As filed with the Securities and Exchange Commission on April 28, 1995
Registration No. 2-57786
811-2714
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 21 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 X
(Check appropriate box or boxes.)
LEXINGTON TAX FREE MONEY FUND, INC.
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Tax Free Money Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, NY 10022
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It is proposed that this filing will become effective May 1, 1995
pursuant to Paragraph (b) of Rule 485.
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The Registrant has registered an indefinite number of shares
under the Securities Act of 1933, pursuant to Section 24(f) of
the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ended December 31, 1994 was filed on
February 24, 1995.
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
- ------------ ------------------ -----------
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information 2
4. General Description of Registrant 3
5. Management of the Fund 4
6. Capital Stock and Other Securities 10
7. Purchase of Securities Being Offered 4
8. Redemption or Repurchase 6
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF ADDITIONAL STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION INFORMATION PAGE NUMBER
- ------ ------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History 10 (Part A)
13. Investment Objectives and Policies 1
14. Management of the Registrant 16
15. Control Persons and Principal Holders 6
of Securities
16. Investment Advisory and Other Services 6
17. Brokerage Allocation and Other Practices 8
18. Capital Stock and Other Securities 10 (Part A)
19. Purchase, Redemption and Pricing of 4, 6 (Part A)
securities being offered
20. Tax Status 10
21. Underwriters 6
22. Calculation of Yield Quotations on Money 2
Market Funds
23. Financial Statements Exhibit
PART C
- ------
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in
Part C to this Registration Statement.
<PAGE>
PROSPECTUS
May 1, 1995
Lexington Tax Free Money Fund, Inc.
P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Service-1-800-526-0056
24 Hour Account Information-1-800-526-0052
A NO-LOAD MONEY MARKET MUTUAL FUND WITH THE PRINCIPAL INVESTMENT
OBJECTIVE OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES.
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Lexington Tax Free Money Fund, Inc. (the "Fund") is a diversified
open-end management investment company, known as a money market mutual
fund.
Shareholders may invest, reinvest or redeem shares at any time
without charge or penalty.
The Fund's investment objective is to seek current income exempt
from Federal income taxes while also maintaining stability of
principal, liquidity and preservation of capital. The Fund invests in
short-term municipal securities which are described more fully on page
3.
Shares of the Fund are not insured or guaranteed by the U.S.
Government and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
Shareholders may use free redemption checks provided by the Fund
for amounts of $100.00 or more.
Lexington Management Corporation ("LMC") is the Investment
Adviser of the Fund. Lexington Funds Distributor, Inc. ("LFD") is the
Distributor of Shares of the Fund.
This Prospectus concisely sets forth information about the Fund
that you should know before investing. It should be read and retained
for future reference.
A Statement of Additional Information dated May 1, 1995, which
provides a further discussion of certain areas in this Prospectus and
other matters that may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, call the appropriate telephone
number above or write to the address listed above.
Mutual fund shares are not deposits or obligations of (or
endorsed or guaranteed by) any bank, nor are they federally insured or
otherwise protected by the Federal Deposit Insurance Corporation
("FDIC"), the Federal Reserve Board or any other agency. Investing in
mutual funds involves investment risks, including the possible loss of
principal, and their value and return will fluctuate.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Investors Should Read and Retain this Prospectus for Future Reference
<PAGE>
FEE TABLE
Annual Fund Operating Expenses:
(as a percentage of average net assets) (net of reimbursement):
Management fees ..................................................... 0.50%
----
Other fees .......................................................... 0.50%
----
Total Fund Operating Expenses ....................................... 1.00%
====
<TABLE>
<CAPTION>
Example: 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period ..... $10.20 $31.84 $55.25 $122.46
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
indirectly. (For more complete descriptions of the various costs and expenses,
see "How to Purchase Shares" and "Investment Adviser and Distributor" below.)
The Expenses and Example appearing in the table above are based on the Fund's
expenses for the period from January 1, 1994 to December 31, 1994. Absent
expense reimbursements, total fund operating expenses would have been 1.09% of
the Fund's average net assets. The Example shown in the table above should not
be considered a representation of past or future expenses and actual expenses
may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following Financial Highlights information for each of the years in the
five year period ended December 31, 1994 has been audited by KPMG Peat Marwick
LLP, Independent Auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes thereto included in the Statement of
Additional Information. The Fund's annual report, which contains additional
performance information, is available upon request and without charge.
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<TABLE>
<CAPTION>
Selected Per Share Data for a share outstanding throughout the period
Year Ended December 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............... 0.020 0.018 0.024 0.041 0.053 0.056 0.047 0.041 0.044 0.050
Less distributions:
Dividends from
net investment income .............(0.020) (0.018) (0.024) (0.041) (0.053) (0.056) (0.047) (0.041) (0.044) (0.050)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period ........$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Total return .......................... 2.00% 1.78% 2.47% 4.22% 5.39% 5.73% 4.79% 4.21% 4.50% 5.13%
Ratio to average net assets:
Expenses, before reimbursement ...... 1.09% 0.92% 0.99% 0.96% 0.93% 0.88% 0.91% 0.74% 0.69% 0.73%
Expenses, net of reimbursement ...... 1.00% 0.92% 0.99% 0.96% 0.93% 0.88% 0.91% 0.74% 0.69% 0.73%
Net investment income,
before reimbursement .............. 1.88% 1.77% 2.46% 4.06% 5.26% 5.57% 4.67% 4.09% 4.32% 4.97%
Net investment income ............... 1.97% 1.77% 2.46% 4.06% 5.26% 5.57% 4.67% 4.09% 4.32% 4.97%
Net assets, end of period
(000's omitted) .....................$37,654 $41,096 $45,844 $53,722 $57,881 $61,385 $82,755 $84,954 $117,922 $79,629
</TABLE>
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2
<PAGE>
YIELD INFORMATION
For the seven-day period ended December 31, 1994, the Fund's annualized
current yield was 3.70% and the compounded effective yield was 3.77%. This yield
is subject to market conditions and will fluctuate daily as income earned
fluctuates. The above yield quotations are not an indication or representation
by the Fund of future yields or rates of return. This Prospectus may be in use
for a full year and it can be expected that these yields will fluctuate
substantially over that time. To obtain a current yield quotation for the Fund,
call the appropriate toll free telephone number listed on the cover of this
Prospectus.
The weighted average portfolio maturity on December 31, 1994 was 34 days.
COMPARATIVE PERFORMANCE INFORMATION
Advertisements and communications may compare the Fund's performance with
that of other mutual funds, as reported by Lipper Analytical Services, Inc. or
similar independent services or financial publications. Such performance may be
categorized according to the Fund's asset size as determined by the independent
service. From time to time, the performance of the Fund may be compared to
various investment indicies, including the Dow Jones Industrial Average and
Standard & Poor's 500 Composite Stock Index. Quotations of historical yields are
not indicative of future dividend income, but are an indication of the return to
shareholders only for the limited historical period used. The Fund's yield will
depend on the particular investments in its portfolio, its total operating
expenses and other conditions. For further information, including an example of
the yield calculation, see the Statement of Additional Information.
DESCRIPTION OF THE FUND
The Fund is a diversified open-end management investment company known as a
money market mutual fund. It is called a no-load fund because its shares are
sold without a sales charge.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek current income exempt from
federal income taxes while also maintaining stability of principal, liquidity
and preservation of capital.
INVESTMENT POLICIES
The Fund will seek to achieve its goal through investment in high grade
short term municipal obligations issued by states, territories, and possessions
of the United States and by the District of Columbia, and their political
subdivisions, and duly constituted authorities and corporations. It will limit
its portfolio purchases, as well as the underlying securities of repurchase
agreements entered into by it, to those United States dollar denominated
instruments which its Board of Directors determines present minimal credit risks
and which are of "high quality" as determined by any major rating service (such
as Standard & Poor's Corporation or Moody's Investors Service, Inc.) or, in the
case of any instruments that are not rated, are of a quality comparable to such
rated instruments as determined by its Board of Directors. The Fund will enter
into repurchase agreements only with commercial banks and primary dealers in
U.S. government securities. Repurchase agreements when entered into with primary
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 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 agreements to institutions believed by its
adviser to present minimal credit risk. The Fund will maintain a dollar weighted
average portfolio maturity of not more than 90 days and will not acquire any
portfolio security with a remaining maturity of more than thirteen months (397
days).
The Fund may also hold cash and invest in obligations, the interest from
which may be subject to federal income tax, so long as at least 80% of the
Fund's net income is derived from securities, the income from which, in the
opinion of Counsel for the issuers thereof, is exempt from federal income tax;
provided, however, the Fund may invest in instruments yielding taxable income
such as short term money market instruments equal to or exceeding 20% of the
Fund's net income in extraordinary circumstances when adverse market conditions
dictate a defensive position. Any net income earned from taxable instruments
will be taxable to shareholders of the Fund as ordinary income. The investment
policies set forth in the preceding paragraph are fundamental policies and may
not be changed without approval of the shareholders.
3
<PAGE>
The Fund restricts its purchases of municipal securities to those rated not
lower than AA or Aa or MIG-2 (see "Appendix" in the Statement of Additional
Information), or municipal securities which have been issued by an issuer having
outstanding debt securities rated not lower than AA or Aa or MIG-2 or are
specifically determined by the Fund's Board of Directors to be of high quality
and represent minimal credit risks. Any municipal security which depends on the
credit of the Federal government will be regarded as having a rating of AAA or
Aaa. Purchases of tax exempt instruments such as municipal commercial paper
(which are also known as short term discount notes) will be limited to those
obligations rated A-1 or Prime-1 (see "Appendix" in the Statement of Additional
Information) or unrated obligations of equivalent quality, as determined by the
Board of Directors. Municipal commercial paper or short term discount notes are
short term obligations of municipalities which are likely to be used to meet
seasonal working capital needs of municipalities or interim construction
financing and to be paid from general revenues of the municipalities or
refinanced with long term debt. In most cases, such obligations are backed by
letters of credit, not repurchase agreements or other credit facility agreements
offered by banks or other institutions.
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the direction of its
Board of Directors. There are currently ten directors (of whom seven are
non-affiliated persons) who meet four times each year. The Statement of
Additional Information contains additional information regarding the directors
and officers of the Fund.
PORTFOLIO MANAGER
Denis P. Jamison, C.F.A. Senior Vice President, Director of Fixed Income
Strategy is responsible for fixed-income portfolio management at LMC. He is a
member of the New York Society of Security Analysts. Mr. Jamison has 23 years
investment experience.
Prior to joining LMC in 1981, Mr. Jamison had 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 is a graduate of the City
College of New York with a B.A. in Economics. Mr. Jamison has been the portfolio
manager of the Fund since July of 1981.
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation, ("LMC") P.O. Box 1515/Park 80 West Plaza
Two, Saddle Brook, New Jersey 07663, is the investment adviser of the Fund.
Lexington Funds Distributor Inc. ("LFD") is the distributor of shares of the
Fund. LMC, established in 1938, currently manages over $3.8 billion in assets.
LMC serves as investment adviser to other investment companies and private
and institutional investment accounts. Included among these clients are persons
and organizations which own significant amounts of capital stock of LMC's
parent. The clients pay fees which LMC considers comparible to the fees paid by
similarly served clients.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian of, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
LMC and LFD are wholly-owned subsidiaries of Piedmont Management Company
Inc., a Delaware corporation with offices at 80 Maiden Lane, New York, New York
10038. Descendants of Lunsford Richardson, Sr., their spouses, trusts and other
related entities have a majority voting control of outstanding shares of
Piedmont Management Company Inc.
For the fiscal year ended December 31, 1994, the Fund paid LMC a monthly
management fee at the annual rate of 1/2 of 1% of the average daily net assets.
For the year ending December 31, 1994, LMC earned $199,643 in net management
fees from the Fund. See "Investment Adviser and Distributor" in the Statement of
Additional Information.
HOW TO PURCHASE SHARES
Initial Investments: Minimum $1,000. By Wire: (1) Telephone the Fund toll
free at 1-800-526-0056 and provide the account registration, address, and social
security or tax identification number, the amount being wired, the name of the
wiring bank, and the
4
<PAGE>
name and telephone number of the person to be contacted in connection with the
order. You will then be provided with an account number. (2) Instruct your bank
to wire the specified amount, along with the account number and registration to:
State Street Bank and Trust Company, Attn: Mutual Funds Dept., re: Lexington Tax
Free Money Fund, Account No. 99043713. (3) A completed New Account Application
must then be forwarded to the Fund at the address on the Application.
By Mail: Send a check payable to Lexington Tax Free Money Fund, along with a
completed New Account Application, to State Street Bank & Trust Company (the
"Agent") at the address on the Application.
Subsequent Investments-By Wire: Instruct your bank to wire the specified
amount and appropriate information to the Agent (see "Initial Investments-By
Wire"-(2), above).
By Mail-Minimum $50: Send a check payable to Lexington Tax Free Money Fund
to the Agent, (see back cover of this prospectus for address) accompanied by
either the detachable form which accompanies the Agent's confirmation of a prior
transaction, or a letter indicating the dollar value of the shares to be
purchased and identifying the Fund, the account number, and registration.
Broker-Dealers: You may invest in shares of the Fund through broker-dealers
who are members of the National Association of Securities Dealers, Inc., and
other financial institutions and who have selling agreements with LFD. Banks and
other financial institutions may be required to register as dealers pursuant to
state law. Broker-dealers and financial institutions who process such purchase
and sale transactions for their customers may charge a transaction fee for these
services. The fee may be avoided by purchasing shares directly from the Fund.
Purchase Price and Effective Date: Shares of the Fund are offered
continuously at net asset value which will normally be constant at $1.00 per
share. Net asset value is determined as of the close of the New York Stock
Exchange (currently 4:00 p.m. New York time) and on such other times or days as
there is a sufficient degree of trading in the portfolio securities of the Fund
to materially affect its net asset value. The price at which a purchase is
effected is based on the next calculation of net asset value per share after the
order is placed. Investments for which market quotations are not readily
available are valued at fair market value, as determined by management and
approved in good faith by the Board of Directors. Fund assets are valued based
upon the amortized cost method. No sales charge is imposed on purchases of
shares. There is no assurance that the Fund will maintain a net asset value per
share of $1.00. Orders will become effective when an investor's wire order or
check is converted into federal funds (monies credited to a bank's account with
its registered Federal Reserve Bank). If payment is transmitted by federal funds
wire, the order will become effective upon receipt. Payments transmitted by bank
wire may take longer to be converted into federal funds. Money transmitted by
check will normally be considered to have been converted into federal funds on
the first business day following receipt by the Agent.
An Open Account: By investing in the Fund, a shareholder appoints the Agent,
as his agent, to establish an Open Account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares. (See "Dividend, Distribution and Reinvestment
Policy"). Share certificates will be issued, for full shares only when requested
in writing. Unless payment for shares is made by certified or cashier's check or
federal funds wire, certificates will not be issued for 30 days. In order to
facilitate redemptions, and transfers, most shareholders elect not to receive
certificates.
After an Open Account is established, payments can be provided for by
"Lex-O-Matic" or other authorized automatic bank check program accounts (checks
drawn on the investor's bank periodically for investment in the Fund).
Automatic Investing Plan with "Lex-O-Matic". A shareholder may arrange to
make additional purchases of shares automatically on a monthly or quarterly
basis. The investments of $50 or more are automatically deducted from a checking
account on or about the 15th day of each month. The institution must be an
Automated Clearing House (ACH) member. Should an order to purchase shares of a
fund be cancelled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.
On payroll deduction accounts administered by an employer and on payments
into qualified pension or profit sharing plans and other continuing purchases
programs, there are no minimum purchase requirements.
Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss, the Fund reserves the right to
redeem shares owned by the
5
<PAGE>
purchaser, seek reimbursement directly from the purchaser and may prohibit or
restrict the purchaser in placing future orders in any of the Lexington Funds.
The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.
Account Statements: The Agent will send shareholders a confirmation of each
transaction indicating the date of the transaction, the number of shares
purchased or redeemed, the price per share and the total amount of the purchase
or redemption proceeds. A statement is also sent to shareholders quarterly or
when a change in the registration, address, or dividend option occurs.
Shareholders are urged to retain their account statements for tax purposes.
HOW TO REDEEM SHARES
By Telephone or Telegram: Shares may be redeemed by telephone. Call the Fund
toll free 1-800-526-0056. A redemption authorization which is contained in the
New Account Application, or a separate authorization form must be on file with
LFD before a shareholder may redeem in this manner. Shareholders may elect on
the redemption authorization form to have checks for redemption proceeds in any
amount of $200 or more mailed either to the registered address, to the
shareholder's bank account, or to any other designated person, and a new form
must be completed whenever these instructions are revised.
Shareholders may request that redemption proceeds of $1,000 or more be wired
directly to a commercial bank account. The signatures on such a request must be
guaranteed, unless an authorization for redemption by telephone form has been
previously filed with LFD. The Agent presently imposes a $5.00 wire charge.
By Check: Shareholders may effect redemptions by writing checks drawn on the
Fund, payable to the order of any person in any amount of $100 or more up to
$500,000 at no charge. Checks in amounts over $500,000 will not be honored. The
special forms and instructions may be obtained from the Fund or the agent.
Redemption checks should not be used to close your account. Redemption checks
are free, but the Agent will impose a fee (currently $15.00) for stopping
payment of a redemption check upon your request or if the Agent cannot honor the
redemption check due to insufficient funds, uncollected funds or other valid
reason.
Procedures for redemptions by telephone, telegram or check may only be used
for shares for which share certificates have not been issued, and may not be
used to redeem shares purchased by check which have been on the books of the
Fund for less than 15 days.
By Mail: Send to the Agent (see back cover of this prospectus for address):
(1) a written request for redemption, signed by each registered owner exactly as
the shares are registered including the name of the Fund, account number and
exact registration; (2) share certificates for any shares to be redeemed which
are held by the shareholder; (3) signature guarantees, when required; and (4)
the additional documents required for redemptions by corporations, executors,
administrators, trustees and guardians. Redemptions by mail will not become
effective until all documents in proper form have been received by the Agent. If
a shareholder has any questions regarding the requirements for redeeming shares,
he should call the Fund at the toll free number on the back cover prior to
submitting a redemption request.
Checks for redemption proceeds will be mailed within seven days, but will
not be mailed until all checks in payment for the shares to be redeemed have
been cleared. Shares redeemed will earn dividends through the date of
redemption. Shareholders who redeem all of their shares will receive a check
representing the value of the shares redeemed plus the accrued dividends through
the date of redemption. Where shareholders redeem only a portion of their
shares, all dividends declared but unpaid will be distributed on the next
dividend payment date.
Signature Guarantee: Signature guarantees are required in connection with
(a) redemptions by mail involving $10,000 or more; (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owners; (c) authorizations to effect redemptions by
telephone, telegram, or check; (d) changes in instructions as to where the
proceeds of redemptions are to be sent; and (e) share transfer requests.
The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.
6
<PAGE>
With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") which should specify the
total number of shares to be redeemed or (c) on all share certificates tendered
for redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power. Signature guarantees in connection with redemptions by
telephone, telegram, or check must appear on the appropriate authorization form.
Redemption Price: The redemption price will be the net asset value per share
of the Fund next determined after receipt by the Agent of a redemption request
in proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information). The right of redemption may be suspended (a) for any
period during which the New York Stock Exchange is closed or the Securities and
Exchange Commission ("SEC") determines that trading on the Exchange is
restricted, (b) when there is an emergency as determined by the SEC as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets, or (c) for such
other periods as the SEC may by order permit for the protection of shareholders
of the Fund. Due to the proportionately high cost of maintaining smaller
accounts, the Fund reserves the right to redeem all shares in an account with a
value of less than $500 (except retirement plan accounts) and mail the proceeds
to the shareholder. Shareholders will be notified before these redemptions are
to be made and will have 30 days to make an additional investment to bring their
accounts up to the required minimum.
SHAREHOLDER SERVICES
Transfer: Shares of the Fund may be transferred to another owner. A
signature guarantee of the registered owner is required on the letter of
instruction or accompanying stock power.
Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.
Group Sub-Accounting: To minimize recordkeeping by fiduciaries,
corporations, and certain other investors, the minimum initial investment may be
waived.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share, next determined at the
time of the exchange. In the event shares of one or more of these Funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the fifth business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.
Lexington Funds currently available for exchange are:
LEXINGTON GLOBAL FUND, INC. (NASDAQ Symbol: LXGLX)/Seeks long-term growth of
capital primarily through investment in common stocks of companies
domiciled in foreign countries and the United States.
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)/Seeks
long-term growth of capital primarily through investment in equity
securities of companies domiciled in, or doing business in, emerging
countries.
LEXINGTON INTERNATIONAL FUND, INC. (NASDAQ Symbol: LEXIX)/Seeks long term growth
of capital through investment in common stocks of companies domiciled
in foreign countries. Shares of the Fund are not presently available
for sale in Vermont.
LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)/Seeks long-term
capital growth and income through investment in an equal number of
shares of the common stocks of a fixed list of American blue chip
corporations.
LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)/Seeks long-term
capital appreciation through investments in stocks of large, ably
managed and well financed companies. Income is a secondary objective.
7
<PAGE>
LEXINGTON GOLDFUND, INC. (NASDAQ Symbol: LEXMX)/Seeks capital appreciation and
such hedge against loss of buying power as may be obtained through
investment in gold bullion and equity securities of companies engaged
in mining or processing gold throughout the world. Shares are not
presently available for sale in Wisconsin.
LEXINGTON CONVERTIBLE SECURITIES FUND (NASDAQ Symbol: CNCVX)/Seeks total return
by providing capital appreciation, current income and conservation of
capital through investments in a diversified portfolio of securities
convertible into shares of common stock. Shares of the Fund are not
presently available for sale in Vermont.
LEXINGTON GNMA INCOME FUND, INC. (NASDAQ Symbol: LEXNX)/Seeks a high level of
current income, consistent with liquidity and safety of principal,
through investment primarily in mortgage-backed GNMA Certificates.
LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)/Seeks high current
income by investing in a combination of foreign and domestic
high-yield, lower rated debt securities. Capital appreciation is a
secondary objective.
LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX)/Seeks a high level of
current income consistent with preservation of capital and liquidity
through investments in interest bearing short term money market
instruments.
LEXINGTON TAX FREE MONEY FUND, INC. (NASDAQ Symbol: LTFXX)/Seeks current income
exempt from Federal income taxes while maintaining liquidity and
stability of principal through investment in short term municipal
securities.
LEXINGTON SHORT-INTERMEDIATE GOVERNMENT SECURITIES FUND, INC. (NASDAQ Symbol:
LSGXX)/Seeks current income as is consistent with preservation of
capital by investing in a portfolio of U.S. Government securities.
Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired.
If an exchange involves investing in a Lexington Fund not already owned and
a new account has to be established, the dollar amount exchanged must meet the
initial investment of the Fund being purchased. If, however, an account already
exists in the Fund being bought, there is a $500 minimum exchange required.
Shareholders must provide the account number of the existing account.
Any exchange between mutual funds is, in effect, a redemption of shares in
one Fund and a purchase in the other Fund. Shareholders should consider the
possible tax effects of an exchange.
Telephone Exchange Provisions-Exchange instructions may be given in writing
or by telephone. Telephone exchanges may only be made if a Telephone
Authorization form has been previously executed and filed with LFD. Telephone
exchanges are permitted only after a minimum of 7 days have elapsed from the
date of a previous exchange. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared. Telephonic exchanges
can only involve shares held on deposit at the Agent; shares held in certificate
form by the shareholder cannot be included. However, outstanding certificates
can be returned to the Agent and qualify for these services. Any new account
established with the same registration will also have the privilege of exchange
by telephone in the Lexington Funds. All accounts involved in a telephonic
exchange must have the same registration and dividend option as the account from
which the shares were transferred and will also have the privilege of exchange
by telephone in the Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD distributor of the
Lexington Group of Mutual Funds as the true and lawful attorney to surrender for
redemption or exchange any and all non-certificated shares held by the Agent in
account(s) designated, or in any other account with the Lexington Funds, present
or future, which has the identical registration with full power or substitution
in the premises, authorizes and directs LFD to act upon any instruction from any
person by telephone for exchange of shares held in any of these accounts, to
purchase shares of any other Lexington Fund that is available, provided the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed, and agrees that neither LFD, the
Agent, nor the Fund(s) will be liable for any loss, expense or cost arising out
of any requests effected in accordance with this authorization which would
include requests effected by imposters or persons otherwise unauthorized to act
on behalf of the account. LFD, the Agent and the Fund, will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine
and if they do not employ reasonable procedures
8
<PAGE>
they may be liable for any losses due to unauthorized or fraudulent
instructions. The following identification procedures may include, but are not
limited to, the following: account number, registration and address, taxpayer
identification number and other information particular to the account. In
addition, all exchange transactions will take place on recorded telephone lines
and each transaction will be confirmed in writing by the Fund. LFD reserves the
right to cease to act as agent subject to the above appointment upon thirty (30)
days' written notice to the address of record. If other than an individual, it
is certified that certain persons have been duly elected and are now legally
holding the titles given and that the said corporation, trust, unincorporated
association, etc. is duly organized and existing and has power to take action
called for by this continuing Authorization.
Exchange authorization forms, Telephone authorization forms and
prospectuses of the other funds may be obtained from LFD.
LFD has made arrangements with certain dealers to accept instructions by
telephone to exchange shares of the Fund for shares of one of the other
Lexington investment companies at net asset value as described above. Under this
procedure, the dealer must agree to indemnify the Distributor and the funds from
any loss or liability that any of them might incur as a result of the acceptance
of such telephone exchange orders. A properly signed exchange application must
be received by the Distributor within five days of the exchange request. In each
such exchange, the registration of the shares of the fund being acquired must be
identical to the registration of the shares of the fund exchanged. Shares in
certificate form are not eligible for this type of exchange. LFD reserves the
right to reject any telephone exchange request. Any telephone exchange orders so
rejected may be processed by mail.
A capital gain or loss for federal tax purposes may be realized upon the
exchange, depending upon the cost or other basis of the shares redeemed. This
exchange offer is available only in states where shares of the fund being
acquired may legally be sold and may be modified or terminated at any time by
the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund declares and reinvests daily, dividends from its net investment
income and distributes such dividends on the last day of each month. Dividends
or distribution payments will be reinvested at net asset value in additional
full and fractional shares of the Fund unless and until the shareholder notifies
the Agent in writing that he wants to receive his payments in cash. This request
must be received by the Agent at least seven days before the payment date. Upon
receipt by the Agent of such written notice, all further payments will be made
in cash until written notice to the contrary is received. An account of such
shares owned by each shareholder will be maintained by the Agent. Shareholders
whose accounts are maintained by the Agent will have the same rights as other
shareholders with respect to shares so registered (see "How to Purchase
Shares-An Open Account").
Since substantially all of the net income will be declared as a dividend
each time the net asset value of the Fund is determined, the net asset value per
share will normally remain at one dollar per share immediately after such
dividend declaration and determination.
TAX MATTERS
The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification of
assets, distribution of income and sources of income. It is the Fund's policy to
distribute to shareholders all of its investment income (net of expenses) and
any capital gains (net of capital losses) so that, in addition to satisfying the
distribution requirement of Subchapter M, the Fund will not be subject to
federal income tax or the 4% excise tax.
The Fund intends to invest principally in tax-exempt municipal obligations
so that distributions by the Fund of its net tax-exempt interest income can be
designated as exempt-interest dividends, which are excludable from gross income
for federal income tax purposes. However, shareholders are required to report
the receipt of exempt-interest dividends, together with other tax-exempt
interest, on their federal income tax returns. In addition, these
exempt-interest dividends may be subject to the federal alternative minimum tax
and to state and local income tax, and will be taken into account in determining
the portion, if any, of Social Security benefits received which must be included
in gross income for federal income tax purposes. Finally, interest or
indebtedness incurred or continued to purchase or carry shares of the Fund
(which indebtedness likely need not be directly traceable to the purchase or
carrying of such shares) will not be deductible for federal income tax purposes.
Distributions by the Fund of any taxable net investment income and any net
short-term capital gain are taxable to shareholders as ordinary income. These
distributions are treated as dividends for federal income tax purposes but do
not qualify for the 70%
9
<PAGE>
dividends-received deduction for corporate shareholders. The Fund is managed so
that it will not have any long-term capital gains or losses. The percentage of
the Fund's net investment income (taxable and tax-exempt) which constitutes
tax-exempt interest will be detemined annually and will be applied uniformly to
all distributions of such income made during the year for purposes of
designating a portion of such distributions as exempt-interest dividends. This
percentage may differ from the actual tax-exempt percentage for any particular
day or period during the year.
Distributions to shareholders will be treated in the same manner for
federal income tax purposes whether received in cash or reinvested in additional
shares of the Fund. In general, distributions by the Fund are taken into account
by the shareholders in the year in which they are made. However, certain
distributions made during January will be treated as having been paid by the
Fund and received by the shareholders on December 31 of the preceding year. A
statement setting forth the federal income tax status of all distributions made
or deemed made during the year will be sent to shareholders promptly after the
end of each year. Shareholders purchasing shares of the Fund just prior to the
ex-dividend date will be taxed on the entire amount of the dividend received,
even though the net asset value per share on the date of such purchase reflected
the amount of such dividend.
All or a portion of any loss realized upon a taxable disposition of shares
of the Fund may be disallowed if other shares of the Fund are purchased within
30 days before or after such disposition.
Under the back-up withholding rules of the Code, certain shareholders may
be subject to 31% withholding of federal income tax on ordinary income dividends
paid by the Fund. In order to avoid this back-up withholding, a shareholder must
provide the Fund with a correct taxpayer identification number (which for most
individuals is their Social Security number) or certify that it is a corporation
or otherwise exempt from or not subject to back-up withholding. The new account
application included with this Prospectus provides for shareholder compliance
with these certification requirements.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, a prospective shareholder should also review the
more detailed discussion of federal income tax considerations relevant to the
Fund that is contained in the Statement of Additional Information. In addition,
each prospective shareholder should consult with his own tax adviser as to the
tax consequences of investments in the Fund, including the application of state
and local taxes which may differ from the federal income tax consequences
described above.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A. 1211 Avenue of the Americas New York, New York
10022, has been retained to act as the Custodian for the Fund's investments and
assets. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is the transfer agent and dividend disbursing agent for the
Fund. Neither Chase Manhattan Bank, N.A. nor State Street Bank and Trust Company
have any part in determining the investment policies of the Fund or in
determining which portfolio securities are to be purchased or sold by the Fund
or in the declaration of dividends and distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus.
KPMG Peat Marwick LLP, 345 Park Avenue New York, New York 10154, has been
selected as independent auditors for the Fund for the fiscal year ending
December 31, 1995.
OTHER INFORMATION
The Fund was organized as a Maryland corporation on November 18, 1976.
Prior to April 29, 1980, its corporate name was "Lexington Tax Free Daily Income
Fund, Inc." On April 26, 1983, the name of the Fund was changed from "Lexington
Tax Free Daily Income Fund, Inc." to Lexington Tax Free Money Fund, Inc. The
Fund has authorized 1,000,000,000 shares of capital stock, $0.01 par value. All
shares are of the same class, with like rights and privileges. Each share is
entitled to one vote and to participate equally in distributions declared by the
Fund and in its net assets on liquidation. The shares have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the Directors if they choose to do
10
<PAGE>
so, and, in such event, the holders of the remaining less than 50% of the shares
voting for the election of directors will not be able to elect any person or
persons to the Board of Directors. The shares are fully paid and non-assessable
when issued and have no preference, preemptive, or conversion rights. There are
no options or other special rights outstanding relating to any Fund shares.
The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
A Registration Statement (herein called the "Registration Statement"), of
which this Prospectus is a part, has been filed with the SEC, Washington, D.C.
under the Securities Act of 1933, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made. A "Statement of Additional Information", to
which reference is made in this Prospectus, provides a further discussion of
certain areas in the Prospectus and other matters which may be of interest to
some investors and is available by request without cost as indicated herein. The
Prospectus and the Statement of Additional Information omit certain information
contained in the Registration Statement, to which reference is made, filed with
the Commission. Items which are thus omitted, including contracts and other
documents referred to or summarized herein and therein, may be obtained from the
Commission upon payment of the prescribed fees.
11
<PAGE>
L E X I N G T O N
LEXINGTON
TAX
FREE
MONEY
FUND, INC.
No sales charge
No redemption fee
Free check writing service
Free telephone exchange
privilege
The Lexington Group
of
No-Load
Investment Companies
P R O S P E C T U S
MAY 1, 1995
Investment Adviser
- -----------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Distributor
- -----------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
All shareholder requests for services of any kind
should be sent to:
Transfer Agent
- -----------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
or call Toll Free:
Service: 1-800-526-0056
24 Hour Account Information: 1-800-526-0052
Table of Contents Page
- -----------------------------------------------------
Fee Table......................................... 2
Financial Highlights.............................. 2
Yield Information................................. 3
Comparative Performance Information............... 3
Description of the Fund........................... 3
Investment Objective.............................. 3
Investment Policies............................... 3
Management of the Fund............................ 4
Portfolio Manager................................. 4
Investment Adviser, Distributor and Administrator. 4
How to Purchase Shares............................ 4
How to Redeem Shares.............................. 6
Shareholder Services.............................. 7
Exchange Privilege................................ 7
Dividend, Distribution and Reinvestment Policy.... 9
Tax Matters....................................... 9
Custodian, Transfer Agent and
Dividend Disbursing Agent....................... 10
Counsel and Independent Auditors.................. 10
Other Information................................. 10
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
This statement of additional information which is not a prospectus,
should be read in conjunction with the current prospectus of Lexington Tax
Free Money Fund, Inc. (the "Fund"), dated May 1, 1995, as it may be revised
from time to time. To obtain a copy of the Fund's prospectus at no charge,
please write to the Fund at P.O. Box 1515/Park 80 West - Plaza Two, Saddle
Brook, New Jersey 07663 or call the following toll-free numbers:
Shareholder Services: 1-800-526-0056
24 Hour Account Information: 1-800-526-0052
Lexington Management Corporation ("LMC") serves as the Fund's
investment adviser. Lexington Funds Distributor, Inc. ("LFD") is the Fund's
distributor.
TABLE OF CONTENTS
PAGE
Investment Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Yield Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Adviser, Distributor and Administrator. . . . . . . . . . . 5
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 6
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . 7
Dividend, Distribution and Reinvestment Policy . . . . . . . . . . . . 8
Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Custodian, Transfer Agent and Dividend Disbursing Agent. . . . . . . .13
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . .13
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .18
<PAGE>
INVESTMENT POLICY
The fundamental investment objective of the Fund is to seek current
income exempt from Federal income taxes while also maintaining stability of
principal, liquidity and preservation of capital.
The Fund will seek to achieve its goal through investment in short
term municipal securities issued by states, territories, and possessions of
the United States and by The District of Columbia, and their political
subdivisions, and duly constituted authorities and corporations. It will
limit its portfolio purchases, as well as the underlying securities of
repurchase agreements entered into by it, to those United States dollar
denominated instruments which its Board of Directors determines present
minimal credit risks and which are of "high quality" as determined by any
major rating service (such as Standard & Poor's Corporation or Moody's
Investors Service, Inc.) or, in the case of any instruments that are not
rated, are of a quality comparable to such rated instruments as determined
by its Board of Directors. 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 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 agreements to institutions believed by
LMC to present minimal credit risks. The Fund will maintain a dollar
weighted average portfolio maturity of not more than 90 days and will not
acquire any portfolio security with a remaining maturity of more than
thirteen months (397 days).
The Fund may also hold cash and invest in obligations, the interest
from which may be subject to Federal income tax, so long as at least 80% of
the Fund's net income is derived from securities, the income from which, in
the opinion of Counsel for the issuers thereof, is exempt from Federal
income tax; provided, however, the Fund may invest in instruments yielding
taxable income equal to or exceeding 20% of the Fund's net income in
extraordinary circumstances when adverse market conditions dictate a
defensive position. Any net income earned from taxable instruments will be
taxable to shareholders of the Fund as ordinary income, except to the extent
that individual taxpayers may exclude such income pursuant to the combined
dividend and interest received exclusion (see "Federal Income Taxation").
The investment policies set forth in the three preceding paragraphs are
fundamental policies and may not be changed without approval of the
shareholders.
The Fund restricts its purchases of municipal securities to those
rated not lower than AA or Aa or MIG-2 (see "Appendix"), or municipal
securities which either have been issued by an issuer having outstanding
debt securities rated not lower than AA or Aa or MIG-2 or are specifically
determined by the Fund's Board of Directors to be of high quality and
represent minimal credit risks. Any municipal security which depends on the
credit of the Federal government will be regarded as having a rating of AAA
or Aaa. Purchases of tax exempt instruments such as municipal commercial
paper (which are also known as short term discount notes) will be limited
to those obligations rated A-l or Prime-l (see "Appendix") or unrated
obligations of equivalent quality, as determined by the Board of Directors.
Municipal commercial paper or short term discount notes are short term
obligations of municipalities which are likely to be used to meet seasonal
working capital needs of municipalities or interim construction financing
and to be paid from general revenues of the municipalities or refinanced
with long term debt. In most cases, such obligations are backed by letters
of credit, not repurchase agreements or other credit facility agreements
offered by banks or other institutions.
1
<PAGE>
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, 1994 was at an annual rate of 3.70% and the effective yield was at an
annual rate of 3.77%. The average weighted maturity of investments was 34
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.
EQUIVALENT YIELDS: TAX EXEMPT VERSUS TAXABLE SECURITIES
The following table shows the effect of the tax status of municipal
bonds, notes and commercial paper on the effective yield received by their
holders under the Federal income tax laws. It gives the approximate yield
a taxable security must earn at various income brackets to produce after tax
yields equivalent to those of tax exempt municipal bonds, notes and
commercial paper.
The table, which is based on tax rates in effect on the date of this
Prospectus, provides separate computations for taxpayers who file joint or
individual returns. Of course, no assurance can be given that the Fund will
achieve any specific tax exempt yield. While it is expected that the Fund
will invest principally in obligations the interest from which is exempt
from Federal income tax, other income received by the Fund may be taxable.
The table does not take into account state or local taxes, if any, payable
on Fund distributions.
2
<PAGE>
COMPARISON OF TAXABLE AND TAX-FREE YIELDS
<TABLE>
<CAPTION>
MARGINAL
TAXABLE INCOME FEDERAL TAX-EXEMPT YIELD
JOINT RETURNS SINGLE RETURNS TAX RATE 1.5% 2% 3% 4% 5%
6% 7%
- ------------------------------------------------------------------------------
- ------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
1995
$0 - $38,999 $0 - $23,349 15% 1.8 2.4 3.5 4.7 5.9
7.1 8.2
$39,000-$94,249 $23,350-$56,549 28% 2.1 2.8 4.2 5.6 6.9
8.3 9.7
$94,250-$143,599 $56,550-$117,949 31% 2.2 2.9 4.3 5.8 7.2
8.7 10.1
$143,600-$256,499 $117,950-$256,499 36% 2.3 3.1 4.7 6.3 7.8
9.4 10.9
$256,500+ $256,500+ 39.6% 2.5 3.3 5.0 6.6 8.3
9.9 11.6
</TABLE>
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as Federal and
state regulatory limitations. The investment restrictions are matters of
fundamental policy and may not be changed without the affirmative vote of
the lesser of (a) 50% of the outstanding shares of the Fund or (b) 67% or
more of the shares present at a meeting if more than 50% of the outstanding
shares of the Fund are represented at the meeting in person or by proxy.
The Fund shall not: (l) issue senior securities; (2) borrow money,
except from banks as a temporary measure for extraordinary or emergency
purposes and not for investment purposes or through "reverse repurchase
agreements"; no borrowing shall be made if such borrowing, combined with any
then outstanding borrowings, shall exceed 5% of the Fund's total assets; (3)
underwrite securities of other issuers; (4) concentrate its investments to
an extent greater than 25% of the value of its total assets in either (a)
securities of issuers located in a single state or (b) revenue bonds which
derive revenue from projects of a similar type or class of facilities; these
limitations not being applicable to securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities, or to
certificates of deposit or banker's acceptances; (5) purchase or sell real
estate, commodity contracts or commodities or invest in interests in oil,
gas or other mineral exploration or development programs (however, the Fund
may purchase municipal bonds secured by real estate or interests herein);
(6) make loans to other persons except (a) through the purchase of a portion
or portions of an issue or issues of municipal bonds or notes or other
publicly distributed bonds, notes, debentures and evidences of indebtedness
authorized by its investment policy, or (b) through investments in
"repurchase agreements" (which are arrangements under which the Fund
acquires a debt security subject to an obligation of the seller to
repurchase it at a fixed price within a short fixed period), provided that
no more than 10% of the Fund's assets may be invested in repurchase
agreements which mature in more than seven days; or (c) through loans of
securities held in the Fund's portfolio to responsible borrowers and subject
to 100% collateral requirements in accordance with guidelines established
by the Fund's directors and applicable federal regulations; (7) purchase the
securities of another investment company or investment trust, except in the
open market and then only if no profit, other than the customary broker's
commission, results to a sponsor or dealer, or by merger or other
reorganization; (8) purchase any security on margin or effect a short sale
of a security; (9) buy securities from or sell securities (other than
securities issued by the Fund) to any of its officers, directors or its
investment adviser, as principal; (10) contract to sell any security or
3
<PAGE>
evidence of interest therein, except to the extent that the same shall be
owned by the Fund; (11) purchase or retain securities of an issuer when one or
more of the officers and directors of the Fund or of the investment adviser,
or a person owning more than 10% of the stock of either, own beneficially more
than 1/2 of 1% of the securities of such issuer and such persons owning more
than 1/2 of 1% of such securities together own beneficially more than 5% of
the securities of such issuer; (12) invest more than 5% of its total assets in
the securities of any one issuer (except securities issued or guaranteed by
the United States Government or any of its agencies or instrumentalities),
except that such restriction shall not apply to 25% of the Fund's portfolio;
(13) purchase an industrial revenue bond if as a result of such purchase more
than 5% of total Fund assets would be invested in industrial revenue bonds
where the payment of principal and interest are the responsibility of a
company with less than three years' operating history; (14) purchase any
security restricted as to disposition under Federal securities laws; or (15)
buy or sell puts, calls or other options.
For the purposes of these limitations, each government subdivision,
(county, city) and any subdivision, agency or instrumentality thereof
(school district, authority) shall be considered as a separate issuer. If
a security is guaranteed as to principal and interest the guarantor may be
considered as the issuer. If the security is backed only by the assets or
revenues of a specific entity, that entity shall be deemed the issuer.
With regard to restriction (6) (b) above, the Fund will enter into
repurchase agreements only with commercial banks and primary dealers in U.S.
government securities.
The Fund's investment portfolio may include repurchase agreements
("repos") with banks and dealers in U.S Government securities. A repurchase
agreement involves the purchase by the Fund of an investment contract from
a bank or a dealer in U.S. Government securities which contract is secured
by debt securities whose value is equal to or greater than the value of the
repurchase agreement including the agreed upon interest. The agreement
provides that the institution will repurchase the underlying securities at
an agreed upon time and price. The total amount received on repurchase would
exceed the price paid by the Fund, reflecting an agreed upon rate of
interest for the period from the date of the repurchase agreement to the
settlement date, and would not be related to the interest rate on the
underlying securities. The difference between the total amount to be
received upon the repurchase of the securities and the price paid by the
Fund upon their acquisition is accrued daily as interest. 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
agreements to transactions with institutions believed by LMC to present
minimal credit risk.
Payment of interest expense by the Fund in connection with borrowing
permitted under its investment restrictions would have the effect of
reducing the Fund's yield to its shareholders. Although the Fund has the
right to pledge, mortgage or hypothecate its assets, in order to comply with
a state statute the Fund will not, as a matter of operating policy while
offering shares in such state, pledge, mortgage or hypothecate its portfolio
securities to the extent that at any time the percentage of pledged
securities will exceed 10% of the total net assets of the Fund.
Lending of portfolio securities: As stated in number (6) above,
subject to guidelines established by the directors 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
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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. Also, the Fund has undertaken
not to invest in real estate limited partnership interests, oil, gas or
mineral leases, as well as exploration or development programs. The Fund
will not purchase warrants except in units with other securities in original
issuance thereof or attached to other securities, if at the time of
purchase, the Fund's investment in warrants, valued at the lower of cost or
market, would exceed 5% of the Fund's total assets. Warrants which are not
listed on the New York or American Stock Exchanges shall not exceed 2% of
the Fund's net assets. Shares of the Fund will not be issued for
consideration other than cash.
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
LMC, P.O. Box 1515/Park 80 West Plaza Two, Saddle Brook, New Jersey
07663, is the investment adviser to the Fund and, as such, advises and makes
recommendations to the Fund with respect to its investments and investment
policies.
Pursuant to an investment advisory agreement the Fund will pay LMC an
annual investment advisory fee equal to 0.5% of its average daily net assets
up to $150 million, 0.4% of such value in excess of $150 million up to $400
million; 0.35% of such value in excess of $400 million up to $800 million;
and 0.3% of such value in excess of $800 million, after deduction of Fund
expenses, if any, in excess of the expense limitations set forth below. The
fee is computed on the basis of current net assets at the end of each
business day and is payable at the end of each month. The investment
advisory agreement provides that LMC must also pay the Fund monthly the
amount by which all of the Fund's other expenses (including the investment
advisory fee) exclusive of interest and taxes exceed 1% of the Fund's net
assets during any fiscal year, calculated by averaging such net assets
daily.
Under the terms of the advisory agreement LMC also pays the Fund's
expenses for office rent, utilities, telephone, furniture and supplies
utilized for the Fund's principal office and the salaries and payroll
expense of officers and directors of the Fund who are also employees of LMC
or its affiliates in carrying out its duties under the investment advisory
agreement. The Fund pays all its other expenses, including custodian and
transfer fees, legal and registration fees, audit fees, printing of
prospectuses, shareholder reports and communications required for regulatory
purposes or for distribution to existing shareholders, computation of net
asset value, mailing of shareholder reports and communications, portfolio
brokerage, taxes and independent directors' fees, and furnishes the
Distributor, at printer's overrun cost paid by the Distributor, such copies
of its prospectus, annual, semiannual and other reports and shareholder
communications as may reasonably be required for sales purposes. In
addition, the Fund will bear any costs associated with the securities loan
program (any such loans will increase the return to shareholders).
LMC's services are provided and its investment advisory fee is paid
pursuant to an agreement which will automatically terminate if assigned and
which may be terminated by either party upon 60 days' notice. The terms of
the agreement and any renewal thereof must be approved at least annually by
a majority of the Fund's Board of Directors, including a majority of
directors who are not parties to the agreement or "interested persons" of
such parties, as such term is defined under the Investment Company Act of
1940, as amended.
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LMC serves as investment adviser to other investment companies and to
private and institutional investment accounts. Included among these clients
are persons and organizations which own significant amounts of capital stock
of LMC's parent (see below). These clients pay fees which LMC considers
comparable to the fee levels for similarly served clients.
LMC's accounts are managed independently with reference to the
applicable investment objectives and current security holdings, but on
occasion more than one investment company or counsel account may seek to
engage in transactions in the same security at the same time. To the extent
practicable, such transactions will be made on a pro rata basis in
proportion to the respective amounts of securities to be bought and sold for
each portfolio, and the allocated transactions will be averaged as to price.
While this procedure may adversely affect the price or volume of a given
Fund transaction, LMC believes that the ability of the Fund to participate
in combined transactions may generally produce better executions overall.
LMC received from the Fund under the advisory agreement the following net
fees as of the fiscal year ended December 31, 1992, $250,651; December 31,
1993, $215,895 and December 31, 1994, $199,643.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited
to, maintaining general ledger accounts, regulatory compliance, preparation
of financial information for semiannual and annual reports, preparing
registration statements, calculating net asset values, shareholder
communications and supervision of the custodian of, transfer agent and
provides facilities for such services. The Fund pays LMC a fee, payable
monthly, equal to the pro-rata portion of LMC s actual cost in providing
such services and facilities.
LFD also serves as Distributor for Fund shares under a Distribution
Agreement which is subject to annual approval by a majority of the Fund's
Board of Directors, including a majority who are not "interested persons".
Of the Directors, executive officers, and employees ("affiliated
persons") of the Fund, Messrs. Corniotes, DeMichele, Faust, Hisey, Jamison,
Kantor, Lavery, Luehs, Petruski and Mmes. Carnicelli, Carr, Curcio,
Gilfillan and Mosca (see "Management of the Fund") may also be deemed
affiliates of LMC by virtue of being officers, directors or employees
thereof. As of April 3, 1995, all officers and Directors of the Fund as a
group owned less than 1% of record capital shares of the Fund.
LMC and LFD are wholly-owned subsidiaries of Piedmont Management
Company Inc., a Delaware corporation with offices at 80 Maiden Lane, New
York, New York 10038. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities have a majority voting control
of outstanding shares of Piedmont Management Company Inc.
PORTFOLIO TRANSACTIONS
Portfolio securities are normally purchased directly from an
underwriter or dealer in municipal securities. Therefore, usually no
brokerage commissions are paid by the Fund. Transactions are allocated to
various dealers by the Fund and LMC in their 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 an 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. For the fiscal years ended December 31, 1992, 1993 and 1994 all
portfolio transactions were effected on a net basis through dealers acting
as principal and, accordingly, no brokerage commissions were payable.
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DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined as of the close of
trading on the New York Stock Exchange each day the Exchange is open for
business and at such other times and/or such other days as there is
sufficient trading in short term municipal securities to affect materially
the Fund's net asset value per share. Substantially all of the Fund's net
income calculated from the immediately preceding determination of net
income, is declared daily as dividends (see "Dividend, Distribution and
Reinvestment Policy").
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 of 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 13 months (397 days) or less, and
invest only in securities which are determined by the Board of Directors to
present minimal credit risks and which are of high quality as determined by
any major rating service, or in the case of any instrument not so rated,
considered by the Board of Directors to be of comparable quality.
The Board of Directors 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 Directors.
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DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund declares and reinvests daily, dividends from its net
investment income and distributes such dividends on the last day of each
month. Dividends or distribution payments will be reinvested at net asset
value in additional full and fractional shares of the Fund unless and until
the shareholder notifies State Street Bank and Trust Company, N.A., (the
"Agent") in writing that he wants to receive his payments in cash. This
request must be received by the Agent at least seven days before the payment
date. Upon receipt by the Agent of such written notice, all further payments
will be made in cash until written notice to the contrary is received. An
account of such shares owned by each shareholder will be maintained by the
Agent. Shareholders whose accounts are maintained by the Agent will have the
same rights as other shareholders with respect to shares so registered (see
"How to Purchase Shares - An Open Account" in the Prospectus).
Since substantially all of the net income will be declared as
dividends each time the net asset value of the Fund is determined, the net
asset value per share will normally remain at one dollar per share
immediately after such dividend declaration and determination (see
"Investment Policy").
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to
federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains
over capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) and at least 90% of its tax-exempt income (net of
expenses allocable thereto) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code that are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within twelve months after the close of the
taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive
of certain gains on designated hedging transactions that are offset by
realized or unrealized losses on offsetting positions) from the sale or
other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). For purposes of these calculations, gross income
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includes tax-exempt income. However, foreign currency gains, including
those derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, the Fund
may have to limit the sale of appreciated securities that it has held for
less than three months. However, the Short-Short Gain Test will not prevent
the Fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is
disregarded for this purpose. Interest (including original issue discount)
received by the Fund at maturity or upon the disposition of a security held
for less than three months will not be treated as gross income derived from
the sale or other disposition of such security within the meaning of the
Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (including municipal obligations) 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.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain
(i.e., the excess of net long-term capital gain over net short-term capital
loss) for any taxable year, to elect (unless it has made a taxable year
election for excise tax purposes as discussed below) to treat all or any
part of any net capital loss, any net long-term capital loss or any net
foreign currency loss incurred after October 31 as if it had been incurred
in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a
regulated investment company. Under this test, at the close of each quarter
of the Fund's taxable year, at least 50% of the value of the Fund's assets
must consist of cash and cash items, U.S. Government securities, securities
of other regulated investment companies, and securities of other issuers (as
to which the Fund has not invested more than 5% of the value of the Fund's
total assets in securities of such issuer and as to which the Fund does not
hold more than 10% of the outstanding voting securities of such issuer), and
no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions
generally will be eligible for the dividends-received deduction in the case
of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to
98% of ordinary taxable income for the calendar year and 98% of capital gain
net income for the one-year period ended on October 31 of such calendar year
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<PAGE>
(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")). (Tax-exempt interest on municipal obligations is not subject to
the excise tax.) The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a regulated investment
company is treated as having distributed any amount on which it is subject to
income tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain)
by the amount of any net ordinary loss for the calendar year; and (2)
exclude foreign currency gains and losses incurred after October 31 of any
year (or after the end of its taxable year if it has made a taxable year
election) in determining the amount of ordinary taxable income for the
current calendar year (and, instead, include such gains and losses in
determining ordinary taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise
tax. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments to make
sufficient distributions to avoid excise tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70%
dividends-received deduction for corporate shareholders.
The Fund does not expect to realize any long-term capital gains or
losses.
The Fund intends to qualify to pay exempt-interest dividends by
satisfying the requirement that at the close of each quarter of the Fund's
taxable year at least 50% of the Fund's total assets consists of tax-exempt
municipal obligations. Distributions from the Fund will constitute exempt-
interest dividends to the extent of the Fund's tax-exempt interest income
(net of expenses and amortized bond premium). Exempt-interest dividends
distributed to shareholders of the Fund are excluded from gross income for
federal income tax purposes. However, shareholders required to file a
federal income tax return will be required to report the receipt of exempt-
interest dividends on their returns. Moreover, while exempt-interest
dividends are excluded from gross income for federal income tax purposes,
they may be subject to alternative minimum tax ("AMT") in certain
circumstances and may have other collateral tax consequences as discussed
below. Distributions by the Fund of any investment company taxable income
will be taxable to shareholders as discussed above.
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum marginal rate of 28% for
noncorporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. In addition, under the Superfund Amendments and Reauthorization Act
of 1986, a tax is imposed for taxable years beginning after 1986 and before
1996 at the rate of 0.12% on the excess of a corporate taxpayer's AMTI
(determined without regard to the deduction for this tax and the AMT net
operating loss deduction) over $2 million. Exempt-interest dividends
derived from certain "private activity" municipal obligations issued after
August 7, 1986 will generally constitute an item of tax preference
includable in AMTI for both corporate and noncorporate taxpayers. In
addition, exempt-interest dividends derived from all municipal obligations,
regardless of the date of issue, must be included in 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.
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<PAGE>
Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that
must be included in an individual shareholder's gross income and subject to
federal income tax. Further, a shareholder of the Fund is denied a
deduction for interest on indebtedness incurred or continued to purchase or
carry shares of the Fund. Moreover, a shareholder who is (or is related to)
a "substantial user" of a facility financed by industrial development bonds
held by the Fund will likely be subject to tax on dividends paid by the Fund
which are derived from interest on such bonds. Receipt of exempt-interest
dividends may result in other collateral federal income tax consequences to
certain taxpayers, including financial institutions, property and casualty
insurance companies and foreign corporations engaged in a trade or business
in the United States. Prospective investors should consult their own tax
advisers as to such consequences.
Distributions by the Fund that do not constitute ordinary income
dividends, exempt-interest dividends or capital gain dividends will be
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain
from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or
reinvested in additional shares of the Fund (or of another fund).
Shareholders receiving a distribution in the form of additional shares will
be treated as receiving a distribution in an amount equal to the fair market
value of the shares received, determined as of the reinvestment date. In
addition, if the net asset value at the time a shareholder purchases shares
of the Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the
assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable
to shareholders of record on a specified date in such a month will be deemed
to have been received by the shareholders (and made by the Fund) on December
31 of such calendar year if such dividends are actually paid in January of
the following year. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or deemed made)
during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder
(1) who has provided either an incorrect tax identification number or no
number at all, (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly, or
(3) who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
Sale or Redemption of Shares
The Fund seeks to maintain a stable net asset value of $1.00 per
share; however, there can be no assurance that the Fund will do this. In
such a case, a shareholder will recognize gain or loss on the sale or
redemption of shares of the Fund in an amount equal to the difference
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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 disallowed to the extent of the amount of exempt-interest
dividends received on such shares.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder"), depends on whether the
income from the Fund is "effectively connected" with a U.S. trade or
business carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding
tax at the rate of 30% (or lower treaty rate) upon the gross amount of the
dividend. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of the Fund and
exempt-interest dividends.
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 and any gains realized upon the sale of shares of the Fund will
be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at
a reduced treaty rate) unless such shareholders furnish the Fund with proper
notification of its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
the Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued
thereunder as in effect on the date of this Statement of Additional
Information. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income and exempt-
interest dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and
other state and local tax rules affecting investment in the Fund.
12
<PAGE>
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New
York 10036 has been retained to act as the custodian for the Fund's
investments and assets. State Street Bank and Trust company, 225 Franklin
Street, Boston, Massachusetts 02110 is the transfer agent and dividend
disbursing agent for the Fund. Neither Chase Manhattan Bank, N.A. nor State
Street Bank and Trust Company have any part in determining the investment
policies of the Fund or in determining which portfolio securities are to be
purchased or sold by the Fund or in the declaration of dividends and
distributions.
MANAGEMENT OF THE FUND
The Directors and executive officers of the Fund and their principal
occupations are set forth below:
*+ROBERT M. DeMICHELE, President and Chairman. P.O. Box 1515, Saddle Brook,
N.J. 07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; Chairman and Chief Executive Officer, Lexington Funds
Distributor, Inc.; President and Director, Piedmont Management Company
Inc. Director, Reinsurance Corporation of New York; Director, Unione
Italiana Reinsurance; Vice Chairman of Board of Trustees, Union
College; Director, Continental National Corporation; Director, The
Navigator's Group, Inc.; Chairman, Lexington Capital Management, Inc.;
Chairman, LCM Financial Services, Inc.; Director, Vanguard Cellular
Systems, Inc.; Chairman of the Board, Market Systems Research, Inc.
and Market Systems Research Advisors, Inc. (registered investment
advisors). Trustee, Smith Richardson Foundation.
+BEVERLEY C. DUER, Director. 340 East 72nd Street, New York, N.Y. 10021.
Investments/Engineering Economics Consultant; formerly Manager of
Operations Research Department, CPC International, Inc.
*+BARBARA M. EVANS, Director. 5 Fernwood Drive, Summit, N.J. 07901. Private
Investor. Prior to May 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation.
*+LAWRENCE KANTOR, Vice President and Director. P.O. Box 1515, Saddle Brook,
N.J. 07663. Executive Vice President, Managing Director and Director,
Lexington Management Corporation; Executive Vice President and
Director, Lexington Funds Distributor, Inc.
+DONALD B. MILLER, Director. 10725 Quail Covey Road, Boynton Beach, Florida
33436. Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds; Director,
Maguire Group of Connecticut; prior to January 1989, President, C.E.O.
and Director, Media General Broadcast Services (advertising firm).
+FRANCIS OLMSTED, Director. 50 Van Hooten Court, San Anselmo, CA 94960.
Private Investor, formerly Manager-Commercial Development (West
Coast), Essex Chemical Corporation, Clifton, N.J. (chemical
manufacturers).
+JOHN G. PRESTON, Director. 3 Woodfield Road, Wellesley, Massachusetts
02181. Associate Professor of Finance, Boston College, Boston,
Massachusetts.
+MARGARET W. RUSSELL, Director. 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor, formerly Community Affairs Director, Union
Camp Corporation.
13
<PAGE>
+PHILIP C. SMITH, Director. 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor; Director, Southwest Investors Income Fund, Inc.,
Fund of the Southwest, Inc., and Plimony Fund, Inc. (registered
investment companies) formerly, Chairman of the Board of Directors of
Yardley of London, Inc. (cosmetic manufacturer).
+FRANCIS A. SUNDERLAND, Director. 309 Quito Place, Castle Pines, Castle
Rock, Colorado 80104. Private Investor; Director and Treasurer,
Castle Pines Metropolitan District, a quasi-municipal body-corporate
of Colorado; formerly Director, Westab, Inc.
*+DENIS P. JAMISON, Vice President and Portfolio Manager. P.O. Box 1515,
Saddle Brook, N.J. 07663. Senior Vice President, Director of Fixed
Income Strategy, Lexington Management Corporation. Mr. Jamison is a
Chartered Financial Analyst and a member of the New York Society of
Security Analysts.
*+LISA A. CURCIO, Vice President and Secretary. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds
Distributor, Inc.
*+RICHARD M. HISEY, Vice President and Treasurer. P.O. Box 1515, Saddle
Brook, N.J. 07663. Chief Financial Officer, Managing Director and
Director, Lexington Management Corporation; Chief Financial Officer,
Vice President and Director, Lexington Funds Distributor, Inc; Chief
Financial Officer, Market Systems Research Advisors, Inc..
*+RICHARD J. LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President, Lexington Management Corporation;
Vice President, Lexington Funds Distributor, Inc.
*+JANICE A. CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+CHRISTIE CARR, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to October 1992, Senior Accountant, KPMG Peat Marwick.
*+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to November, 1993, Supervisor Investment Accounting,
Alliance Capital Management, Inc.
*+SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to September 1990, Fund Accounting Manager, Lexington Group of
Investment Companies.
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to May 1994, Supervising Senior Accountant, NY Life
Securities. Prior to December 1990, Senior Accountant, Dreyfus
Corporation.
*+PETER CORNIOTES, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Assistant Secretary, Lexington Management Corporation.
Assistant Secretary, Lexington Funds Distributor, Inc.
*+ENRIQUE J. FAUST, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator,
Lexington Group of Investment Companies.
14
<PAGE>
*"Interested person" and/or "affiliated person" of LMC as defined in
the Investment Company Act of 1940, as amended.
+Messrs. Corniotes, DeMichele, Duer, Faust, Hisey, Jamison, Kantor,
Lavery, Luehs, Miller, Olmsted, Petruski, Preston, Smith and Sunderland and
Mmes. Carnicelli, Carr, Curcio, Evans, Gilfillan, Mosca and Russell hold
similar offices with some or all of the other registered investment
companies advised and/or distributed by Lexington Management Corporation and
Lexington Funds Distributor, Inc.
Directors not employed by the Fund or its affiliates receive an annual
fee of $600 and a fee of $150 for each meeting attended plus reimbursement
of expenses for attendance at regular meetings. During the fiscal year ended
December 31, 1994, an aggregate of $13,560 fees and expenses was paid to
eight Directors not employed by the Fund's affiliates. The Board of
Directors held four meetings in the past fiscal year. The Board does not
have any audit, nominating or compensation committees.
Aggregate Total Compensation Number of
Compensation From Fund and Directorships in
Name of Director From Fund Fund Complex Fund Complex
- ---------------- ------------ ------------------ ----------------
Robert M. DeMichele 0 0 15
Beverley C. Duer $1350 $20,250 15
Barbara R. Evans 0 0 14
Lawrence Kantor 0 0 15
Donald B. Miller $1350 $20,250 14
Francis Olmsted $1350 $18,900 13
John G. Preston $1350 $20,250 14
Margaret Russell $1350 $18,900 13
Philip C. Smith $1350 $20,250 14
Francis A. Sunderland $1200 $16,800 13
15
<PAGE>
APPENDIX
Municipal Securities and Other Investments: Municipal bonds include debt
obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal
bonds may also be issued in connection with the refunding of outstanding
obligations, and obtaining funds to lend to other public institutions and
facilities or for general operating expenses. In addition, certain types of
industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide various privately operated facilities
for business and manufacturing, housing, sports, conventions or trade shows,
pollution control, and airport, mass transit, port and parking facilities.
Such obligations are included within the term municipal securities if the
interest paid thereon is exempt from federal income tax .
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. In some instances, the taxes that can be levied
for the payment of debt service may be limited as to rate, amount or special
assessments. Revenue bonds are payable only from the revenue derived from
a particular facility or class of facilities, or, in some cases, from the
proceeds of a special excise tax or other specific revenue source. Although
industrial development bonds are issued by municipal authorities, they are
generally not secured by the taxing power of the municipality but are
secured by the revenues derived from payments from specific projects by the
industrial user.
There are, in addition to the two principal classifications described
above, a variety of hybrid and special types of municipal obligations as
well as numerous differences in the security of municipal bonds.
Municipal notes include tax, revenue and bond anticipation notes of
short maturity, generally less than three years, which are issued to obtain
funds for various public purposes.
Project notes are issued by local public agencies created under the
laws of a state, territory or U. S. possession and have maturities of up to
one year. They generally relate to financing of housing, redevelopment or
urban renewal programs and are backed by agreements between the issuing
agencies and the U. S. Department of Housing and Urban Development . Thus,
while the local agency issuing project notes is the primary obligor, such
notes are secured by the full faith and credit of the U. S. Government.
Ratings of Municipal Bonds: The four highest ratings of Moody's for
municipal bonds are Aaa, Aa, A and Baa. Municipal bonds rated Aaa are judged
to be of the "best quality". The rating of Aa is assigned to municipal bonds
which are of "high quality by all standards", together with the Aaa group
they comprise what are generally known as "high grade bonds". They are
rated lower than Aaa bonds because margins of protection may not be as large
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear somewhat
larger than Aaa securities. Municipal bonds rated A possess many favorable
investment attributes and are considered "upper medium grade obligations".
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future. Municipal bonds rated Baa are considered "medium
grade" obligations. They are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
16
<PAGE>
The four highest ratings of Standard & Poor's for municipal bonds are
AAA (Prime), AA (High Grade), A (Good Grade) and BBB (Medium Grade).
Municipal bonds rated AAA are "obligations of the highest quality". The
rating of AA is accorded issues with investment characteristics "only
slightly less marked than those of the prime quality issues". The category
of A describes "the third strongest capacity for payment of debt service".
Principal and interest payments on bonds in this category are regarded as
safe. It differs from the two higher ratings because, with respect to
general obligation bonds, there is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date. With respect to revenue bonds,
debt service coverage is good, but not exceptional. Stability of the pledged
revenues could show some variations because of increased competition or
economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appears adequate.
The BBB rating is the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than one
fundamental weakness, or one very substantial fundamental weakness, whereas
the former shows only one deficiency among the factors considered. With
respect to revenue bonds, debt coverage is only fair. Stability of the
pledged revenues could show substantial variations, with the revenue flow
possibly being subject to erosion over time. Basic security provisions are
no more than adequate and management performance could be stronger.
Moody's Rating of Municipal Notes:
MIG 1: the best quality, enjoying strong protection from established
cash flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both.
MIG 2: high quality, with margins of protection ample although not so
large as in the preceding group.
MIG 3: favorable quality, with all security elements accounted for but
lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
Municipal Commercial Paper Ratings: Commercial paper rated A-l by Standard
& Poor's has the following characteristics: Liquidity ratios are adequate
to meet cash requirements. Long term senior debt is rated "A" or better,
although in some cases "BBB" credits may be allowed. The issuer has access
to at least two channels of borrowing. Basic earnings and cash flow have an
upward trend with an allowance made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
questioned. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-l, A-2 or A-3.
The rating Prime-l is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are
the following: (l) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to the competition and
customer acceptance; (4) liquidity; (5) amount and quality of long term
debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the
issuer; and (8) recognition by the management of obligations which may be
present or which may arise as a result of public interest questions and
preparations to meet such obligations.
17
<PAGE>
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
Page in the Financial
(a) Financial statements: Statements Exhibit
------------------
Report of Independent Auditors 1
dated February 15, 1995
Statement of Net Assets (Including 2
the Portfolio of Investments) at
December 31, 1994 (1)
Statement of Assets and Liabilities 5
at December 31, 1994
Statement of Operations for the year 5
ended December 31, 1994 (2)
Statements of Changes in Net Assets for 6
the years ended December 31, 1994
and 1993
Notes to Financial Statements 7
Schedules II-VII and other Financial Statements, for which provisions
are made in the applicable accounting regulations of the Securities
and Exchange Commission, are omitted because they are not required
under the related instructions, they are inapplicable, or the required
information is presented in the financial statements or notes thereto.
(1) Includes the information required by Schedule I.
(2) Includes the information required by the Statement of
Realized Gain or Loss on Investments
<PAGE>
ITEM 24. Financial Statements and Exhibits - List
----------------------------------------
(b) Exhibits:
1. Articles of Incorporation - Filed 9/27/77 -
Incorporated by reference
2. By-Laws - Filed 9/27/77 - Incorporated by reference
3. Not Applicable
4. Stock Certificate Specimen - Filed 9/27/77 -
Incorporated by reference
5. Investment Advisory Agreement between
Registrant and Lexington Management Corporation -
Filed 7/18/77 - Incorporated by reference
6. Distribution Agreement between Registrant and
Lexington Funds Distributor, Inc. - Filed 4/30/91 -
Incorporated by reference
7. Not Applicable
8a. Form of Custodian Agreement between Filed electronically
Registrant and Chase Manhattan Bank, N.A.
8b. Custodian and Transfer Agency Agreements between
Registrant and State Street Bank and Trust Company -
Filed 4/30/90 - Incorporated by reference
9. Form of Administrative Services Agreement Filed electronically
between Registrant and Lexington Management
Corporation
10. Opinion of Counsel as to Legality of Securities being
registered - Filed 7/18/77 - Incorporated by reference
11. Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Performance Calculation - Filed 5/2/88 -
Incorporated by reference
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
------------------------------------------------------------
Furnish a list or diagram of all persons directly or
indirectly controlled by or under common control with the
Registrant and as to each such person indicate (1) if a company,
the state or other sovereign power under the laws of which it is
organized, (2) the percentage of voting securities owned or other
basis of control by the person, if any, immediately controlling
it.
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.
The following information is given as of April 3, 1995:
Title of Class Number of Record Holders
Capital Stock 1,415
($1.00 par value)
Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified in
any manner against any liability which may be incurred in such
capacity, other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and
the Company's By-Laws, the Company may indemnify any person who
was or is a director, officer or employee of the Company to the
maximum extent permitted by the Maryland General Corporation Law;
provided, however, that Company only as authorized in the
specific case upon a determination that indemnification of such
persons is proper in the circumstances. Such determination shall
be made (i) by the Board of Directors, by a majority vote of a
quorum which consists of directors who are neither "interested
persons" of Company as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or if a quorum of such directors so
directs by independent legal counsel in a written opinion. No
indemnification will be provided by the Company to any director
or officer of the Company for any liability to the Company or
Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment
adviser of the Registrant, and each director, officer or partner
of any such investment adviser, is or has been, at any time
during the past two fiscal years, engaged for his own account or
in the capacity of director, officer, employee, partner or
trustee.
See Prospectus Part A and Statement of Additional
Information Part B ("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington Short-Intermediate Government Securities Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Corporate Leaders Trust Fund
Lexington Natural Resources Trust
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington Convertible Securities Fund
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
<PAGE>
29 (b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ---------------- -------------------- ------------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa A. Curcio* Vice President and Secretary
Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer, Vice President and
Vice President & Director Treasurer
Lawrence Kantor* Executive Vice President, Director & Vice
General Manager & Director President
Richard Lavery* Vice President Vice President
Janice Violette* Assistant Treasurer None
(c)
Not Applicable.
- --------------
*P.O. Box 1515
Saddle Brook, New Jersey 07663
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document
required to be maintained by Section 31(a) of the 1940 Act and
the Rules (17 CFR 270, 31a-1 to 31a-3) promulgated thereunder,
furnish the name and address of each person maintaining physical
possession of each such account, book or other document.
The Registrant, Lexington Tax Free Money Fund, Inc.,
Park 80 West - Plaza Two, Saddle Brook, New Jersey 07663 will
maintain physical possession of such of each such account, book
or other document of the Company, except for those maintained by
the Registrant's Custodian, Chase Manhattan Bank, N.A., 1211
Avenue of the Americas, New York, New York 10036, or Transfer
Agent, State Street Bank and Trust Company, c/o National
Financial Data Services, City Center Square, 1100 Main, Kansas
City, Missouri 64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B
of this Form (because the contract was not believed to be
material to a purchaser of securities of the Registrant) under
which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom for
the last three fiscal years.
None.
Item 32. Undertakings -
------------
The Registrant, Lexington Tax Free Money Fund, Inc.
undertakes to furnish a copy of the Fund's latest
annual report, upon request and without charge, to
every person to whom a prospectus is delivered.
<PAGE>
Registration No. 2-57786
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON TAX FREE MONEY FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as
exhibits to this filing:
Financial Statements for the period ending December 31, 1994
Form of Custodian Agreement
Form of Administrative Services Agreement
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of independent auditors for the inclusion of their report herein
Article 6 Financial Data Schedule
Cover
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and 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 25th day of April, 1995.
LEXINGTON TAX FREE MONEY FUND, INC.
Robert M. DeMichele
_______________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of
1933, this amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
Robert M. DeMichele
__________________________ Chairman of the Board April 25, 1995
Robert M. DeMichele Principal Executive
Officer
Richard M. Hisey
__________________________ Principal Financial April 25, 1995
Richard M. Hisey and Accounting Officer
Lisa Curcio
__________________________ Principal Compliance April 25, 1995
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director April 25, 1995
- --------------------------
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 25, 1995
- --------------------------
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 25, 1995
- --------------------------
Lawrence Kantor
*Donald B. Miller Director April 25, 1995
- --------------------------
Donald B. Miller
*Francis Olmsted Director April 25, 1995
- --------------------------
Francis Olmsted
*John G. Preston Director April 25, 1995
- --------------------------
John G. Preston
*Margaret W. Russell Director April 25, 1995
- --------------------------
Margaret W. Russell
*Philip C. Smith Director April 25, 1995
- --------------------------
Philip C. Smith
*Francis A. Sunderland Director April 25, 1995
- --------------------------
Francis A. Sunderland
Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
Independent Auditors' Report
The Board of Directors and Shareholders
Lexington Tax Free Money Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Tax Free Money
Fund, Inc. as of December 31, 1994, the related statement of operations for the
year then ended, the statements of changes in net assets for each of the years
in the two-year period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Tax Free Money Fund, Inc. as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 6, 1995
1
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1994
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALASKA:
$ 755,000 Alaska Industrial Development & Export
Authority (Lot 11)* .......................... A-1 07/01/07 5.80% 5.80% $ 755,000
-----------
CALIFORNIA: 16.5%
1,000,000 Alum Rock Union Elementary School District Tax
& Revenue Anticipation Note .................. SP-1+ 08/03/95 4.75 4.12 1,003,092
1,000,000 California Housing Finance Agency Series 1** ... VMig 1/SP1+ 05/01/95 4.15 4.15 1,000,000
1,200,000 California Pollution Control Finance Authority
(Southdown Project)* ......................... A-1+ 02/15/98 4.35 4.35 1,200,000
1,100,000 California Pollution Control Finance Authority
(Southern California Project)* ............... Mig 1/A-1+ 02/28/08 5.00 5.00 1,100,000
1,500,000 City of Livermore
Tax & Revenue Anticipation Notes ............. Mig 1 07/05/95 4.25 4.00 1,501,822
400,000 San Mateo County School District Tax & Revenue
Anticipation Notes ........................... SP-1+ 06/30/95 4.50 4.07 400,827
-----------
$ 6,205,741
-----------
FLORIDA: 8.8%
900,000 Hillsborough County I.D.A. (Tampa Electric)* ... AA/Aa 09/01/25 5.90 5.90 900,000
1,400,000 Indian River County Hospital District* ......... VMig 1/A-1 10/01/15 5.70 5.70 1,400,000
1,000,000 St. Johns County Housing Financial Authority
(Remington Project)* ......................... A-1+ 02/01/17 5.75 5.75 1,000,000
-----------
3,300,000
-----------
GEORGIA: 11.4%
1,000,000 Burke County Development Authority (Georgia
Power) Series 4* ............................. A-1/P-1 07/01/14 5.00 5.00 1,000,000
1,700,000 Fulton County I.D.A. (ADP Project)* ............ P-1/Aa2 09/01/12 4.25 4.25 1,700,000
1,100,000 Georgia Technical Foundation Facilities Inc.*... A-1+ 02/01/12 5.45 5.45 1,100,000
500,000 Monroe County Development Authority (Gulf
Power) Series 2* ............................. A-1 09/01/24 5.00 5.00 500,000
-----------
4,300,000
-----------
HAWAII: 4.0%
1,500,000 Hawaii State Department Budget & Finance
(G.N. Wilcox Memorial Hospital)* ............. VMig 1 07/01/18 6.15 6.15 1,500,000
-----------
ILLINOIS: 1.4%
100,000 Chicago Pre-Refunded Bonds ..................... AAA/Aaa 07/01/95 9.00 3.94 104,346
300,000 Chicago Metropolitan Sanitation District
Revenue Bonds ................................ AA/Aa 01/01/95 6.80 2.78 300,000
115,000 Northwest Suburban Municipal Joint Action Water
Agency Pre-Refunded Bonds .................... AAA/Aaa 05/01/95 9.88 3.75 118,369
-----------
522,715
-----------
INDIANA: 2.7%
1,000,000 Indiana Bond Bank............................... Mig 1/SP-1+ 01/18/95 3.03 2.74 1,000,119
-----------
KENTUCKY: 2.7%
1,000,000 Pendleton County Leasing Program***............. A-1+ 02/03/95 3.90 3.90 1,000,000
-----------
</TABLE>
2
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1994 (continued)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LOUISIANA: 3.4%
$ 700,000 Caddo Parish I.D.B. (Pennzoil Project)*......... A-1 12/01/12 5.60% 5.60% $ 700,000
600,000 East Baton Rouge I.D.B. (Series 1982)*.......... Aa1 12/01/12 3.85 3.85 600,000
-----------
1,300,000
-----------
MARYLAND: 0.5%
200,000 Washington Suburban Sanitation District
Revenue Bonds................................. Aa/AA 01/01/95 6.60 2.78 200,000
-----------
MISSISSIPPI: 2.1%
800,000 Clairborne County
(South Mississippi Project)***................ P-1 01/04/95 3.45 3.45 800,000
-----------
NEW JERSEY: 0.3%
100,000 New Jersey State Housing Finance Agency
Revenue Bonds................................. Aaa/AAA 04/01/95 7.00 5.00 100,476
-----------
NEVADA: 0.3%
125,000 Henderson County G.O. Bonds..................... AAA/Aaa 05/01/95 4.75 4.06 125,258
-----------
NEW YORK: 3.4%
600,000 City of New York*............................... VMig 1/SP-1+ 08/15/18 4.80 4.80 600,000
700,000 City of New York Series B*...................... VMig 1/A-1+ 10/01/22 4.80 4.80 700,000
-----------
1,300,000
-----------
NORTH CAROLINA: 4.0%
1,500,000 Person County Industrial Facility Authority
(Carolina Power) Series 1992A*................ P-1/A-1 11/01/09 5.55 5.55 1,500,000
-----------
OHIO: 4.0%
1,500,000 Ohio State Air Quality Authority***............. A-1+/VMig 1 01/06/95 4.50 4.50 1,500,000
-----------
PENNSYLVANIA: 2.0%
60,000 Delaware River Port Authority
Pre-Refunded Bonds............................ AAA/Aaa 01/01/95 9.38 3.73 61,808
200,000 University of Pittsburgh Series A Revenue Bonds. AAA 06/01/95 7.00 3.95 202,405
500,000 Venango I.D.A. (Pennzoil Project)
Series 1982A*................................. A-1 12/01/12 5.60 5.60 500,000
-----------
764,213
-----------
TEXAS: 9.0%
530,000 Coppell I.D.C. Series 1984
(Minyard Properties)*......................... A-1 12/01/01 3.90 3.90 530,000
800,000 Garland I.D.A.*................................. A-1 12/01/05 5.80 5.80 800,000
1,000,000 Greater East Texas Higher Education Authority
Series 1992A*................................. VMig 1/A-1+ 09/01/02 5.45 5.45 1,000,000
1,060,000 Texas Higher Education Authority Inc.
Series B*..................................... VMig 1 12/01/25 5.50 5.50 1,060,000
-----------
3,390,000
-----------
UTAH: 2.8%
1,000,000 Intermountain Power Agency Pre-Refunded Bonds... AAA/Aaa 07/01/95 10.25 3.71 1,049,337
-----------
VIRGINIA: 4.8%
1,810,000 Town of Louisa (Virginia Electric Power
Company) Series 1984***....................... A-1/F-1 02/06/95 4.25 4.25 1,810,000
-----------
</TABLE>
3
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1994 (continued)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEST VIRGINIA: 4.8%
$1,800,000 West Virginia Public Energy Commission
(Morgantown Association)***................... P-1/A-1+ 01/03/95 4.65% 4.65% $ 1,800,000
-----------
WYOMING: 6.6%
1,500,000 Gillette County (Pacificorp)***................. A-1+/P-1 01/05/95 4.50 4.50 1,500,000
1,000,000 Uinta County (Champlin Petroleum)
Series 1983*.................................. A-1 11/01/12 3.75 3.75 1,000,000
-----------
2,500,000
-----------
TOTAL INVESTMENTS: 97.5%
(cost $36,722,859****) (Note 1)............... 36,722,859
Other assets in excess of liabilities: 2.5%..... 930,983
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $1.00 per share on
37,653,842 shares outstanding.)............... $37,653,842
===========
<FN>
*Seven day Floating Rate Note backed by Letter of Credit. I.D.A.- Industrial Development Authority
**Optional or Mandatory Tender Bonds. I.D.B.- Industrial Development Bonds
***Municipal Commercial Paper. I.D.C.- Industrial Development Corporation
****Aggregate cost for Federal income tax purposes is identical. G.O.- General Obligation
</FN>
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Assets and Liabilities
December 31, 1994
Assets
<TABLE>
<S> <C>
Investments in securities, at value (cost $36,722,859) (Note 1)....................... $36,722,859
Cash (Note 4)......................................................................... 103,533
Receivable for investment securities sold............................................. 501,118
Receivable for shares sold............................................................ 402,774
Interest receivable................................................................... 278,627
-----------
Total Assets.................................................................... 38,008,911
-----------
Liabilities
Due to Lexington Management Corporation (Note 2)...................................... 24,851
Payable for shares redeemed........................................................... 288,446
Accrued expenses...................................................................... 41,772
-----------
Total Liabilities............................................................... 355,069
-----------
Net Assets (equivalent to $1.00 per share on 37,653,842 shares outstanding) (Note 3).. $37,653,842
===========
Net Assets consist of:
Capital stock-authorized 1,000,000,000 shares, $.01 par value per share............... $ 376,538
Additional paid-in capital............................................................ 37,277,304
-----------
$37,653,842
===========
</TABLE>
Lexington Tax Free Money Fund, Inc.
Statement of Operations
Year ended December 31, 1994
<TABLE>
Investment Income
<S> <C> <C>
Interest income.......................................... $1,185,193
Expenses
Investment advisory fee (Note 2)...................... $199,643
Accounting and shareholder services expense (Note 2).. 61,427
Custodian and transfer agent expenses................. 50,788
Printing and mailing ................................. 33,397
Directors' fees and expenses.......................... 13,560
Audit and legal....................................... 28,070
Registration fees..................................... 17,128
Computer processing fees.............................. 11,985
Other expenses........................................ 20,020
--------
Total expenses..................................... 436,018
Less: expenses recovered under contract with the
investment adviser (Note 2)...................... 36,275 399,743
-------- ----------
Net investment income.............................. 785,450
----------
Increase in Net Assets Resulting from Operations......... $ 785,450
==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statements of Changes in Net Assets
Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Net investment income...................................... $ 785,450 $ 764,887
Distributions to shareholders from net investment income... (785,450) (764,887)
Decrease in net assets from capital share transactions
(Note 3)................................................. (3,441,989) (4,748,279)
----------- -----------
Net decrease in net assets................................. (3,441,989) (4,748,279)
Net Assets
Beginning of period........................................ 41,095,831 45,844,110
----------- -----------
End of period.............................................. $37,653,842 $41,095,831
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
6
<PAGE>
Lexington Tax Free Money Fund, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
1. Significant Accounting Policies
Lexington Tax Free Money Fund, Inc. (the "Fund") is an open end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements:
Securities Security transactions are accounted for on a trade date basis.
Investments are carried at amortized cost, which approximates market value.
Under this valuation method, a portfolio instrument is carried at cost and any
discount or premium is amortized on a constant basis to the maturity of the
instrument. Interest income is accrued as earned.
Federal Income Taxes It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and tax exempt income to its
shareholders. Therefore, no provision for Federal income taxes has been made.
Dividends Dividends are declared daily from the total of net investment
income and net realized gain (loss) on investments.
2. Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 0.5% of the Fund's average daily net assets up to
$150 million and in decreasing stages to 0.3% of average daily net assets in
excess of $800 million. LMC is required to reimburse the Fund for any expenses,
including the investment adviser's fee but excluding interest and taxes, in
excess of 1% of the Fund's average daily net assets. Reimbursement for the year
ended December 31, 1994 amounted to $36,275 and is set forth in the statement of
operations.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund but paid by LMC.
3. Capital Stock
Transactions (at $1.00 per share) in capital stock were as follows:
Year ended Year ended
December 31, December 31,
1994 1993
----------- -----------
Shares sold...................................... 25,605,181 27,039,155
Shares issued on reinvestment of dividends....... 692,214 648,709
---------- ----------
26,297,395 27,687,864
Shares redeemed.................................. (29,739,384) (32,436,143)
---------- ----------
Net decrease in outstanding shares............... (3,441,989) (4,748,279)
========== ==========
4. Cash
In order to facilitate the clearing process for redemptions by check, the Fund
maintains a compensating balance with its transfer agent. At December 31, 1994,
this compensating balance amounted to $46,200 and is included in cash in the
statement of assets and liabilities.
7
<PAGE>
Lexington Tax Free Money Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income..................... .020 .018 .024 .041 .053
Less distributions:
Dividends from net investment income...... (.020) (.018) (.024) (.041) (.053)
------ ------ ------ ------ ------
Net asset value, end of period.............. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return................................ 2.00% 1.78% 2.47% 4.22% 5.39%
Ratio to average net assets:
Expenses, before reimbursement............ 1.09% 0.92% 0.99% 0.96% 0.93%
Expenses, net of reimbursement............ 1.00% 0.92% 0.99% 0.96% 0.93%
Net investment income, before
reimbursement........................... 1.88% 1.77% 2.46% 4.06% 5.26%
Net investment income..................... 1.97% 1.77% 2.46% 4.06% 5.26%
Net assets, end of period (000's omitted)... $37,654 $41,096 $45,844 $53,722 $57,881
</TABLE>
8
CUSTODY AGREEMENT
This AGREEMENT is effective __________, 19__, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and LEXINGTON TAX FREE MONEY FUND, INC. (the
"Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined
in Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank or its Subcustodian
for the account of the Customer, which cash shall not be subject to withdrawal
by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established with
one or more of its branches or Subcustodians. The Bank and Subcustodians are
authorized to hold any of the Securities in their account with any securities
depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit of
customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that such assets will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of
such Subcustodian except for safe custody or administration, and that the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, the Customer
will promptly return any such amount upon oral or written notification: (i)
that such amount has not been received in the ordinary course of business or
(ii) that such amount was incorrectly credited. If the Customer does not
promptly return any amount upon such notification, the Bank shall be entitled,
upon oral or written notification to the Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited. The Bank or
its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may
act for the Customer upon Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on
a contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions will
be credited or debited to the Accounts on the date cash or Securities are
actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts
in its discretion if the related transaction fails to settle
within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the related
transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer sends the Bank a written exception or objection
to any Bank statement within sixty (60) days of receipt, the Customer shall be
deemed to have approved such statement. In such event, or where the Customer
has otherwise approved any such statement, the Bank shall, to the extent
permitted by law, be released, relieved and discharged with respect to all
matters set forth in such statement or reasonably implied therefrom as though
it had been settled by the decree of a court of competent jurisdiction in an
action where the Customer and all persons having or claiming an interest in
the Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay
in the actual receipt of notice by the Bank or by its Subcustodians of any
payment, redemption or other transaction regarding Securities in the Custody
Account in respect of which the Bank has agreed to take any action under this
Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give
the Customer notice of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it
deems, in good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and where
bearer Securities are involved, proxies will be delivered in accordance with
Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank believes in good faith to have
been given by Authorized Persons or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold
the Bank harmless for the failure of an Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions with
respect to the Custody Account. The Customer shall be responsible for
safeguarding any testkeys, identification codes or other security devices
which the Bank shall make available to the Customer or its Authorized Persons.
<PAGE>
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets.
The Bank shall be liable to the Customer for any loss which shall
occur as the result of the failure of a Subcustodian to exercise
reasonable care with respect to the safekeeping of such Assets to
the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or
its Subcustodian to utilize reasonable care, the Bank shall be
liable to the Customer only to the extent of the Customer's direct
damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery
of such loss and without reference to any special conditions or
circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made negligently
or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether
pursuant to Instructions or otherwise within the scope of this
Agreement if such act or omission was in good faith, without
negligence. In performing its obligations under this Agreement,
the Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and any
related expenses with respect to income from or Assets in the
Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of
the Customer.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or
affect the value of Assets.
(viii) Neither party shall be liable to the other for any
loss due to forces beyond their control including, but not limited
to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or
acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the
Customer or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than
as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made
pursuant to this Agreement;
(v) review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in
Section 10) issuing Instructions shall bear any responsibility to
review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have
a material interest in a transaction, or circumstances are such that the Bank
may have a potential conflict of duty or interest including the fact that the
Bank or any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities, act as a
lender to the issuer of Securities, act in the same transaction as agent for
more than one customer, have a material interest in the issue of Securities,
or earn profits from any of the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to, legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under any
provision of this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration
of the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the Bank's
obligations under this Agreement. The Customer will indemnify the Bank
against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination of
books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking
to permit the Customer's independent public accountants reasonable access to
the records of any Subcustodian which has physical possession of any Assets as
may be required in connection with the examination of the Customer's books and
records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
MUTUAL FUND
SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances
or in other jurisdictions and of the remaining provisions will not in any way
be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise, or the
exercise of any other power or right. No waiver by a party of any provision
of this Agreement, or waiver of any breach or default, is effective unless in
writing and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
Customer: Richard Hisey
Lexington Management Corp.
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
or telex:
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under Section
13. If within sixty (60) days following receipt of a notice of termination by
the Bank, the Bank does not receive Instructions from the Customer specifying
the names of the persons to whom the Bank shall deliver the Assets, the Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or to Authorized Persons, or may continue to
hold the Assets until Instructions are provided to the Bank.
LEXINGTON TAX FREE MONEY FUND, INC.
By:____________________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By:____________________________________________
Title
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally came
, to me known, who being by me duly sworn, did
depose and say that he/she resides in at
;
that he/she is of
, the entity described in and which executed the foregoing
instrument; that he/she knows the seal of said entity, that the seal affixed
to said instrument is such seal, that it was so affixed by order of said
entity, and that he/she signed his/her name thereto by like order.
Sworn to before me this
day of , 19 .
Notary
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,19 ,
before me personally came , to me known, who being by
me duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the corporation
described in and which executed the foregoing instrument; that he/she knows
the seal of said corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.
Sworn to before me this
day of , 19 .
Notary
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made by and between LEXINGTON TAX FREE MONEY FUND,
INC., a Maryland corporation (the Fund ), and LEXINGTON MANAGEMENT
CORPORATION, a Delaware corporation (the Administrator ), with respect to
the following recital of facts:
RECITAL
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
1940 Act ), and the rules and regulations promulgated thereunder;
WHEREAS, the Administrator is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the Advisers Act ),
and engages in the business of acting as an investment adviser and an
administrator of investment companies;
WHEREAS, the Fund, and the Administrator desire to enter into an
agreement to provide for administrative services for the Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADMINISTRATOR
The Administrator is hereby appointed to serve as the Administrator
to the Fund, to provide the administrative services described herein and
assume the obligations set forth in Section II, subject to the terms of this
Agreement and the control of the Fund s Board of [Directors/Trustees] (the
Board ). The administrator shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided
or authorized, no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADMINISTRATOR
In carrying out the terms of this Agreement, the Administrator shall:
A. provide office space, equipment and facilities (which may be
the Administrator s or its affiliates ) for maintaining the
Fund s organization, for meetings of the Board and the
shareholders, and for performing administrative services
hereunder;
B. supervise and manage all aspects of the Fund s operations
(other than investment advisory activities), and supervise
relations with, and monitor the performance of, custodians,
depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and
other persons in any capacity deemed to be necessary and
desirable by the Board;
C. determine and arrange for the publication of the net asset
value of the Fund;
D. provide non-investment related statistical and research data
and such other reports, evaluations and information as the Fund
may request from time to time;
E. provide internal clerical, accounting and legal services, and
stationery and office supplies;
F. prepare, to the extent requested by the Fund, the Fund s
prospectus, statement of additional information, proxy
statements and annual and semi-annual reports to shareholders;
G. arrange for the printing and mailing (at the Fund s expense) of
proxy statements and other reports or other materials provided
to the Fund s shareholders;
H. prepare for execution and file all the Fund s federal and state
tax returns and required tax filings other than those required
to be made by the Fund s custodian and transfer agent;
I. prepare periodic reports to and filings with the Securities and
Exchange Commission (the SEC ) and state Blue Sky authorities
with the advice of the Fund s counsel;
J. maintain the Fund s existence, and during such times as the
shares of the Fund are publicly offered, maintain the
registration and qualification of the Fund s shares under the
federal and state law;
K. keep and maintain the financial accounts and records of the
Fund;
L. develop and implement, if appropriate, management and
shareholder services designed to enhance the value or
convenience of the Fund as an investment vehicle;
M. provide the Board on a regular basis with reports and analyses
of the Fund s operations and the operations of comparable
investment companies;
N. respond to inquiries from shareholders or participants of
employee benefit plans (for which the administrator or any
affiliate provides recordkeeping) relating to the Fund,
concerning, among other things, exchanges among Funds, or refer
any such inquiries to the Fund s officers or the Fund s
transfer agent;
O. provide participant recordkeeping services for participants in
employee benefit plans for which the Administrator or any
affiliate provides recordkeeping services; and
P. provide such information as may be reasonably requested by a
shareholder representative of or a participant in an employee
benefit plan to comply with applicable federal or state laws.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator hereby represents and warrants to the Fund as
follows:
1. Due Incorporation and Organization. The Administrator is
duly organized and is in good standing under the laws of the
State of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations hereunder.
2. Best Efforts. The Administrator at all times shall provide
its best judgment and effort to the Fund in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF THE FUND AND THE FUND
The Fund hereby represents and warrants to the Administrator as
follows:
1. Organization. The Fund has been duly organized as a
corporation under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
terms.
2. Registration. The Fund is registered as an investment
company with the SEC under the 1940 Act and shares of the Fund
are registered or qualified for offer and sale to the public
under the Securities Act of 1933, as amended (the 1933 Act ),
and all applicable state securities laws. Such registrations
or qualifications will be kept in effect during the term of
this Agreement.
IV. CONTROL BY THE BOARD
Any activities undertaken by the administrator pursuant to this
Agreement on behalf of the Fund shall at all times be subject to any
directives of the Board.
V. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the
Administrator shall at all times conform to:
A. all applicable provisions of the 1940 Act;
B. the provisions of the registration statement of the Fund under
the 1933 Act and the 1940 Act;
C. the provisions of the Fund s chartering documents, as amended;
D. the provisions of the By-Laws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VI. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement
may be furnished by any directors, officers or employees of the
Administrator or by any affiliates of the Administrator under the
Administrator s supervision.
VII. COMPENSATION
For the services to be rendered, the facilities furnished and the
expenses assumed by the administrator, the Fund shall pay to the
Administrator an annual fee, payable monthly, equal to the pro-rata portion
of the Administrator s actual cost in providing such services, facilities
and expenses.
VIII. NON-EXCLUSIVITY
The services of the Administrator to the Fund are not to be deemed to
be exclusive, and the Administrator shall be free to render administrative
or other services to others (including other investment companies) and to
engage in other activities, so long as its services under this agreement are
not impaired thereby. It is understood and agreed that officers and
directors of the Administrator may serve as officers or [directors/trustees]
of the Fund, and that officers of [directors/trustees] of the Fund may serve
as officers or directors of the Administrator to the extent permitted by
law; and that the officers and directors of the Administrator are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers,
directors or trustees of any other firm or trust, including other investment
companies.
IX. TERM
This Agreement shall become effective at the close of business on the
date hereof and shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund s [directors/trustees] who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, or by
the vote of the holders of a majority (as so defined) of the outstanding
voting securities of the Fund and by such vote of the [directors/trustees].
X. TERMINATION
This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Fund s [directors/trustees] or by vote of a
majority of the Fund s outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Administrator, on sixty (60) days
written notice to the other party.
XI. LIABILITY OF ADMINISTRATOR AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator or its officers, directors
or employees, or reckless disregard by the Administrator of its duties
under this Agreement, the Administrator shall not be liable to the
Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
looses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder
on the part of the Administrator or any officer, director or employee
of the Administrator, to the extent permitted by applicable law, the
Fund hereby agrees to indemnify and hold the Administrator harmless
from and against all claims, actions, suits and proceedings at law or
in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating
to the sale, purchase, pledge of, advertisement of, or solicitation
of sales or purchases of any security (whether of the Fund or
otherwise) by the Fund, its officers, directors, employees or agents
in alleged violation of applicable federal, state or foreign laws,
rules or regulations.
XII. MATERIALS FOR DISTRIBUTION TO SHAREHOLDERS
During the term of this Agreement, the Fund shall furnish to the
Administrator at its principal office copies of all prospectuses, proxy
statements, reports to shareholders, sales literature and other material
referring to the Administrator that were prepared for distribution to
shareholders of the Fund and to participants in employee benefit plans
owning interests in the Fund (prior to the public distribution of such
materials). The Fund shall not use any such materials that refer to the
Administrator if the Administrator reasonably objects in writing within five
business days (or such other time as the parties may agree) after receipt
thereof, unless prior to such use the material is modified in a manner that
is satisfactory to the Administrator. Subsequent to the termination of this
Agreement, the Fund will continue to furnish to the Administrator copies of
such materials. The Fund shall also furnish or otherwise make available to
the Administrator other information relating to the business affairs of the
Fund as the Administrator reasonably requests from time to time.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the
Administrator and that of the Fund for this purpose shall be Park 80 West,
Plaza Two, Saddle Brook, New Jersey, 07663.
XIV. QUESTIONS OF INTERPRETATIONS
This Agreement shall be governed by the laws of the State of New
Jersey. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to
said Act. In addition, where the effect of a requirement of the 1940 Act
reflected in the provisions of this Agreement is revised by rule, regulation
or order of the SEC, such provisions shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the ____ day of
_________________, 199__.
LEXINGTON TAX FREE MONEY FUND, INC.
Attest: By: _______________________________
Name Title
________________________
LEXINGTON MANAGEMENT CORPORATION
Attest: By: ______________________________
Name Title
________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 21, 1995
Lexington Tax Free Money Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Re: Lexington Tax Free Money Fund, Inc.
Registration No. 2-57786
Post-Effective Amendment to Registration
Statement on Form N-1A
Gentlemen:
We hereby consent to the reference of our firm as Counsel in the
Post-Effective Amendment No. 21 to the Registration Statement on Form N-1A of
Lexington Tax Free Money Fund, Inc.
Very truly yours,
Independent Auditors' Consent
The Board of Directors
Lexington Tax Free Money Fund, Inc.:
We consent to the use of our report dated February 6, 1995, included in the
Registration Statement on form N-1A and to the reference to our firm under the
heading "Financial Highlights" in the Prospectus.
KPMG PEAT MARWICK LLP
New York, New York
April 26, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-
end audited financial statements dated December 31, 1994 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 36,722,859
<INVESTMENTS-AT-VALUE> 36,722,859
<RECEIVABLES> 1,182,519
<ASSETS-OTHER> 103,533
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,008,911
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 355,609
<TOTAL-LIABILITIES> 355,609
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,653,842
<SHARES-COMMON-STOCK> 37,653,842
<SHARES-COMMON-PRIOR> 41,095,831
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,653,842
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,185,193
<OTHER-INCOME> 0
<EXPENSES-NET> 399,743
<NET-INVESTMENT-INCOME> 785,450
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 785,450
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 785,450
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,605,181
<NUMBER-OF-SHARES-REDEEMED> 29,739,384
<SHARES-REINVESTED> 692,214
<NET-CHANGE-IN-ASSETS> (3,441,989)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199,643
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 436,018
<AVERAGE-NET-ASSETS> 39,928,434
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
