is responsible for protecting the
interests of shareholders. The Directors are experienced executives who oversee
the Fund's activities, review contractual arrangements with companies that
provide services to the Fund, and review the Fund's performance.
Set forth below is information regarding the Directors of the Fund.
MARY A. BALDWIN, PH.D. (Age 60) Director. Realtor, Coldwell Banker Success
Realty (formerly, The Prudential Arizona Realty) for more than the last
five years. Ms. Baldwin is also Vice President, United States Olympic
Committee (November 1996 - Present), and formerly Treasurer, United States
Olympic Committee (November 1992 - November 1996). Ms. Baldwin is also a
Director, Trustee, or a member of the Advisory Board of each of the funds
managed by the Investment Adviser.
AL BURTON. (Age 72) Director. President of Al Burton Productions for more
than the last five years; formerly Vice President, First Run Syndication,
Castle Rock Entertainment (July 1992 - November 1994). Mr. Burton is also a
Director, Trustee, or a member of the Advisory Board of each of the funds
managed by the Investment Adviser.
PAUL S. DOHERTY. (Age 66) Director. President, of Doherty, Wallace,
Pillsbury and Murphy, P.C., Attorneys. Mr. Doherty was formerly a Director
of Tambrands, Inc. (1993 - 1998). Mr. Doherty is also a Director or Trustee
of each of the funds managed by the Investment Adviser.
ROBERT B. GOODE. (Age 69) Director. Currently retired. Mr. Goode was
formerly Chairman of American Direct Business Insurance Agency, Inc. (1996
- 2000), Chairman of The First Reinsurance Company of Hartford (1990-1991)
and President and Director of American Skandis Life Assurance Company
(1987-1989). Mr. Goode is also a Director or Trustee of each of the funds
managed by the Investment Adviser.
ALAN L. GOSULE. (Age 59) Director. Partner, Rogers & Wells (since 1991).
Mr. Gosule is a Director of F.L. Putnam Investment Management Co., Inc,
Simpson Housing Limited Partnership, Home Properties of New York, Inc.,
CORE Cap, Inc. and Colonnade Partners. Mr. Gosule is also a Director or
Trustee of each of the funds managed by the Investment Adviser.
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*MARK LIPSON. (Age 51) Director. Formerly Chairman and Director of Pilgrim
Advisors, Inc. Director of Pilgrim Funding, Inc. Mr. Lipson was formerly
Chairman of Pilgrim Capital Corporation and Northstar Distributors, Inc.;
Director of Northstar Administrators Corporation; President of Pilgrim
Funding, Inc.; Director, President and Chief Executive Officer of National
Securities & Research Corporation; and Director/Trustee and President of
the National Affiliated Investment Companies and certain of National's
subsidiaries (prior to August 1993). Mr. Lipson is also a Director or
Trustee of each of the funds managed by the Investment Adviser.
WALTER H. MAY. (Age 63) Director. Retired. Mr. May was formerly Managing
Director and Director of Marketing for Piper Jaffray, Inc. Mr. May is also
a Director or Trustee of each of the funds managed by the Investment
Adviser.
JOCK PATTON. (Age 54) Director. Private Investor. Director of Hypercom
Corporation (since January 1999), and JDA Software Group, Inc. (since
January 1999). Mr. Patton is also a Director of Buick of Scottsdale, Inc.,
National Airlines, Inc., BG Associates, Inc. , BK Entertainment, Inc.,
Arizona Rotorcraft, Inc. and Director and Chief Executive Officer of
Rainbow Multimedia Group, Inc. Mr. Patton was formerly Director of Stuart
Entertainment, Inc., Director of Artisoft, Inc. (August 1994 - July 1998);
President and co-owner of StockVal, Inc. (April 1993 - June 1997) and a
Partner and Director of the law firm of Streich, Lang, P.A. (1972 - 1993).
Mr. Patton is also a Director, Trustee, or a member of the Advisory Board
of each of the funds managed by the Investment Adviser.
DAVID W.C. PUTNAM. (Age 60) Director. President and Director of F.L. Putnam
Securities Company, Inc. and affiliates. Mr. Putnam is Director of Anchor
Investment Trusts, the Principled Equity Market Trust, and Progressive
Capital Accumulation Trust. Mr. Putnam was formerly Director of Trust
Realty Corp. and Bow Ridge Mining Co. Mr. Putnam is also a Director or
Trustee of each of the funds managed by the Investment Adviser.
JOHN R. SMITH. (Age 76) Director. President of New England Fiduciary
Company (since 1991). Mr. Smith is Chairman of Massachusetts Educational
Financing Authority (since 1987), Vice Chairman of Massachusetts Health and
Education Authority (since 1979), Vice-Chairman of MHI, Inc. (Massachusetts
non-profit Energy Purchasers Consortium) (since 1996), and formerly
Financial Vice President of Boston College (1970-1991). Mr. Smith is also a
Director or Trustee of each of the funds managed by the Investment Adviser.
*ROBERT W. STALLINGS. (Age 51) Director. Chief Executive Officer and
President. Chairman, Chief Executive Officer and President of Pilgrim
Group, Inc. ("Pilgrim Group") (since December 1994); Chairman, Pilgrim
Investments, Inc. (since December 1994); Chairman, Pilgrim Securities, Inc.
("Pilgrim Securities") (since December 1994); President and Chief Executive
Officer of Pilgrim Funding, Inc. (since November 1999); and Chairman,
President and Chief Executive Officer of Pilgrim Holdings Corporation
(Pilgrim Capital Corporation merged into this subsidiary October 29, 1999)
(since August 1991). Mr. Stallings is also a Director, Trustee, or a member
of the Advisory Board of each of the funds managed by the Investment
Adviser.
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*JOHN G. TURNER. (Age 60) Chairman. Chairman and Chief Executive Officer of
ReliaStar Financial Corp. and ReliaStar Life Insurance Co. (since 1993);
Chairman of ReliaStar United Services Life Insurance Company and ReliaStar
Life Insurance Company of New York (since 1995); Chairman of Northern Life
Insurance Company (since 1992); Director of Northstar Investment Management
Corporation and affiliates (since October 1993); Chairman and
Director/Trustee of the Northstar affiliated investment companies (since
October 1993). Mr. Turner was formerly President of ReliaStar Financial
Corp. and ReliaStar Life Insurance Co. (1989-1991) and President and Chief
Operating Officer of ReliaStar Life Insurance Company (1986-1991). Mr.
Turner is also Chairman of each of the funds managed by the Investment
Adviser.
DAVID W. WALLACE. (Age 76) Director. Chairman of FECO Engineered Systems,
Inc. Mr. Wallace is President and Director/Trustee of the Robert R. Young
Foundation, Governor of the New York Hospital, Trustee of Greenwit Hospital
and Director of UMC Electronics and Zurn Industries, Inc. Mr. Wallace was
formerly Chairman of Lone Star Industries, Putnam Trust Company, Chairman
of Todd Shipyards, Bangor Punta Corporation, and National Securities &
Research Corporation.Mr. Wallace is also a Director or Trustee of each of
the funds managed by the Investment Adviser.
The Fund pays each Director who is not an interested person a pro rata share, as
described below, of (i) an annual retainer of $20,000; (ii) $5,000 per quarterly
Board meeting; (iii) $500 per committee meeting; (iv) $500 per special or
telephonic meeting; and (v) out-of-pocket expenses. The pro rata share paid by
the Fund is based on the Fund's average net assets as a percentage of the
average net assets of all the funds managed by the Adviser for which the
Directors serve in common as Directors.
COMPENSATION OF DIRECTORS
The following table sets forth information regarding compensation of Directors
by the Fund for the fiscal year ended December 31, 1999. Officers of the Fund
and Directors who are interested persons of the Fund do not receive any
compensation from the Fund. In the column headed "Total Compensation From
Registrant and Fund Complex Paid to Directors," the number in parentheses
indicates the total number of boards in the fund complex on which the Director
served during that fiscal year.
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COMPENSATION TABLE
Total Compensation Number of
Aggregate From Fund and Directorships in
Name of Director Compensation Fund Complex Fund Complex
- ---------------- ------------ ------------ ------------
S.M.S. Chadha $112 $24,006 15
Robert M. DeMichele $ 0 $ 0 15
Beverly C. Duer $112 $29,656 15
Barbara R. Evans $ 0 $ 0 15
Richard M. Hisey $ 0 $ 0 8
Jerard F. Maher $112 $22,976 15
Andrew M. McCosh $112 $24,006 15
Donald B. Miller $112 $24,006 15
John G. Preston $112 $24,006 15
Allen H. Stowe $112 $12,712 8
OFFICERS
Unless otherwise noted, the mailing address of the officers is 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004. The following individuals serve as
officers for the Fund:
James R. Reis, Executive Vice President and Assistant Secretary. (Age 42)
Director, Vice Chairman (since December 1994), Executive Vice President
(since April 1995), and Director of Structured Finance (since April 1998),
Pilgrim Group, Inc. and Pilgrim Investments; Director (since December 1994)
and Vice Chairman (since November 1995) of Pilgrim Securities; Executive
Vice President, Assistant Secretary and Chief Credit Officer of Pilgrim
Prime Rate Trust; Executive Vice President and Assistant Secretary of each
of the other Pilgrim Funds. Chief Financial Officer (since December 1993),
Vice Chairman and Assistant Secretary (since April 1993) and former
President (May 1991 - December 1993), Pilgrim Capital (formerly Express
America Holdings Corporation). Presently serves or has served as an officer
or director of other affiliates of Pilgrim Capital.
Stanley D. Vyner, Executive Vice President. (Age 49) President and Chief
Executive Officer (since August 1996), Pilgrim Investments; Executive Vice
President of most of the other Pilgrim Funds (since July 1996). Formerly
Chief Executive Officer (November 1993 - December 1995) HSBC Asset
Management Americas, Inc., and Chief Executive Officer, and Actuary (May
1986 - October 1993) HSBC Life Assurance Co.
James M. Hennessy, Executive Vice President and Secretary. (Age 50)
Executive Vice President and Secretary (since April 1998), Pilgrim Capital
(formerly Express America Holdings Corporation), Pilgrim Group, Pilgrim
Securities and Pilgrim Investments; Executive Vice President and Secretary
of each of the other Pilgrim Funds. Formerly Senior Vice President, Pilgrim
Capital (April 1995 - April 1998); Senior Vice President, Express America
Mortgage Corporation (June 1992 - August 1994) and President, Beverly Hills
Securities Corp. (January 1990 - June 1992).
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Michael J. Roland, Senior Vice President and Principal Financial Officer.
(Age 41) Senior Vice President and Chief Financial Officer, Pilgrim Group,
Pilgrim Investments and Pilgrim Securities (since June 1998); Senior Vice
President and Principal Financial Officer of each of the other Pilgrim
Funds. He served in same capacity from January, 1995 - April, 1997.
Formerly, Chief Financial Officer of Endeaver Group (April, 1997 to June,
1998).
Robert S. Naka, Senior Vice President and Assistant Secretary. (Age 36)
Senior Vice President, Pilgrim Investments (since November 1999) and
Pilgrim Group, Inc. (since August 1999). Senior Vice President and
Assistant Secretary of each of the other Pilgrim Funds. Formerly Vice
President, Pilgrim Investments (April 1997 - October 1999), Pilgrim Group,
Inc. (February 1997 - August 1999). Formerly Assistant Vice President,
Pilgrim Group, Inc. (August 1995 - February 1997). Formerly Operations
Manager, Pilgrim Group, Inc. (April 1992 - April 1995).
Robyn L. Ichilov, Vice President and Treasurer. (Age 32) Vice President,
Pilgrim Investments (since August 1997), Accounting Manager (since November
1995). Vice President and Treasurer of most of the other Pilgrim Funds.
Formerly Assistant Vice President and Accounting Supervisor for PaineWebber
(June 1993 - April 1995).
CODE OF ETHICS
The Fund has adopted a Code of Ethics governing personal trading activities of
all Directors and officers of the Fund and persons who, in connection with their
regular functions, play a role in the recommendation of any purchase or sale of
a security by the Fund or obtain information pertaining to such purchase or
sale. The Code is intended to prohibit fraud against the Fund that may arise
from personal trading. Personal trading is permitted by such persons subject to
certain restrictions; however they are generally required to pre-clear all
security transactions with the Fund's Compliance Officer or her designee and to
report all transactions on a regular basis.
PRINCIPAL SHAREHOLDERS
As of ____________, 2000, the Directors and Officers as a group owned less than
1% of the outstanding Class A shares of the Fund. As of that date, to the
knowledge of management, no person owned beneficially or of record more than 5%
of the outstanding Class A shares of the Fund, except as follows.
[INSERT 5% INFORMATION]
ADVISER
The Adviser for the Fund is Pilgrim Investments. Prior to July 26, 2000,
Lexington Management Corporation ("LMC") served as investment adviser to the
Fund. On July 26, 2000, Lexington Global Asset Managers, Inc, the indirect
parent of LMC, was acquired by ReliaStar Financial Corp., the indirect parent of
Pilgrim Investments, Inc.
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The Adviser, subject to the authority of the Directors of the Fund, serves as
investment adviser to the Fund pursuant to an Investment Management Agreement
between the Adviser and the Fund. The Investment Management Agreement requires
the Adviser to oversee the provision of all investment advisory and portfolio
management services for the Fund.
The Investment Management Agreement requires the Adviser to provide, subject to
the supervision of the Board of Directors, investment advice and investment
services to the Fund and to furnish advice and recommendations with respect to
investment of the Fund's assets and the purchase or sale of its portfolio
securities. The Adviser also provides investment research and analysis. The
Investment Management Agreement (the "Advisory Agreement") provides that the
Adviser is not subject to liability to the Fund for any act or omission in the
course of, or connected with, rendering services under the Advisory Agreement,
except by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties under the Advisory Agreement.
After an initial two year term, the Advisory Agreement continues in effect from
year to year so long as such continuance is specifically approved at least
annually by (a) the Board of Directors or (b) the vote of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding shares voting as a single
class; provided, that in either event the continuance is also approved by at
least a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Adviser by vote cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement is
terminable without penalty with not less than 60 days' notice by the Board of
Directors or by a vote of the holders of a majority of the Fund's outstanding
shares voting as a single class, or upon not less than 60 days' notice by the
Adviser. The Advisory Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
Pilgrim Investments is registered as an investment adviser with the SEC and
serves as an investment adviser to registered investment companies (or series
thereof), as well as privately managed accounts. As of June ____, 2000, the
Adviser had assets under management of approximately $___ billion. Pilgrim
Investments, Inc. is a wholly-owned subsidiary of ReliaStar Financial Corp.
(NYSE:RLR). Through its subsidiaries, ReliaStar Financial Corp. offers
individuals and institutions life insurance and annuities, employee benefits
products and services, life and health reinsurance, retirement plans, mutual
funds, bank products and personal finance education.
The Adviser bears the expense of providing its services. For its services, the
Fund pays the Adviser a monthly fee in arrears equal to a percentage of the
Fund's average daily net assets during the month. The annual investment
management fee for the Fund will be ___% of the Fund's average net assets.
The total amount of advisory fees paid by the Fund for fiscal years ended
December 31, 1997, 1998, and 1999 were $______, ______, and ______,
respectively.
ADMINISTRATOR
Pilgrim Group, Inc. serves as Administrator for the Fund, pursuant to an
Administrative Services Agreement. Subject to the supervision of the Board of
Directors, the Administrator provides the overall business management and
administrative services necessary to proper conduct the Fund's business, except
for those services performed by the Adviser under the Advisory Agreement, the
custodian for the Fund under the Custodian Agreement, the transfer agent for the
Fund under the Transfer Agency Agreement, and such other service providers as
may be retained by the Fund from time to time. The Administrator acts as liaison
among these service providers to the Fund. The Administrator is also responsible
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for ensuring that the Fund operate in compliance with applicable legal
requirements and for monitoring the Adviser for compliance with requirements
under applicable law and with the investment policies and restrictions of the
Fund. The Administrator is an affiliate of the Adviser. For its services under
the Administration Services Agreement, Pilgrim Group, Inc. receives an annual
fee equal to 0.10% of the Fund's average daily net assets.
Prior to July 26, 2000, LMC acted as administrator to the Fund and performed
certain administrative and internal accounting services, including but not
limited to, maintaining general ledger accounts, regulatory compliance,
preparation of financial information for semiannual and annual reports,
preparing registration statements, calculating net asset values, shareholder
communications and supervision of the custodian and transfer agent and provides
facilities for such services. The Fund reimbursed LMC for its actual cost in
providing such services, facilities and expenses.
The total amount of administrative fees paid by the Fund for fiscal years ended
December 31, 1997, 1998, and 1999 were $______, ______, and ______,
respectively.
EXPENSE LIMITATION AGREEMENTS
The Adviser has entered into an expense limitation agreement with the Fund,
pursuant to which the Adviser has agreed to waive or limit its fees. In
connection with this agreement and certain U.S. tax requirements, the Adviser
will assume other expenses so that the total annual ordinary operating expenses
of the Fund (which excludes interest, taxes, brokerage commissions,
extraordinary expenses such as litigation, other expenses not incurred in the
ordinary course of the Fund's business, and expenses of any counsel or other
persons or services retained by the Fund's directors who are not "interested
persons" (as defined in the 1940 Act) of the Adviser) do not exceed ___% for
Class A.
The Fund will at a later date reimburse the Adviser for management fees waived
and other expenses assumed by the Adviser during the previous 36 months, but
only if, after such reimbursement, the Fund's expense ratio does not exceed the
percentage described above. The Adviser will only be reimbursed for fees waived
or expenses assumed after the effective date of the expense limitation
agreements.
The expense limitation agreement provides that these expense limitations shall
continue until _____, 2001. Thereafter, the agreement will automatically renew
for one-year terms unless the Adviser provides written notice of the termination
of the agreement to the Fund at least 30 days prior to the end of the
then-current term. In addition, the agreement will terminate upon termination of
the Advisory Agreement, or it may be terminated by the Fund, without payment of
any penalty, upon ninety (90) days' prior written notice to the Adviser at its
principal place of business.
DISTRIBUTOR
Shares of the Fund are distributed by Pilgrim Securities pursuant to a
Distribution Agreement between the Fund and the Distributor. The Distribution
Agreement requires the Distributor to use its best efforts on a continuing basis
to solicit purchases of shares of the Fund. The Fund and the Distributor have
agreed to indemnify each other against certain liabilities. At the discretion of
the Distributor, all sales charges may at times be re-allowed to an authorized
dealer ("Authorized Dealer"). If 90% or more of the sales commission is
re-allowed, such Authorized Dealer may be deemed to be an "underwriter" as that
term is defined under the Securities Act of 1933, as amended. The Distribution
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Agreement will remain in effect for two years and from year to year thereafter
only if its continuance is approved annually by a majority of the Board of
Directors who are not parties to such agreement or "interested persons" of any
such party and must be approved either by votes of a majority of the Directors
or a majority of the outstanding voting securities of the Fund. See the
Prospectus for information on how to purchase and sell shares of the Fund, and
the charges and expenses associated with an investment. The sales charge
retained by the Distributor and the commissions re-allowed to selling dealers
are not an expense of the Fund and have no effect on the net asset value of the
Fund. The Distributor, like the Adviser, is a subsidiary of ReliaStar. Prior to
July 26, 2000, the distributor for the Fund was Lexington Funds Distributor,
Inc. ("LFD").
SHAREHOLDER SERVICING AGENT
Pilgrim Group, Inc. serves as Shareholder Servicing Agent for the Fund. The
Shareholder Servicing Agent is responsible for responding to written and
telephonic inquiries from shareholders. The Fund pays the Shareholder Servicing
Agent a monthly fee on a per-contact basis, based upon incoming and outgoing
telephonic and written correspondence.
OTHER EXPENSES
In addition to the management fee and other fees described previously, the Fund
pays other expenses, such as legal, audit, transfer agency and custodian
out-of-pocket fees, proxy solicitation costs, and the compensation of Directors
who are not affiliated with the Adviser. Most Fund expenses are allocated
proportionately among all of the outstanding shares of the Fund.
INVESTMENT STRATEGIES AND RISKS OF THE FUND
In order to achieve its objective of seeking as high a level of current income
as is available from short term investments and consistent with the preservation
of capital and liquidity, the Fund will invest its assets in the following money
market instruments: (l) Obligations issued, or guaranteed as to interest and
principal, by the Government of the United States or any agency or
instrumentality thereof; (2) U.S. dollar denominated time deposits, certificates
of deposit and bankers' acceptances of U.S. banks and their London and Nassau
branches and of U.S. branches of foreign banks, provided that the bank has total
assets of one billion dollars; (3) Commercial paper of U.S. corporations, rated
Al, A2 by Standard & Poor's Corporation or Pl, P2 by Moody's Investors Service,
Inc. or, if not rated, of such issuers having outstanding debt rated A or better
by either of such services, or debt obligations of such issuers maturing in two
years or less and rated A or better; (4) Repurchase agreements under which the
Fund may acquire an underlying debt instrument for a relatively short period
subject to the obligation of the seller to repurchase, and of the Fund to
resell, at a fixed price. The underlying security must be of the same quality as
those described herein, although the usual practice is to use U.S. Government or
government agency securities. The Fund will enter into repurchase agreements
only with commercial banks and dealers in U.S. Government securities. Repurchase
agreements when entered into with dealers, will be fully collateralized
including the interest earned thereon during the entire term of the agreement.
If the institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Fund may be delayed or limited and the Fund may incur additional costs. In such
case the Fund will be subject to risks associated with changes in the market
value of the collateral securities. The Fund intends to limit repurchase
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agreements to institutions believed by the Adviser to present minimal credit
risk. The Fund will not enter into repurchase agreements maturing in more than
seven days if the aggregate of such repurchase agreements would exceed 10% of
the total assets of the Fund; or (5) Other money market instruments.
FOREIGN BRANCHES OF U.S. BANKS
The obligations of London and Nassau branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as "sovereign risk"). In addition, evidences of ownership of portfolio
securities may be held outside of the U.S., and the Fund may be subject to the
risks associated with the holding of such property overseas. Examples of
governmental actions would be the imposition of currency controls, interest
limitations, seizure of assets, or the declaration of a moratorium. Obligations
of U.S. branches of foreign banks may be general obligations of the parent bank
in addition to the issuing branch, or may be limited by the terms of a specific
obligation and by Federal and state regulation as well as by governmental action
in the country in which the foreign bank has its head office. While the Fund
will carefully consider these factors on making such investments, there are no
limitations on the percentage of the Fund's portfolio which may be invested in
any one type of instrument.
The Investment Policies stated above are fundamental and may not be changed
without shareholder approval. The Fund may not invest in securities other than
the types of securities listed above and is subject to other specific
restrictions as detailed under "Investment Restrictions" below.
INVESTMENT RESTRICTIONS
The following investment restrictions adopted by the Fund may not be changed
without the affirmative vote of a majority (defined as the lesser of: 67% of the
shares represented at a meeting at which 50% of outstanding shares are present,
or 50% of outstanding shares) of its outstanding shares. The Fund may not: (l)
purchase any securities other than money market instruments or other debt
securities maturing within two years of the date of purchase; (2) borrow an
amount which is in excess of one-third of its total assets taken at market value
(including the amount borrowed); and then only from banks as a temporary measure
for extraordinary or emergency purposes. The Fund will not borrow to increase
income but only to meet redemption requests which might otherwise require undue
disposition of portfolio securities. The Fund will not invest while it has
borrowings outstanding; (3) pledge its assets except in an amount up to 15% of
the value of its total assets taken at market value in order to secure
borrowings made in accordance with number (2) above; (4) sell securities short
unless at all times while a short position is open the Fund maintains a long
position in the same security in an amount at least equal thereto; (5) write or
purchase put or call options; (6) purchase securities on margin except the Fund
may obtain such short term credit as may be necessary for the clearance of
purchases and sales of portfolio securities; (7) make investments for the
purpose of exercising control or management; (8) purchase securities of other
investment companies, except in connection with a merger, consolidation,
acquisition or reorganization; (9) make loans to other persons, provided that
the Fund may purchase money market securities or enter into repurchase
agreements and lend securities owned or held by it as provided herein; (10) lend
its portfolio securities, except in conformity with the guidelines set forth
below; (11) concentrate more than 25% of its total assets, taken at market value
at the time of such investment, in any one industry, except U.S. Government and
U.S. Government agency securities and U.S. bank obligations; (12) purchase any
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securities other than U.S. Government or U.S. Government agency securities, if
immediately after such purchase more than 5% of its total assets would be
invested in securities of any one issuer for more than three business days;
(taken at market value) (13) purchase or hold real estate, commodities or
commodity contracts; (14) invest more than 5% of its total assets (taken at
market value) in issues for which no readily available market exists or with
legal or contractual restrictions on resale except for repurchase agreements;
(15) act as an underwriter (except as it may be deemed such as to the sale of
restricted securities); or (16) enter into reverse repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
As stated in number (10) above, subject to guidelines established by the Fundees
and by the Securities and Exchange Commission, the Fund, from time-to-time, may
lend portfolio securities to brokers, dealers, corporations or financial
institutions and receive collateral which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such collateral will be either cash or fully negotiable U. S.
Treasury or agency issues. If cash, such collateral will be invested in short
term securities, the income from which will increase the return to the Fund.
However, a portion of such incremental return may be shared with the borrower.
If securities, the usual procedure will be for the borrower to pay a fixed fee
to the Fund for such time as the loan is outstanding. The Fund will retain
substantially all rights of beneficial ownership as to the loaned portfolio
securities including rights to interest or other distributions and will have the
right to regain record ownership of loaned securities in order to exercise such
beneficial rights. Such loans will be terminable at any time. The Fund may pay
reasonable fees to persons unaffiliated with it in connection with the arranging
of such loans.
PORTFOLIO TRANSACTIONS
Portfolio securities are normally purchased directly from the issuer or
from an underwriter or market maker for money market instruments. Therefore,
usually no brokerage commissions were paid by the Fund. Transactions are
allocated to various dealers by LMC in its best judgment. Dealers are selected
primarily on the basis of prompt execution of orders at the most favorable
prices. The Fund has no obligation to deal with any dealer or group of dealers.
Particular dealers may be selected for research or statistical and other
services to enable LMC to supplement its own research and analysis with that of
such firms. Information so received will be in addition to and not in lieu of
the services required to be performed by LMC under the investment advisory
agreement and the expenses of LMC will not necessarily be reduced as a result of
the receipt of such supplemental information.
YIELD CALCULATION
The Fund provides current yield and effective yield quotations, which are
calculated in accordance with the regulations of the Securities and Exchange
Commission, based upon changes in account value during a recent seven-day base
period.
Current yield quotations are computed by annualizing (on a 365-day basis)
the "base period return". The "base period return" is computed by determining
the net change exclusive of capital changes in the value of the account, divided
by the value of the account at the beginning of the base period. Effective yield
is computed by compounding the "base period return". Based upon dividends
actually credited to the shareholders' accounts (i.e.: based upon net investment
income), the current yield to an investor in the Fund during the last seven
calendar days of its fiscal year ended December 31, 1998 was at an annual rate
of 4.34% and the effective yield was at an annual rate of 4.43%. The average
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weighted maturity of investments was 19 days. The current and effective yield
are affected by market conditions, portfolio quality, portfolio maturity, type
of instruments held and operating expenses. The Fund attempts to keep its net
asset value per share at $1.00, but attainment of this objective is not
guaranteed. This Statement of Additional Information may be in use for a full
year and it can be expected that these yields will fluctuate substantially from
the example shown above.
The current and effective yield figures are not a representation of future
yield as the Fund's net income and expenses will vary based on many factors,
including changes in short term money market yields generally and the types of
instruments in the Fund's portfolio. The stated yield of the Fund may be useful
in reviewing the Fund's performance and in providing a basis for comparison with
other investment alternatives. However, unlike bank deposits and other
investments which pay fixed yields for stated periods of time, the yield of the
Fund fluctuates. In addition, other investment companies may calculate yield on
a different basis and may purchase securities for their portfolios which have
different qualities and maturities than those of the Fund's portfolio
securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A complete description of the manner in which shares may be purchased, redeemed
or exchanged appears in the Prospectus under "Shareholder Guide." Shares of the
Fund are offered at the net asset value next computed following receipt of the
order by the dealer (and/or the Distributor) or by the Fund's transfer agent,
State Street Bank Trust Company, ("Transfer Agent"), plus, for Class A, a
varying sales charge depending upon the amount of money invested, as set forth
in the Prospectus.
SPECIAL PURCHASES AT NET ASSET VALUE
Class A shares of the Fund may be purchased at net asset value, without a sales
charge, by persons who have redeemed their Class A shares of the Fund (or shares
of other funds managed by the Adviser in accordance with the terms of such
privileges established for such funds) within the previous 90 days. The amount
that may be so reinvested in the Fund is limited to an amount up to, but not
exceeding, the redemption proceeds (or to the nearest full share if fractional
shares are not purchased). In order to exercise this privilege, a written order
for the purchase of shares must be received by the Transfer Agent, or be
postmarked, within 90 days after the date of redemption. This privilege may only
be used once per calendar year. Payment must accompany the request and the
purchase will be made at the then current net asset value of the Fund. Such
purchases may also be handled by a securities dealer who may charge a
shareholder for this service. If the shareholder has realized a gain on the
redemption, the transaction is taxable and any reinvestment will not alter any
applicable Federal capital gains tax. If there has been a loss on the redemption
and a subsequent reinvestment pursuant to this privilege, some or all of the
loss may not be allowed as a tax deduction depending upon the amount reinvested,
although such disallowance is added to the tax basis of the shares acquired upon
the reinvestment.
Class A shares of the Fund may also be purchased at net asset value by any
person who can document that Fund shares were purchased with proceeds from the
redemption (within the previous 90 days) of shares from any unaffiliated mutual
fund on which a sales charge was paid or which were subject at any time to a
CDSC, and the Distributor has determined in its discretion that the unaffiliated
fund invests primarily in the same types of securities as the Pilgrim Fund
purchased.
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Additionally, Class A shares of the Fund may also be purchased at net asset
value by any charitable organization or any state, county, or city, or any
instrumentality, department, authority or agency thereof that has determined
that the Fund is a legally permissible investment and that is prohibited by
applicable investment law from paying a sales charge or commission in connection
with the purchase of shares of any registered management investment company ("an
eligible governmental authority"). If an investment by an eligible governmental
authority at net asset value is made though a dealer who has executed a selling
group agreement with respect to the Fund (or the other open-end Pilgrim Funds)
the Distributor may pay the selling firm 0.25% of the Offering Price.
The officers, directors and bona fide full-time employees of the Fund and the
officers, directors and full-time employees of the Adviser, any Sub-Adviser, the
Distributor, any service provider to the Fund or affiliated corporations thereof
or any trust, pension, profit-sharing or other benefit plan for such persons,
broker-dealers, for their own accounts or for members of their families (defined
as current spouse, children, parents, grandparents, uncles, aunts, siblings,
nephews, nieces, step-relations, relations at-law, and cousins) employees of
such broker-dealers (including their immediate families) and discretionary
advisory accounts of the Adviser or any Sub-Adviser, may purchase Class A shares
of the Fund at net asset value without a sales charge. Such purchaser may be
required to sign a letter stating that the purchase is for his own investment
purposes only and that the securities will not be resold except to the Fund. The
Fund may, under certain circumstances, allow registered investment adviser's to
make investments on behalf of their clients at net asset value without any
commission or concession.
Class A shares may also be purchased at net asset value by certain fee based
registered investment advisers, trust companies and bank trust departments under
certain circumstances making investments on behalf of their clients and by
shareholders who have authorized the automatic transfer of dividends from the
same class of another open-end fund managed by the Adviser. Class A shares may
also be purchased without a sales charge by (i) shareholders who have authorized
the automatic transfer of dividends from the same class of another Pilgrim Fund
distributed by the Distributor or from Pilgrim Prime Rate Trust; (ii) registered
investment advisors, trust companies and bank trust departments investing in
Class A shares on their own behalf or on behalf of their clients, provided that
the aggregate amount invested in any one or more Funds, during the 13 month
period starting with the first investment, equals at least $1 million; (iii)
broker-dealers, who have signed selling group agreements with the Distributor,
and registered representatives and employees of such broker-dealers, for their
own accounts or for members of their families (defined as current spouse,
children, parents, grandparents, uncles, aunts, siblings, nephews, nieces, step
relations, relations-at-law and cousins); (iv) broker-dealers using third party
administrators for qualified retirement plans who have entered into an agreement
with the Pilgrim Funds or an affiliate, subject to certain operational and
minimum size requirements specified from time-to-time by the Pilgrim Funds; (v)
accounts as to which a banker or broker-dealer charges an account management fee
("wrap accounts"); and (vi) any registered investment company for which Pilgrim
Investments, Inc. serves as adviser.
The Fund may terminate or amend the terms of these sales charge waivers at any
time.
LETTERS OF INTENT AND RIGHTS OF ACCUMULATION
An investor may immediately qualify for a reduced sales charge on a purchase of
Class A shares or shares with front-end sales charges, by completing the Letter
of Intent section of the Shareholder Application in the Prospectus (the "Letter
of Intent" or "Letter"). By completing the Letter, the investor expresses an
intention to invest during the next 13 months a specified amount which if made
at one time would qualify for the reduced sales charge. At any time within 90
days after the first investment which the investor wants to qualify for the
reduced sales charge, a signed Shareholder Application, with the Letter of
Intent section completed, may be filed with the Fund. After the Letter of Intent
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is filed, each additional investment made will be entitled to the sales charge
applicable to the level of investment indicated on the Letter of Intent as
described above. Sales charge reductions based upon purchases in more than one
investment in the Pilgrim Funds will be effective only after notification to the
Distributor that the investment qualifies for a discount. The shareholder's
holdings in the Adviser's funds (excluding Pilgrim General Money Market Shares)
acquired within 90 days before the Letter of Intent is filed will be counted
towards completion of the Letter of Intent but will not be entitled to a
retroactive downward adjustment of sales charge until the Letter of Intent is
fulfilled. Any redemptions made by the shareholder during the 13-month period
will be subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the Letter of
Intent is not completed within the 13-month period, there will be an upward
adjustment of the sales charge as specified below, depending upon the amount
actually purchased (less redemption) during the period.
An investor acknowledges and agrees to the following provisions by completing
the Letter of Intent section of the Shareholder Application in the Prospectus. A
minimum initial investment equal to 25% of the intended total investment is
required. An amount equal to the maximum sales charge or 5.75% of the total
intended purchase will be held in escrow at Pilgrim Funds, in the form of
shares, in the investor's name to assure that the full applicable sales charge
will be paid if the intended purchase is not completed. The shares in escrow
will be included in the total shares owned as reflected on the monthly
statement; income and capital gain distributions on the escrow shares will be
paid directly by the investor. The escrow shares will not be available for
redemption by the investor until the Letter of Intent has been completed, or the
higher sales charge paid. If the total purchases, less redemptions, equal the
amount specified under the Letter, the shares in escrow will be released. If the
total purchases, less redemptions, exceed the amount specified under the Letter
and is an amount which would qualify for a further quantity discount, a
retroactive price adjustment will be made by the Distributor and the dealer with
whom purchases were made pursuant to the Letter of Intent (to reflect such
further quantity discount) on purchases made within 90 days before, and on those
made after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the applicable offering price.
If the total purchases, less redemptions, are less than the amount specified
under the Letter, the investor will remit to the Distributor an amount equal to
the difference in dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total of
such purchases had been made at a single account in the name of the investor or
to the investor's order. If within 10 days after written request such difference
in sales charge is not paid, the redemption of an appropriate number of shares
in escrow to realize such difference will be made. If the proceeds from a total
redemption are inadequate, the investor will be liable to the Distributor for
the difference. In the event of a total redemption of the account prior to
fulfillment of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the Investor. By completing the Letter of Intent section of the Shareholder
Application, an investor grants to the Distributor a security interest in the
shares in escrow and agrees to irrevocably appoint the Distributor as his
attorney-in-fact with full power of substitution to surrender for redemption any
or all shares for the purpose of paying any additional sales charge due and
authorizes the Transfer Agent or Sub-Transfer Agent to receive and redeem shares
and pay the proceeds as directed by the Distributor. The investor or the
securities dealer must inform the Transfer Agent or the Distributor that this
Letter is in effect each time a purchase is made.
If at any time prior to or after completion of the Letter of Intent the investor
wishes to cancel the Letter of Intent, the investor must notify the Distributor
in writing. If, prior to the completion of the Letter of Intent, the investor
requests the Distributor to liquidate all shares held by the investor, the
Letter of Intent will be terminated automatically. Under either of these
situations, the total purchased may be less than the amount specified in the
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Letter of Intent. If so, the Distributor will redeem at NAV to remit to the
Distributor and the appropriate authorized dealer an amount equal to the
difference between the dollar amount of the sales charge actually paid and the
amount of the sales charge that would have been paid on the total purchases if
made at one time.
The value of shares of the Fund plus shares of the other open-end funds
distributed by the Distributor (excluding Pilgrim General Money Market Shares)
can be combined with a current purchase to determine the reduced sales charge
and applicable offering price of the current purchase. The reduced sales charge
apply to quantity purchases made at one time or on a cumulative basis over any
period of time by (i) an investor, (ii) the investor's spouse and children under
the age of majority, (iii) the investor's custodian accounts for the benefit of
a child under the Uniform Gift to Minors Act, (iv) a trustee or other fiduciary
of a single trust estate or a single fiduciary account (including a pension,
profit-sharing and/or other employee benefit plans qualified under Section 401
of the Code), by trust companies' registered investment advisors, banks and bank
trust departments for accounts over which they exercise exclusive investment
discretionary authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity.
The reduced sales charge also apply on a non-cumulative basis, to purchases made
at one time by the customers of a single dealer, in excess of $1 million. The
Letter of Intent option may be modified or discontinued at any time.
Shares of the Fund and other open-end Pilgrim Funds (excluding Pilgrim General
Money Market Shares) purchased and owned of record or beneficially by a
corporation, including employees of a single employer (or affiliates thereof)
including shares held by its employees, under one or more retirement plans, can
be combined with a current purchase to determine the reduced sales charge and
applicable offering price of the current purchase, provided such transactions
are not prohibited by one or more provisions of the Employee Retirement Income
Security Act or the Internal Revenue Code. Individuals and employees should
consult with their tax advisors concerning the tax rules applicable to
retirement plans before investing.
For the purposes of Rights of Accumulation and the Letter of Intent Privilege,
shares held by investors in the Pilgrim Funds which impose a CDSC may be
combined with Class A shares for a reduced sales charge but will not affect any
CDSC which may be imposed upon the redemption of shares of a Fund which imposes
a CDSC.
REDEMPTIONS
Payment to shareholders for shares redeemed will be made within seven days after
receipt by the Fund's Transfer Agent of the written request in proper form,
except that the Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such exchange is closed for other than
weekends and holidays; (b) an emergency exists as determined by the SEC making
disposal of portfolio series or valuation of net assets of the Fund not
reasonably practicable; or (c) for such other period as the SEC may permit for
the protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received good payment.
Accordingly, the Fund may delay the mailing of a redemption check until such
time as it has assured itself that good payment has been collected for the
purchase of such shares, which may take up to 15 days or longer.
The Fund intends to pay in cash for all shares redeemed, but under abnormal
conditions that make payment in cash unwise, the Fund may make payment wholly or
partly in securities at their then current market value equal to the redemption
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price. In such case, an investor may incur brokerage costs in converting such
securities to cash. However, the Fund has elected to be governed by the
provisions of Rule 18f-1 under the 1940 Act, which contains a formula for
determining the minimum amount of cash to be paid as part of any redemption. In
the event the Fund must liquidate portfolio securities to meet redemptions, it
reserves the right to reduce the redemption price by an amount equivalent to the
pro-rated cost of such liquidation not to exceed one percent of the net asset
value of such shares.
Due to the relatively high cost of handling small investments, the Fund reserves
the right, upon 30 days written notice, to redeem, at net asset value (less any
applicable deferred sales charge), the shares of any shareholder whose account
has a value of less than $1,000 in the Fund, other than as a result of a decline
in the net asset value per share. Before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares in the account is less than the minimum amount and will allow the
shareholder 30 days to make an additional investment in an amount that will
increase the value of the account to at least $1,000 before the redemption is
processed. This policy will not be implemented where the Fund has previously
waived the minimum investment requirements.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of the portfolio securities at
the time of redemption or repurchase.
Certain purchases of Class A shares and most Class B and Class C shares may be
subject to a CDSC. Shareholders will be charged a CDSC if certain of those
shares are redeemed within the applicable time period as stated in the
prospectus.
No CDSC is imposed on any shares subject to a CDSC to the extent that those
shares (i) are no longer subject to the applicable holding period, (ii) resulted
from reinvestment of distributions on CDSC shares, or (iii) were exchanged for
shares of another fund managed by the Adviser, provided that the shares acquired
in such exchange and subsequent exchanges will continue to remain subject to the
CDSC, if applicable, until the applicable holding period expires.
The CDSC or redemption fee will be waived for certain redemptions of shares upon
(i) the death or permanent disability of a shareholder, or (ii) in connection
with mandatory distributions from an Individual Retirement Account ("IRA") or
other qualified retirement plan. The CDSC or redemption fee will be waived in
the case of a redemption of shares following the death or permanent disability
of a shareholder if the redemption is made within one year of death or initial
determination of permanent disability. The waiver is available for total or
partial redemptions of shares owned by an individual or an individual in joint
tenancy (with rights of survivorship), but only for redemptions of shares held
at the time of death or initial determination of permanent disability. The CDSC
or redemption fee will also be waived in the case of a total or partial
redemption of shares in connection with any mandatory distribution from a
tax-deferred retirement plan or an IRA. The waiver does not apply in the case of
a tax-free rollover or transfer of assets, other than one following a separation
from services, except that a CDSC or redemption fee may be waived in certain
circumstances involving redemptions in connection with a distribution from a
qualified employer retirement plan in connection with termination of employment
or termination of the employer's plan and the transfer to another employer's
plan or to an IRA. The shareholder must notify the Fund either directly or
through the Distributor at the time of redemption that the shareholder is
entitled to a waiver of CDSC or redemption fee. The waiver will then be granted
subject to confirmation of the shareholder's entitlement. The CDSC or redemption
fee, which may be imposed on Class A shares purchased in excess of $1 million,
will also be waived for registered investment advisors, trust companies and bank
trust departments investing on their own behalf or on behalf of their clients.
These waivers may be changed at any time.
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REINSTATEMENT PRIVILEGE
If you sell Class B or Class C shares of a Pilgrim Fund, you may reinvest some
or all of the proceeds in the same share class within 90 days without a sales
charge. Reinstated Class B and Class C shares will retain their original cost
and purchase date for purposes of the CDSC. The amount of any CDSC also will be
reinstated. To exercise this privilege, the written order for the purchase of
shares must be received by the Transfer Agent or be postmarked within 90 days
after the date of redemption. This privilege can be used only once per calendar
year. If a loss is incurred on the redemption and the reinstatement privilege is
used, some or all of the loss may not be allowed as a tax deduction.
DETERMINATION OF SHARE PRICE
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 and at such other times and/or such other days as there is
sufficient trading in money market instruments to affect materially the Trust's
net asset value per share. 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. Substantially all of the Fund's net income calculated from the
immediately preceding determination of net income, is declared daily as
dividends.
For the purpose of determining the price at which shares are issued and
redeemed, the net asset value per share is calculated immediately after the
daily dividend declaration by: (a) valuing all securities and instruments as set
forth below; (b) deducting the Fund's liabilities; and (c) dividing the
resulting amount by the number of shares outstanding. As discussed below, it is
the intention of the Fund to maintain a net asset value per share of $1.00. The
Fund's portfolio instruments are valued on the basis of amortized cost. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold its portfolio. During periods of declining
interest rates, the daily yield on shares of the Fund computed as described
above may be higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all its portfolio instruments. Thus, if the use
of amortized cost by the Fund results in a lower aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values, and existing investors in the Fund would receive less
investment income. The converse would apply in a period of rising interest
rates.
The Fund's use of amortized cost and the maintenance of the Fund's per share net
value at $1.00 is based on its election to operate under the provisions of Rule
2a-7 under the Investment Company Act of 1940. As a condition of operating under
that rule, the Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase only instruments having remaining maturities of
thirteen months or less, and invest only in securities which are determined by
the Board of Trustees to present minimal credit risks and which are of high
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quality as required by the Rule, or in the case of any instrument not so rated,
considered by the Board of Trustees to be of comparable quality. Securities in
the Trust will consist of money market instruments that have been rated (or
whose issuer's short-term debt obligations are rated) in one of the two highest
categories (i.e., "Al/Pl") by both Standard & Poor's Corporation ("S&P") and
Moody's Investors Services, Inc. ("Moody's"), two nationally recognized
statistical rating organizations ("NRSRO").
The Fund may invest up to 5% of its assets in any single "Tier I" security
(other than U.S. Government securities), measured at the time of acquisition;
however, it may invest more than 5% of its assets in a single Tier 1 security
for no more than three business days. A "Tier I" security is one that has been
rated (or the issuer of such security has been rated) by both S&P and Moody's in
the highest rating category or, if unrated, is of comparable quality. A security
rated in the highest category by only one of these NRSROs is also considered a
Tier 1 security.
In addition, the Fund may invest not more than 5% of its assets in "Tier 2"
securities. A Tier 2 security is a security that is (a) rated in the second
highest category by either S&P or Moody's or (b) an unrated security that is
deemed to be of comparable quality by the Fund's investment advisor. The Fund
may invest up to 1% of its assets in any single Tier 2 security.
The Fund may invest only in a money market instrument that has a remaining
maturity of 13 months (397 days) or less, provided that the Fund's average
weighted maturity is 90 days or less.
The Board of Trustees has also agreed, as a particular responsibility within the
overall duty of care owed to its shareholders, to establish procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objective, to stabilize the net asset value per share as
computed for the purposes of sales and redemptions at $1.00. These procedures
include periodic review, as the Board deems appropriate and at such intervals as
are reasonable in light of current market conditions, of the relationship
between the amortized cost value per share and a net asset value per share based
upon available indications of market value. In such review, investments for
which market quotations are readily available are valued at the most recent bid
price or quoted yield equivalent for such securities or for securities of
comparable maturity, quality and type as obtained from one or more of the major
market makers for the securities to be valued. Other investments and assets are
valued at fair value, as determined in good faith by the Board of Trustees.
SHAREHOLDER INFORMATION
Certificates representing shares of the Fund will not normally be issued to
shareholders. The Transfer Agent will maintain an account for each shareholder
upon which the registration and transfer of shares are recorded, and any
transfers shall be reflected by bookkeeping entry, without physical delivery.
The Transfer Agent will require that a shareholder provide requests in writing,
accompanied by a valid signature guarantee form, when changing certain
information in an account (i.e., wiring instructions, telephone privileges,
etc.).
The Fund reserves the right, if conditions exist that make cash payments
undesirable, to honor any request for redemption or repurchase order with
respect to shares of the Fund by making payment in whole or in part in readily
marketable securities chosen by the Fund and valued as they are for purposes of
computing the Fund's net asset value (redemption-in-kind). If payment is made in
securities, a shareholder may incur transaction expenses in converting theses
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securities to cash. The Fund has elected, however, to be governed by Rule 18f-1
under the 1940 Act as a result of which the Fund is obligated to redeem shares
with respect to any one shareholder during any 90-day period solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of the period.
SHAREHOLDER SERVICES AND PRIVILEGES
As discussed in the Prospectus, the Fund provides a Pre-Authorized Investment
Program for the convenience of investors who wish to purchase shares of the Fund
on a regular basis. Such a Program may be started with an initial investment
($1,000 minimum) and subsequent voluntary purchases ($100 minimum) with no
obligation to continue. The Program may be terminated without penalty at any
time by the investor or the Fund. The minimum investment requirements may be
waived by the Fund for purchases made pursuant to (i) employer-administered
payroll deduction plans, (ii) profit-sharing, pension, or individual or any
employee retirement plans, or (iii) purchases made in connection with plans
providing for periodic investments in Fund shares.
For investors purchasing shares of the Fund under a tax-qualified individual
retirement or pension plan or under a group plan through a person designated for
the collection and remittance of monies to be invested in shares of the Fund on
a periodic basis, the Fund may, in lieu of furnishing confirmations following
each purchase of Fund shares, send statements no less frequently than quarterly
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
and the rules thereunder. Such quarterly statements, which would be sent to the
investor or to the person designated by the group for distribution to its
members, will be made within five business days after the end of each quarterly
period and shall reflect all transactions in the investor's account during the
preceding quarter.
All shareholders will receive a confirmation of each new transaction in their
accounts, which will also show the total number of Fund shares owned by each
shareholder, the number of shares being held in safekeeping by the Fund's
Transfer Agent for the account of the shareholder and a cumulative record of the
account for the entire year. Shareholders may rely on these statements in lieu
of certificates. Certificates representing shares of the Fund will not be issued
unless the shareholder requests them in writing.
SELF-EMPLOYED AND CORPORATE RETIREMENT PLANS
For self-employed individuals and corporate investors that wish to purchase
shares of the Fund, there is available through the Fund a Prototype Plan and
Custody Agreement. The Custody Agreement provides that Investors Fiduciary Trust
Company, Kansas City, Missouri, will act as Custodian under the Plan, and will
furnish custodial services for an annual maintenance fee of $12.00 for each
participant, with no other charges. (This fee is in addition to the normal
Custodian charges paid by the Fund.) The annual contract maintenance fee may be
waived from time to time. For further details, including the right to appoint a
successor Custodian, see the Plan and Custody Agreements as provided by the
Fund. Employers who wish to use shares of the Fund under a custodianship with
another bank or trust company must make individual arrangements with such
institution.
INDIVIDUAL RETIREMENT ACCOUNTS
Investors having earned income are eligible to purchase shares of the Fund under
an IRA pursuant to Section 408(a) of the Internal Revenue Code. An individual
who creates an IRA may contribute annually certain dollar amounts of earned
income, and an additional amount if there is a non-working spouse. Simple IRA
plans that employers may establish on behalf of their employees are also
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available. Roth IRA plans that enable employed and self-employed individuals to
make non-deductible contributions, and, under certain circumstances, effect
tax-free withdrawals, are also available. Copies of a model Custodial Account
Agreement are available from the Distributor. Investors Fiduciary Trust Company,
Kansas City, Missouri, will act as the Custodian under this model Agreement, for
which it will charge the investor an annual fee of $12.00 for maintaining the
Account (such fee is in addition to the normal custodial charges paid by the
Fund). Full details on the IRA are contained in an IRS required disclosure
statement, and the Custodian will not open an IRA until seven (7) days after the
investor has received such statement from the Fund. An IRA using shares of the
Fund may also be used by employers who have adopted a Simplified Employee
Pension Plan.
Purchases of Fund shares by Section 403(b) and other retirement plans are also
available. Section 403(b) plans are arrangements by a public school organization
or a charitable, educational, or scientific organization that is described in
Section 501(c)(3) of the Internal Revenue Code under which employees are
permitted to take advantage of the federal income tax deferral benefits provided
for in Section 403(b) of the Code. It is advisable for an investor considering
the funding of any retirement plan to consult with an attorney or to obtain
advice from a competent retirement plan consultant.
TELEPHONE REDEMPTION AND EXCHANGE PRIVILEGES
As discussed in the Prospectus, the telephone redemption and exchange privileges
are available for all shareholder accounts; however, retirement accounts may not
utilize the telephone redemption privilege. The telephone privileges may be
modified or terminated at any time. The privileges are subject to the conditions
and provisions set forth below and in the Prospectus.
(1) Telephone redemption and/or exchange instructions received in good order
before the pricing of the Fund on any day on which the New York Stock
Exchange is open for business (a "Business Day"), but not later than 4:00
p.m. eastern time, will be processed at that day's closing net asset value.
For each exchange, the shareholder's account may be charged an exchange
fee. There is no fee for telephone redemption; however, redemptions of
Class A and Class B shares may be subject to a contingent deferred sales
charge (See "Redemption of Shares" in the Prospectus).
(2) Telephone redemption and/or exchange instructions should be made by dialing
1-800-992-0180 and selecting option 3.
(3) The Fund will not permit exchanges in violation of any of the terms and
conditions set forth in the Fund's Prospectus or herein.
(4) Telephone redemption requests must meet the following conditions to be
accepted by the Fund:
(a) Proceeds of the redemption may be directly deposited into a
predetermined bank account, or mailed to the current address on the
registration. This address cannot reflect any change within the
previous sixty (30) days.
(b) Certain account information will need to be provided for verification
purposes before the redemption will be executed.
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(c) Only one telephone redemption (where proceeds are being mailed to the
address of record) can be processed with in a 30 day period.
(d) The maximum amount which can be liquidated and sent to the address of
record at any one time is $100,000.
(e) The minimum amount which can be liquidated and sent to a predetermined
bank account is $5,000.
(5) If the exchange involves the establishment of a new account, the dollar
amount being exchanged must at least equal the minimum investment
requirement of the Pilgrim Fund being acquired.
(6) Any new account established through the exchange privilege will have the
same account information and options except as stated in the Prospectus.
(7) Certificated shares cannot be redeemed or exchanged by telephone but must
be forwarded to Pilgrim at P.O. Box 419368, Kansas City, MO 64141 and
deposited into your account before any transaction may be processed.
(8) If a portion of the shares to be exchanged are held in escrow in connection
with a Letter of Intent, the smallest number of full shares of the Fund to
be purchased on the exchange having the same aggregate net asset value as
the shares being exchanged shall be substituted in the escrow account.
Shares held in escrow may not be redeemed until the Letter of Intent has
expired and/or the appropriate adjustments have been made to the account.
(9) Shares may not be exchanged and/or redeemed unless an exchange and/or
redemption privilege is offered pursuant to the Fund's then-current
prospectus.
(10) Proceeds of a redemption may be delayed up to 15 days or longer until the
check used to purchase the shares being redeemed has been paid by the bank
upon which it was drawn.
SYSTEMATIC WITHDRAWAL PLAN
You may elect to make periodic withdrawals from your account in any fixed amount
in excess of $100 to yourself, or to anyone else you properly designate, as long
as the account has a current value of at least $10,000. To establish a
systematic cash withdrawal, complete the Systematic Withdrawal Plan section of
the Account Application. To have funds deposited to your bank account, follow
the instructions on the Account Application. You may elect to have monthly,
quarterly, semi-annual or annual payments. Redemptions are normally processed on
the fifth day prior to the end of the month, quarter or year. Checks are then
mailed or proceeds are forwarded to your bank account on or about the first of
the following month. You may change the amount, frequency and payee, or
terminate the plan by giving written notice to the Transfer Agent. A Systematic
Withdrawal Plan may be modified at any time by the Fund or terminated upon
written notice by the relevant Fund.
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During the withdrawal period, you may purchase additional shares for deposit to
your account, subject to any applicable sales charge, if the additional
purchases are equal to at least one year's scheduled withdrawals, or $1,200,
whichever is greater. There are no separate charges to you under this Plan,
although a CDSC may apply if you purchased Class A, B or C shares. Shareholders
who elect to have a systematic cash withdrawal must have all dividends and
capital gains reinvested. As shares of the Fund are redeemed under the Plan, you
may realize a capital gain or loss for income tax purposes.
DISTRIBUTIONS
The Fund intends to pay annual dividends from investment income, if earned and
as declared by its Board of Directors. The Board of Directors may, at its
discretion, elect to retain or declare and pay distributions from any realized
security profits.
Any dividends and distribution payments will be reinvested at net asset value,
without sales charge, in additional full and fractional shares of the Fund
unless and until the shareholder notifies the Transfer Agent in writing that he
wants to receive his payments in cash. This request must be received by the
Transfer Agent at least seven days before the dividend record date. Upon receipt
by the Transfer 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 Transfer 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" in the Prospectus).
TAX CONSIDERATIONS
Information set forth in the Prospectus and this SAI is only a summary of
certain key tax considerations generally affecting purchasers of shares of the
Fund. 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 has been made to present a complete explanation of the
federal, state and local tax treatment of the Fund or the implications to
shareholders, and the discussions here and in the Fund's Prospectus are not
intended as substitutes for careful tax planning. Accordingly, potential
purchasers of shares of the Fund are urged to consult their tax advisers with
specific reference to their own tax circumstances. In addition, the tax
discussion in the Prospectus and this SAI is based on tax law in effect on the
date of the Prospectus and this SAI; such laws and regulations may be changed by
legislative, judicial or administrative action, sometimes with retroactive
effect.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, the Fund is not
subject to federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net of expenses)
and capital gain net income (i.e., the excess of capital gains over capital
losses) that it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (i.e., net investment income
and the excess of net short-term capital gain over net long-term capital loss)
for the taxable year (the "Distribution Requirement"), and satisfies certain
other requirements of the Code that are described below. Distributions by the
Fund made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and will, therefore, count
toward satisfaction of the Distribution Requirement.
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In addition to satisfying the Distribution Requirement, a regulated investment
company must derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In general, gain or loss recognized by the Fund on the disposition of an asset
will be a capital gain or loss. In addition, gain will be recognized as a result
of certain constructive sales, including short sales "against the box." However,
gain recognized on the disposition of a debt obligation purchased by the Fund at
a market discount (generally, at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of the market discount
which accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code section 1256 (unless the Fund
elects otherwise), will generally be treated as ordinary income or loss.
Further, the Code also treats as ordinary income a portion of the capital gain
attributable to a transaction where substantially all of the return realized is
attributable to the time value of the Fund's net investment in the transaction
and: (1) the transaction consists of the acquisition of property by the Fund and
a contemporaneous contract to sell substantially identical property in the
future; (2) the transaction is a straddle within the meaning of section 1092 of
the Code; (3) the transaction is one that was marketed or sold to the Fund on
the basis that it would have the economic characteristics of a loan but the
interest-like return would be taxed as capital gain; or (4) the transaction is
described as a conversion transaction in the Treasury Regulations. The amount of
the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses will be preserved where the Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed
through to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss recognized
by the Fund on the disposition of an asset is long-term or short-term, the
holding period of the asset may be affected if (1) the asset is used to close a
"short sale" (which includes for certain purposes the acquisition of a put
option) or is substantially identical to another asset so used, (2) the asset is
otherwise held by the Fund as part of a "straddle" (which term generally
excludes a situation where the asset is stock and the Fund grants a qualified
covered call option (which, among other things, must not be deep-in-the-money)
with respect thereto), or (3) the asset is stock and the Fund grants an
in-the-money qualified covered call option with respect thereto. In addition,
the Fund may be required to defer the recognition of a loss on the disposition
of an asset held as part of a straddle to the extent of any unrecognized gain on
the offsetting position. Any gain recognized by the Fund on the lapse of, or any
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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.
Certain transactions that may be engaged in by the Fund (such as regulated
futures contracts, certain foreign currency contracts, and options on stock
indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
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. The Fund, however,
may elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a "mixed straddle" with other investments of the Fund that are
not Section 1256 contracts.
The Fund may purchase securities of certain foreign investment funds or trusts
which constitute passive foreign investment companies ("PFICs") for federal
income tax purposes. If the Fund invests in a PFIC, it has three separate
options. First, it may elect to treat the PFIC as a qualified electing fund (a
"QEF"), in which event the Fund will each year have ordinary income equal to its
pro rata share of the PFIC's ordinary earnings for the year and long-term
capital gain equal to its pro rata share of the PFIC's net capital gain for the
year, regardless of whether the Fund receives distributions of any such ordinary
earnings or capital gains from the PFIC. Second, the Fund that invests in stock
of a PFIC may make a mark-to-market election with respect to such stock.
Pursuant to such election, the Fund will include as ordinary income any excess
of the fair market value of such stock at the close of any taxable year over the
Fund's adjusted tax basis in the stock. If the adjusted tax basis of the PFIC
stock exceeds the fair market value of the stock at the end of a given taxable
year, such excess will be deductible as ordinary loss in an amount equal to the
lesser of the amount of such excess or the net mark-to-market gains on the stock
that the Fund included in income in previous years. The Fund's holding period
with respect to its PFIC stock subject to the election will commence on the
first day of the next taxable year. If the Fund makes the mark-to-market
election in the first taxable year it holds PFIC stock, it will not incur the
tax described below under the third option.
Finally, if the Fund does not elect to treat the PFIC as a QEF and does not make
a mark-to-market election, then, in general, (1) any gain recognized by the Fund
upon the sale or other disposition of its interest in the PFIC or any "excess
distribution" (as defined) received by the Fund from the PFIC will be allocated
ratably over the Fund's holding period of its interest in the PFIC stock, (2)
the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Fund level), (3) the Fund shall be liable for tax on the portions of such gain
or excess distribution so allocated to prior years in an amount equal to, for
each such prior year, (i) the amount of gain or excess distribution allocated to
such prior year multiplied by the highest tax rate (individual or corporate) 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
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the Fund to its shareholders of the portions of such gain or excess distribution
so allocated to prior years (net of the tax payable by the Fund thereon) will
again be taxable to the shareholders as an ordinary income dividend.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss (including, to the
extent provided in Treasury Regulations, losses recognized pursuant to the PFIC
mark-to-market election) incurred after October 31 as if it had been incurred in
the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to each of which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies. A 4% non-deductible excise tax is
imposed on a regulated investment company that fails to distribute in each
calendar year an amount equal to 98% of its ordinary income for such 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 and ordinary gains or losses arising as a result of a PFIC
mark-to-market election (or upon the actual disposition of the PFIC stock
subject to such election) incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
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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. Distributions attributable to dividends received by the Fund from
domestic corporations will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below. Distributions
attributable to interest received by the Fund will not, and distributions
attributable to dividends paid by a foreign corporation generally should not,
qualify for the dividend-received deduction.
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).
The Fund may either retain or distribute to shareholders its net capital gain
for each taxable year. The Fund currently intends to distribute any such
amounts. Net capital gain that is distributed and designated as a capital gain
dividend will be taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder has held his shares or whether such gain
was recognized by the Fund prior to the date on which the shareholder acquired
his shares. The Code provides, however, that under certain conditions only 50%
(58% for alternative minimum tax purposes) of the capital gain recognized upon
the Fund's disposition of domestic "small business" stock will be subject to
tax.
Conversely, if the Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carryovers) at
the 35% corporate tax rate. If the Fund elects to retain its net capital gain,
it is expected that the Fund also will elect to have shareholders of record on
the last day of its taxable year treated as if each received a distribution of
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his pro rata share of such gain, with the result that each shareholder will be
required to report his pro rata share of such gain on his tax return as
long-term capital gain, will receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain, and will increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for non corporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. For purposes of the corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, a corporate shareholder will generally be required to take the full
amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within foreign
countries may be subject to foreign taxes withheld at the source. The United
States has entered into tax treaties with many foreign countries which entitle
the Fund to a reduced rate of, or exemption from, taxes on such income. It is
impossible to determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested in various countries is not known. If
more than 50% of the value of the Fund's total assets at the close of its
taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to its 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 Fund shares or shares of another portfolio (or another fund).
Shareholders receiving a distribution in the form of additional shares will be
treated as receiving a distribution in an amount equal to the fair market value
of the shares received, determined as of the reinvestment date. In addition, if
the net asset value at the time a shareholder purchases shares of the Fund
reflects undistributed net investment income or recognized capital gain net
income, or unrealized appreciation in the value of the assets of the Fund,
distributions of such amounts will be taxable to the shareholder in the manner
described above, although they economically constitute a return of capital to
the shareholder.
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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 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 failed to
provide a correct taxpayer identification number, (2) who is subject to backup
withholding for failure to properly report the receipt of interest or dividend
income, or (3) who has failed to certify to the Fund that it is not subject to
backup withholding or that it is an exempt recipient (such as a corporation).
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of shares of
the Fund in an amount equal to the difference between the proceeds of the sale
or redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder purchases
other shares of the Fund within 30 days before or after the sale or redemption.
In general, any gain or loss arising from (or treated as arising from) the sale
or redemption of shares of the Fund will be considered capital gain or loss and
will be long-term capital gain or loss if the shares were held for longer than
one year. However, any capital loss arising from the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of the amount of capital gain dividends received on such shares.
For this purpose, the special holding period rules of Code section 246(c)(3) and
(4) (discussed above in connection with the dividends-received deduction for
corporations) generally will apply in determining the holding period of shares.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder") depends on whether the income from the Fund is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower applicable treaty rate) upon the gross amount of the dividend.
Furthermore, such foreign shareholder may be subject to U.S. withholding tax at
the rate of 30% (or lower applicable treaty rate) on the gross income resulting
from the Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or a
credit against this U.S. withholding tax for the foreign shareholder's pro rata
share of such foreign taxes which it is treated as having paid. Such 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,
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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 the rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; STATE AND LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies may differ from the rules for U.S.
federal income taxation described above. Shareholders are urged to consult their
tax advisers as to the consequences of these and other state and local tax rules
affecting investment in the Fund.
CALCULATION OF PERFORMANCE DATA
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 SEC ("SEC rules"), funds advertising performance must
include total return quotes calculated according to the following formula:
n
P(l+T) = 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
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<PAGE>
the period. Total return, or "T" in the formula above, is computed by finding
the average annual compounded rates of return over the 1, 5 and 10 year periods
(or fractional portion thereof) that would equate the initial amount invested to
the ending redeemable value. Any recurring account charges that might in the
future be imposed by the Fund would be included at that time.
The Fund may also from time to time include in such advertising a total return
figure that is not calculated according to the formula set forth above in order
to compare more accurately the performance of the Fund with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., or with the performance of the
Standard and Poor's 500 Stock Index or the Dow Jones Industrial Average, the
Fund calculates its aggregate total return for the specified periods of time
assuming the investment of $10,000 in Fund shares and assuming the reinvestment
of each dividend or other distribution at net asset value on the reinvestment
date. Percentage increases are determined by subtracting the initial value of
the investment from the ending value and by dividing the remainder by the
beginning value.
GENERAL INFORMATION
CUSTODIAN
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 Fund's portfolio
securities including those to be held by foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the S.E.C. and for the Fund's domestic securities and other assets.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02181, has been retained to act as the transfer agent and dividend disbursing
agent. 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.
LEGAL COUNSEL
Legal matters for the Fund are passed upon by _________________________________.
INDEPENDENT AUDITORS
___________________________________________________ has been selected as
independent auditors for the Fund for the fiscal year ending December 31, 2000.
OTHER INFORMATION
The Fund is registered with the SEC as an open-end management investment
company. Such registration does not involve supervision of the management or
policies of the Fund by any governmental agency. The Prospectus and this
Statement of Additional Information omit certain of the information contained in
the Fund's Registration Statement filed with the SEC and copies of this
information may be obtained from the SEC upon payment of the prescribed fee or
examined at the SEC in Washington, D.C. without charge.
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<PAGE>
Investors in the Fund will be kept informed of their progress through
semi-annual reports showing portfolio composition, statistical data and any
other significant data, including financial statements audited by independent
certified public accountants.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on December 31. The Fund will send financial
statements to its shareholders at least semiannually. An annual report
containing financial statements audited by the independent accountants will be
sent to shareholders each year.
FINANCIAL STATEMENTS
The financial statements from the Fund's December 31, 1999 Annual Report are
incorporated herein by reference. Copies of the Fund's Annual and Semi-Annual
Reports may be obtained without charge by contacting Pilgrim Funds at Suite
1200, 40 North Central Avenue, Phoenix, Arizona 85004, (800) 992-0180.
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<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS - LIST
The Annual Report for the year ending December 31, 1999 was filed electronically
on February 28, 2000 (as form type N-30D).
(a) FINANCIAL STATEMENTS:
Report of Independent Auditors dated February 7, 2000
Statement of Net Assets (including the Portfolio of Investments) at
December 31, 1999
Statement of Assets and Liabilities at December 31, 1999
Statement of Operations for the year ended December 31, 1999
Statement of Changes in Net Assets for the year ended December 31,
1999 and 1998
Notes to Financial Statements
Schedules II-VII and other Financial Statements, for which provisions
are made in the applicable accounting regulations of the Securities
and Exchange Commission, are omitted because they are not required
under the related instructions, they are inapplicable, or the required
information is presented in the financial statements or notes thereto.
(1) Includes the information required by Schedule I.
(2) Includes the information required by the Statement of Realized
Gain or Loss on Investments
(b) EXHIBITS:
1. Declaration of Trust - Filed electronically 4/29/96 -
Incorporated by reference
2. By-Laws - Filed electronically 3/3/97 - Incorporated by reference
3. Not Applicable
4. Rights of Holders - Filed electronically 3/2/98 - Incorporated by
reference
5. Investment Advisory Agreement between Registrant and Lexington
Management Corporation - Filed electronically 4/29/96 -
Incorporated by reference
<PAGE>
6. Distribution Agreement between Registrant and Lexington Funds
Distributor, Inc. -- Filed electronically 3/3/97 - Incorporated
by reference
7. Retirement Plan for Eligible Trustees - Filed electronically
3/2/98 - Incorporated by reference
8a. Form of Custodian Agreement between Registrant and Chase
Manhattan Bank, N.A. - Filed electronically 4/28/95 -
Incorporated by reference
8b. Transfer Agency Agreement between Registrant and State Street
Bank and Trust Company - Filed electronically 4/29/96 -
Incorporated by reference
9. Form of Administrative Services Agreement between Registrant and
Lexington Management Corporation - Filed electronically 4/28/95 -
Incorporated by reference
10. Opinion of Counsel as to Legality of Securities being registered
- Filed electronically 3/2/98 - Incorporated by reference
11. Consents
(a) Consent of Counsel -- To be filed
(b) Consent of Independent Auditors -- To be filed
12. Not Applicable
13. Not Applicable
14. Retirement Plans - Filed electronically 4/29/96 Incorporated by
reference
15. Not Applicable
16. Performance Calculation - Filed electronically 3/2/98 -
Incorporated by reference
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.
None.
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.
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<PAGE>
The following information is given as of April 16, 2000:
Title of Class Number of Record Holders
--------------- ------------------------
Shares of beneficial interest
($0.01 par value) 6,137
ITEM 27. INDEMNIFICATION
State the general effect of any contract, arrangements or statute under
which any trustee, 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 trustee,
officer, affiliated person or underwriter for their own protection.
Under the terms of the General Laws of the State of Massachusetts and the
Trust's Restated Declaration of Trust, the Trust shall indemnify each of its
Trustees to receive such indemnification (including those who serve at its
request as directors, officers or trustees of another organization in which it
has any interest as a shareholder, creditor or otherwise), against all
liabilities and expenses, including amounts paid in satisfaction of judgements,
in compromise of fines and penalties, and counsel fees, reasonably incurred by
him in connection with the defense or disposition of any action, suit or other
proceeding by the Trust or any other person, whether civil or criminal, in which
he may be involved or with which he may be threatened, while in office or
thereafter, by reason of this being or having been such a Trustee, officer,
employee or agent, except with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith or with willful misfeasance or
reckless disregard of duties or gross negligence; provided, however, that as to
any matter disposed of by a compromise payment by such Trustee, officer,
employee or agent, pursuant to a consent, decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
counsel approved by the Trustee to the effect that if the foregoing matter had
been adjudicated they would likely have been adjudicated in favor of such
Trustee, officer, employee or agent. The rights accruing to any Trustee,
officer, employee or agent under these provisions shall not exclude any other
right to which he may lawfully be titled; provided, however, that no Trustee,
officer, employee or agent may satisfy any right of indemnity or reimbursement
granted herein or to which he may otherwise be entitled except out of Trust
Property, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under the
Declaration of Trust, provided that the indemnified Trustee, officer, employee
or agent shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is entitled to such indemnification.
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.
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<PAGE>
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 Growth and Income Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Corporate Leaders Fund, Inc.
Lexington Natural Resources Trust
Lexington Corporate Leaders Trust Fund
Lexington Silver Fund, Inc.
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
Lexington Small Cap Asia Growth Fund, Inc.
Lexington Troika Dialog Russia Fund, Inc.
Lexington Global Technology Fund, Inc.
(b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa A. Curcio* Vice President and Secretary Vice President and
Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the Board
and Chairman and President
Richard M. Hisey* Chief Financial Officer, Vice President and
Managing Director & Director Chief Financial Officer
Richard Lavery* Vice President Vice President
Janice McInerney* Assistant Treasurer None
- ----------
* P.O. Box 1515
Saddle Brook, New Jersey 07663
(c) Not Applicable.
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<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 Money Market Trust, Park 80 West -Plaza Two,
Saddle Brook, New Jersey 07663 will maintain physical possession of each such
account, book or other document of the Company, except for those maintained by
the Registrant's Custodian, Chase Manhattan Bank, N.A., 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, 1004 Baltimore, Kansas
City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Furnish a summary of the substantive provisions of any management-related
service contract not discussed in Part A or B of this Form (because the contract
was not believed to be material to a purchaser of securities of the Registrant)
under which services are provided to the Registrant, indicating the parties to
the contract, the total dollars paid and by whom for the last three fiscal
years.
None.
ITEM 32. UNDERTAKINGS
The Registrant, Lexington Money Market Trust undertakes to furnish a copy
of the Fund's latest annual report, upon request and without charge, to every
person to whom a prospectus is delivered.
The Registrant will hold a meeting of its public shareholders, if requested
to do so by the holders of at least 10 percent of the Registrant's outstanding
shares, to call a meeting of shareholders for the purpose of voting upon the
question of removal of a trustee or trustees and to assist in communications
with other shareholders.
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<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 Amendment 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 26th day of May, 2000.
LEXINGTON MONEY MARKET TRUST
/s/ Robert M. DeMichele
----------------------------------------
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert M. Demichele Chairman of the Board May 26, 2000
- -------------------------- Principal Executive Officer
Robert M. DeMichele
/s/ Richard M. Hisey Principal Financial and May 26, 2000
- -------------------------- Accounting Officer and
Richard M. Hisey Trustee
/s/ Lisa Curcio Principal Compliance Officer May 26, 2000
- --------------------------
Lisa Curcio
*SMS Chadha Trustee May 26, 2000
- --------------------------
SMS Chadha
* Beverley C. Duer, P.E. Trustee May 26, 2000
- --------------------------
Beverley C. Duer, P.E.
/s/ Barbara R. Evans Trustee May 26, 2000
- --------------------------
Barbara R. Evans
*Jerard F. Maher Trustee May 26, 2000
- --------------------------
Jerard F. Maher
*Andrew M. Mccosh Trustee May 26, 2000
- --------------------------
Andrew M. Mccosh
/s/ Donald B. Miller Trustee May 26, 2000
- --------------------------
Donald B. Miller
/s/ Allen H. Stowe Trustee May 26, 2000
- --------------------------
Allen H. Stowe
*By: /s/ Lisa Curcio
---------------------
Lisa Curcio
Attorney-in-Fact
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