As filed with the Securities and Exchange Commission on March 9, 1999
File No.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
Amendment No. ___
LEXINGTON GOLDFUND, INC.
(Exact name of Registrant as Specified in Trust Instrument)
Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663
(Address of Principal Executive Office)
(201) 845-7300
(Area Code and Telephone Number)
Lisa Curcio Copy to:
Park 80 West Plaza Two Carl Frischling, Esq.
Saddle Brook , NJ 07663 Kramer Levin Naftalis & Frankel LLP
(Name and Address of Agent for Service) 919 Third Avenue
New York, New York 10022
The Registrant proposes that this filing becomes effective on the thirteenth
day after the date which it is filed, pursuant to Rule 488.
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
Title of Securities Being Registered: Shares of Beneficial Interest. No Filing
Fee is due because of reliance on Section 24(f).
<PAGE>
Cross-Reference Sheet
Lexington Goldfund, Inc.
Part A Form N-14
Item No. Prospectus/Proxy Caption
-------- ------------------------
1(a) Cross Reference Sheet of Lexington Goldfund, Inc.
(b) Cover Page - Special Meeting of Shareholders May 19, 1999 -
Lexington Goldfund, Inc. - Combined Proxy Statement and Prospectus.
2(a) Not applicable.
(b) Table of Contents.
3(a) Part 2 - The Proposal - The Proposal to Approve the Reorganization of
Lexington Strategic Investments Fund, Inc. How the Fees of the Fund
Compare to the Fees of the Lexington Goldfund, Inc.
(b) Part 1 - An Overview; Part 2 - The Proposal - To Approve the
Reorganization of Lexington Strategic Investmetns Fund, Inc -
Introduction - How the Reorganization Works.
(c) Part 2 - The Proposal - To Approve the Reorganization of the Lexington
Strategic Investment Funds, Inc. - Comparison of Potential Risks and
Rewards.
4(a) Part 1 - An Overview; Part 2 - The Proposal - To Approve the
Reorganization of Lexington Strategic Investments Fund, Inc. - How the
Reorganization Works, Information about the Reorganization - Why We
Want to Reorganize the Fund; Considerations by the Boards of
Directors; Comparison of Shareholder Rights.
(b) Part 2 - The Proposal - To Approve the Reorganization of the Lexington
Strategic Investments Fund, Inc. - Capitalization of the Funds.
5(a) Part 2 - The Proposal - To Approve the Reorganization of the Lexington
Strategic Investments Func, Inc. - How the Fund Compares to Lexington
Goldfund, Inc., - Part 5- Prospectus for Shares of Lexington Goldfund,
Inc.
(b) - (e) Not applicable.
(f) Combined Proxy Statement and Prospectus - Cover Page.
6(a) Part 2 - The Proposal - To Approve the Reorganization of the Lexington
Strategic Investments Func, Inc. - How the Fund Compares to Lexington
Goldfund, Inc.
<PAGE>
(b) Combined Proxy Statement and Prospectus - Part 2 - The Proposal - How
the Fund Compares to Lexington Goldfund, Inc.
(c)-(d) Not applicable.
7(a) Part 3 - More on Proxy Voting and Shareholder Meetings.
(b) Not applicable.
(c) Part 3 - More on Proxy Voting and Shareholder Meetings.
8 Not applicable.
9 Not applicable.
Part B Statement of Additional Information Caption
------ -------------------------------------------
10 Front Cover Page.
11 Table of Contents.
12(a) Additional Information about the Registrant.
(b)-(c) Not applicable.
13 Additional Information about Lexington Strategic Investments Fund,
Inc.
14 Financial Statements.
<PAGE>
PRELIMINARY PROXY MATERIALS FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Lexington Strategic Investments Fund, Inc. will host a Special Meeting
of Shareholders on May 19, 1999, at 9:30 a.m., Eastern Time. The Special Meeting
will be held at Lexington Strategic Investments Fund, Inc.'s offices, Park 80
West Plaza Two, Saddle Brook, New Jersey. At the meeting, we will ask
shareholders to vote on:
1. A proposal to reorganize the Lexington Strategic Investments Fund,
Inc. into the Lexington Goldfund, Inc.
2. Any other business properly brought before the meeting.
By Order of the Boards of Directors
Lisa Curcio, Secretary
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
_________________, 1999
<PAGE>
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE EASILY AND QUICKLY BY MAIL OR BY PHONE (Toll-Free).
JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR
ON YOUR ENCLOSED PROXY CARD.
- --------------------------------------------------------------------------------
LEXINGTON STRATEGIC INVESTMENTS FUND INC.
SPECIAL MEETING OF SHAREHOLDERS
MAY 19, 1999
Lexington Strategic Goldfund, Inc.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated __________, 1999
INTRODUCTION ------------ This Combined Proxy Statement and Prospectus
is being provided for a special meeting of shareholders of Lexington Strategic
Investments Fund, Inc. to be held on May 19, 1999. We've divided the Combined
Proxy Statement and Prospectus into seven parts:
Part 1-- An Overview
Part 2 -- Lexington Strategic Investments Fund's Proposals
Part 3 -- More on Proxy Voting and Shareholder Meetings
Part 4 -- Lexington Strategic Investments Fund's Information
Part 5 -- Prospectus for Lexington Goldfund, Inc.
Part 6 -- Form of Agreement and Plan of Reorganization and Liquidation
Part 7 -- Financial Information about Lexington Goldfund, Inc.
Please read the entire proxy statement before voting. If you have any
questions, please call us at (201) 845-7300 in the Northern New Jersey area or
(800) 526-0056.
This Combined Proxy Statement and Prospectus was first mailed to
shareholders the week of _____________, 1999.
This Combined Proxy Statement and Prospectus contains information
about Lexington Goldfund, Inc. that you should know. Please
keep it for future reference. A Statement of Additional Information
dated _________, 1999 is incorporated by reference.
<PAGE>
Neither the Securities and Exchange Commission (the SEC) nor any
state securities commission has approved or disapproved these
securities, or determined that this Combined Proxy Statement and
Prospectus is truthful or complete. Anyone who tells you
otherwise is committing a crime.
o Shares of Lexington Goldfund, Inc. are not insured by the FDIC.
o Shares of Lexington Goldfund, Inc. are not deposits of or
guaranteed by any of its affiliates, or any other bank.
o You can lose money by investing in Lexington Goldfund, Inc.,
because it is subject to investment risks.
Lexington Goldfund, Inc. and Lexington Strategic Investments Fund, Inc.
are required by federal law to file reports, proxy statements and other
information with the SEC. The SEC maintains a Web site that contains information
about Lexington Goldfund, Inc. Any such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's New
York Regional Office, Seven World Trade Center, New York, NY 10048 and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such materials can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
<PAGE>
Table of Contents
Part 1 - An Overview..........................................................1
Part 2 - The Proposal.........................................................1
Introduction....................................................1
How the Reorganization Works....................................1
Why We Want to Reorganize the Fund..............................2
Considerations by the Boards of Directors.......................4
How The Fund, Compares to Lexington Goldfund, Inc.
Comparison of Investment Objectives..........................5
Comparison of Investment Policies and Strategies.............6
Comparison of Potential Risks and Rewards....................6
Comparison of Operations.....................................8
Investment Advisory Agreement............................8
Administrator and Distributor............................8
Purchase, Redemption and Exchange Procedures ............8
How Fund Shares are Priced ..............................8
Dividends and Capital Gains Distribution ....................9
Tax Issues ..............................................9
Distribution of the Fund's Shares ......................10
Directors...............................................10
Comparison of Shareholder Rights............................10
Capitalization of the Funds'................................10
Required Vote........................................................10
Board Recommendation.................................................10
Part 3 - More on Proxy Voting and Shareholder Meetings........................11
Part 4 - Fund Information.....................................................12
Part 5 - Prospectus for Shares of Lexington Goldfund, Inc.....................13
Part 6 - Forms of Agreement and Plan of Reorganization and Liquidation .......13
Part 7 - Financial Information about Lexington Goldfund, Inc. ................31
i
<PAGE>
PART 1 - AN OVERVIEW
The Board of Directors of the Lexington Strategic Investments Fund,
Inc. (the "Fund") has sent you this Combined Proxy Statement and Prospectus to
ask for your vote on a proposal to approve an Agreement and Plan of
Reorganization and Liquidation relating to the Fund. This proposal will be
presented at a shareholder meeting on May 19, 1999.
PART 2 - THE PROPOSAL
TO APPROVE THE REORGANIZATION OF LEXINGTON STRATEGIC
INVESTMENTS FUND, INC.
Introduction
The Board of Directors of the Fund has approved a proposal to
reorganize the Fund into Lexington Goldfund, Inc.
>> The primary purpose of this proposal is to allow shareholders
to invest in gold and gold-related Securities within a fund that
Neither you nor the Fund will have any federal income tax liability
solely as a result of the reorganization.
To adopt the Agreement and Plan of Reorganization, we need shareholder
approval.
The next few pages of this Combined Proxy Statement and Prospectus
discusses some of the details of the proposed reorganization and how it will
affect the Fund.
How the Reorganization Works
The Fund has entered into an "Agreement and Plan of Reorganization and
Termination." If shareholders approve this proposal, the Fund would reorganize
into Lexington Goldfund, Inc. The reorganization would work as follows:
-> The Fund would transfer all its assets and liabilities to
Lexington Goldfund, Inc., in exchange for shares of Lexington
Goldfund, Inc.
-> The Fund would distribute Lexington Goldfund, Inc. shares it
receives to you. You would receive the same dollar value of
Lexington Goldfund, Inc. shares as you owned of the Fund's
shares.
-> You will not have to pay any Federal income tax solely as a
result of the reorganization.
-> You would become a shareholder of Lexington Goldfund, Inc. The
Fund would then cease operations.
<PAGE>
A few words about this Combined Proxy Statement and Prospectus
This Combined Proxy Statement and Prospectus is a proxy statement for a
special meeting of shareholders of the Fund and a prospectus for shares of the
Lexington Goldfund, Inc. that you will receive in the reorganization.
How the Fees of the Fund Compare to the Fees of Lexington Goldfund, Inc.
Shareholder transaction expenses are shown below:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Lexington Strategic Lexington Goldfund, Inc.
Investments Fund, Inc.
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 5.75% None
(as a percentage of offering price)
Sales Charge Imposed on Reinvested Dividends None None
Deferred Sales Charge None None
Redemption Fees None None
Exchange Fees None None
</TABLE>
The Fund, like all mutual funds, incurs certain expenses in its
operations. The Fund pays these expenses from its assets and, as a shareholder
of the Fund, you pay these expenses indirectly. Lexington Goldfund, Inc. also
incurs expenses in its operations. These expenses include management fees, as
well as the costs of maintaining accounts, administration, providing shareholder
liaison services and distribution services, and other activities. The following
table compares the expenses paid by the Fund, as a percentage of average daily
net assets, with the expenses that you will incur indirectly as a shareholder of
Lexington Goldfund, Inc., after the reorganization.
<TABLE>
<CAPTION>
Lexington Strategic Investment Lexington Goldfund, Inc.
Annual Fund Operating Expenses Fund, Inc. ------------------------
----------
<S> <C> <C>
Management Fees 1.00% 0.97%(1)
Distribution (Rule 12b-1) Fees None 0.07%
Other Expenses 1.96% 0.70%
Total Fund Operating Expenses 2.96% 1.74%
</TABLE>
(1) The management fee is based upon the average daily net assets of the Fund
at an annual rate of 1.00% of net asstes up to $50,000,000 and 0.75% of the
net assets in excess of $50,000,000.
2
<PAGE>
Example
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in Lexington Goldfund, Inc. and other mutual
funds.
The Example assumes that you invest $10,000 in the Fund and Lexington
Goldfund, Inc. for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your investment has a
5% return each year and that the Fund's operating expenses remain the same.
Although your actual costs or returns may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lexington Strategic Investment Fund, Inc. $856.83 $1,437.84 $2,042.81 $3,666.56
Lexington Goldfund, Inc. $176.84 $547.99 $943.74 $2,051.67
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Information About the Reorganization
This section describes some information you should know about the
reorganization of the Fund.
The Agreement and Plan of Reorganization and Liquidation
The Fund has entered into an Agreement and Plan of Reorganization and
Liquidation with Lexington Goldfund, Inc. In this Combined Proxy Statement and
Prospectus, we refer to the Agreement and Plan of Reorganization and Liquidation
as the "Plan of Reorganization."The transactions described in the Plan of
Reorganization are referred to as the "reorganization."
Description of transaction. The Plan of Reorganization provides that
the Fund will transfer all of its assets to Lexington Goldfund, Inc., in
exchange for shares of Lexington Goldfund, Inc. Lexington Goldfund, Inc. also
will assume all of the Fund's liabilities. After this transaction, the Fund will
give you shares of Lexington Goldfund, Inc. The total value of the shares you
receive will be equal to the aggregate net asset value of the Fund shares you
owned at the end of business on the day the transaction occurs. You will not pay
a sales charge or any other fee as part of this transaction.
Please see the Plan of Reorganization for a more detailed description
of the reorganization. You can find a copy of a form of the Plan of
Reorganization in Part 6 of this Combined Proxy Statement and Prospectus.
The reorganization will be "tax-free." We expect the reorganization to
be "tax-free." That is, the Fund will obtain an opinion of counsel saying, in
effect, that neither you nor the Fund will have to pay any federal income taxes
solely as a result of the reorganization. The Fund, however, may pay a dividend
or distribute a taxable gain prior to the reorganization. You may be liable for
taxes on those distributions.
3
<PAGE>
Conditions of the reorganization. Before the reorganization can occur,
the Fund and Lexington Goldfund, Inc. must satisfy certain conditions. For
example:
> The Fund must receive an Opinion of Counsel stating, in effect, that
neither you nor the Fund will pay any federal income taxes solely as a
result of the reorganization.
> The Fund and Lexington Goldfund, Inc. must receive an Opinion of
Counsel certifying to certain matters concerning their legal
existence.
> Shareholders of the Fund must approve the reorganization.
Why We Want to Reorganize the Fund
Gold has generally been out of favor as an investment category for a
number of years. In August 1998 it touched a 17-year low of approximately $275
an ounce. This was lower than prior lows of 1982, 1985 and 1993. While we
believe the events that led to lower gold bullion prices may be behind us (i.e.
central bank sales, record lending to gold producers, Far Eastern gold sales and
concern over the European Central Bank) the length of the down trend has had a
major impact on gold producers around the world. The impact has been the
greatest on high cost gold mines such as those located in South Africa, the
world's largest producer of gold. The Fund is concentrated in South Africa gold
mining shares which tend to be most closely related to movements in the price of
bullion. The effect of lower gold prices over a prolonged period of time has
caused many of these mines to merge. This consolidation is taking place on a
global basis. The result of the consolidation has been: (i) fewer gold mining
companies to invest in, and (ii) pressure on the respective gold mining shares.
The pressure on gold mining shares are the result of combinations that are
creating excessive weightings for portfolio managers. These managers have a
responsibility to maintain proper diversification, with shares being sold to
reduce overweightings.
In order to continue to provide shareholders with investment
opportunities in gold and to provide company diversification in this gold
investment environment, it is being proposed that the Fund merge into Lexington
Goldfund, Inc. Lexington Goldfund, Inc., one of America's first gold oriented
mutual funds, is diversified on a worldwide basis and includes a significant
portfolio weighting in South Africa. It is managed by the same management team
as the Fund and enjoys a significantly lower expense ratio with no sales
charges.
Considerations by the Boards of Directors
The Board of Directors of the Fund approved the proposed Plan of
Reorganization on February 18, 1999. The Board of Directors concluded that the
reorganization of the Fund
o was in the best interests of the Fund's shareholders, and
o would not result in any dilution of the value of your investment.
4
<PAGE>
In approving the Plan of Reorganization, the Board of Directors
(including a majority of the Directors who are not "interested persons")
considered that, among other things:
o The policies of Lexington Goldfund, Inc. are similar to those of the
Fund.
o You will not pay a sales charge to become a shareholder of Lexington
Goldfund, Inc.
o Shareholders will not have to pay any federal income taxes solely as a
result of the reorganization.
o Lexington Goldfund, Inc. has a lower expense ratio.
Similarly, the Board of Directors of Lexington Goldfund, Inc. approved
the Plan of Reorganization on February 18, 1999. Lexington Goldfund, Inc.
Directors concluded that the reorganization of the Fund
o was in the best interests of Lexington Goldfund, Inc. shareholders,
and
o would not dilute the value of their investments.
How the Fund Compares to Lexington Goldfund, Inc.
For complete information about the Fund, please refer to the Fund's
prospectus. If you need a copy of the prospectus, you can call us at (201)
845-7300 or 1-800-526-0056 for a free copy. The information contained in the
Fund's prospectus is incorporated by reference into this Combined Proxy
Statement and Prospectus.
For complete information about Lexington Goldfund, Inc., please refer
to the prospectus included with this Combined Proxy Statement and Prospectus.
Comparison of Investment Objectives
The following table compares the investment objectives of the Funds.
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------------------------------------------
Lexington Strategic Investment Fund, Inc. Lexington Goldfund, Inc.
- --------------------------------------------------------- ---------------------------------------------------
<S> <C>
The Fund's principal investment objective is capital The Lexington Goldfund's investment objective is
appreciation. Current income is a secondary objective. to attain capital appreciation and such hedge
against loss of buying
power as may be
obtained through
investment in gold and
securities of
companies engaged in
mining or processing
gold throughout the
world.
- --------------------------------------------------------- ---------------------------------------------------
5
<PAGE>
Comparison of Investment Policies and Strategies
The following table compares the principal investment policies and
strategies of the Fund.
- --------------------------------------------------------- ---------------------------------------------------
Lexington Srategic Investment Fund, Inc. Lexington Goldfund, Inc.
- --------------------------------------------------------- ---------------------------------------------------
The investment concentration of the Fund's assets is Under normal conditions the Lexington Goldfund,
currently in the common stock of gold and other Inc. will invest at least 65% of the value of its
precious metals mining companies. The Fund may also total assets in gold and the securities of
invest in bullion. As the highest production of gold companies engaged in mining or processing gold
and other precious metals is currently taking place in ("gold-related securities"). Lexington Goldfund,
the Republic of South Africa, management anticipates Inc. may also invest in other precious metals,
that a substantial portion of the Fund's portfolio will including platinum, palladium and silver. The
continue to consist of securities of issuers of that Fund intends to invest less than half of the
area. value of its total assets in gold bullion and
other precious metals. Gold-related securities
would include securities of foreign issuers.
- --------------------------------------------------------- ---------------------------------------------------
</TABLE>
Comparison of Potential Risks and Rewards
Each of the Funds has its own risks and potential rewards. The bar
charts and tables below compare the potential risks and rewards of investing in
the Fund and Lexington Goldfund, Inc.
6
<PAGE>
Each bar chart provides an indication of the risks of investing in each
Fund by showing changes in the Fund's performance from year to year, for the
last ten years or since the inception of the Fund. The table shows how each
Fund's average annual returns for one year, five years and ten years (or since
inception) compare to the returns of a broad-based securities market index. The
figures shown assume reinvestment of dividends and distributions. Keep in mind
that past performance does not indicate future results.
Lexington Strategic Investments Fund, Inc.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
300.00%
269.78%
- ------------ ---------- --------- ---------- ---------- --------- ---------- ---------
250.00%
- ------------ ---------- --------- ---------- ---------- --------- ---------- ---------
200.00%
---------- --------- ---------- ---------- --------- ---------- ---------
150.00%
---------- --------- ---------- ---------- --------- ---------- ---------
100.00%
%
---------- --------- ---------- ---------- --------- ---------- ---------
50.00%
% % 11.33% % % %
========== ======== ========= =========== ======== ========== =========
-50.00% -14.72% -11.07% -11.07%
-64.02% % -45.67%
---------- --------- ---------- ---------- --------- ---------- ---------
-100. %
---------- --------- ---------- ---------- --------- ---------- ---------
-150.%
---------- --------- ---------- ---------- --------- ---------- ---------
1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------
</TABLE>
Lexington Goldfund, Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.00%
86.96%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
80.00%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
60.00%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
40.00%
23.62% % % %
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
20.00%
% % 7.84% % %
========= ========== ========== ========= ========== ========= ========== ========== =========
-20.00% -6.14% -7.28% -1.89% -6.39%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
-40.00% -20.65% -20.51%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
-60.00% -42.98%
--------- ---------- ---------- --------- ---------- --------- ---------- ---------- ---------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Fund Highest Quarterly Return Lowest Quarterly Return
<S> <C> <C>
Lexington Strategic Investments Fund, Inc. 72.93% 2nd Quarter 1993 (27.99%) 4th Quarter 1997
Lexington Goldfund, Inc. 34.36% 2nd Quarter 1993 (29.07%) 4th Quarter 1997
</TABLE>
The Average Annual Total Returns for the Funds for the periods ended
December 31, 1998, are as follows:
<TABLE>
Average Annual Total Returns
(for the Periods ended December 31, 1998) Past One Year Past 5 Years Past 10 Years
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Lexington Strategic Investments Fund, Inc. (15.89%) (17.39%) (7.73%)*
Lexington Goldfund, Inc. (6.39%) (12.14%) (3.28%)
</TABLE>
*From date of inception, January 2, 1992.
Comparison of Operations
Investment Advisory Agreement. Both the Fund and Lexington Goldfund,
Inc. have the same Investment Advisor. The Investment Advisory Agreement for
both Funds are substantially the same as to their material terms.
Administrator and Distributor. Both the Fund and Lexington Goldfund,
Inc. have the same Adminstrator and Distributor who provides services to both
Funds under substantially similar provisions.
Purchase, Redemption and Exchange Procedures. The purchase, redemption
and exchange procedures for both the Fund and the Lexington Goldfund, Inc. are
the same and have not changed. Please refer to either Fund's prospectus for more
information.
How Fund Shares Are Priced. How and when we calculate both Funds' price
or net asset value (NAV) determines the price at which you will buy or sell
shares. The net asset value of each fund is determined once daily as of 4:00
p.m., New York time, on each day that the New York Stock Exchange is open for
trading. Per share net asset value is calculated by dividing the value of each
fund's total net assets by the total number of that fund's shares then
outstanding.
Portfolio securities are valued using current market valuations; either
the last reported sales price or, in the case of securities for which there is
no reported last sale and fixed-income securities, the mean between the closing
bid and asked prices. Securities for which market quotations are not readily
available or which are illiquid are valued at their fair values as determined in
good faith under the supervision of the Funds' officers, and by Lexington
Management Corporation and the Boards of Directors, in accordance with methods
that are specifically authorized by the Boards. Short-term obligations with
maturities of 60 days or less are valued at amortized cost as reflecting fair
value.
The value of securities denominated in foreign currencies and traded on
foreign exchanges or in foreign markets will be translated into U.S. dollars at
the last price of their
8
<PAGE>
respective currency denomination against U.S. dollars quoted by a major bank or,
if no such quotation is available, at the rate of exchange determined in
accordance with policies established in good faith by the Boards of Directors.
Because the value of securities denominated in foreign currencies must be
translated into U.S. dollars, fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of fund shares even
without any change in the foreign-currency denominated values of such
securities.
Precious metals are valued using the mean between the closing bid and asked
quotations for precious metals at the time of the close of the New York Stock
Exchange, as supplied by Republic Bank of New York, or other broker-dealers or
banks approved by the Fund.
Because foreign securities markets may close before the funds determine
their net asset values, events affecting the value of portfolio securities
occurring between the time prices are determined and the time the funds
calculate their net asset values may not be reflected unless the Manager, under
supervision of the Boards of Directors, determines that a particular event would
materially affect a fund's net asset value.
Dividends and Capital Gains Distributions. Each Fund distributes
substantially all its net investment income and net capital gains to
shareholders each year. Unless you request cash distributions in writing, all
dividends and other distributions will be reinvested automatically in additional
shares and credited to your account.
The Board of Directors has discretion in determining the amount and
frequency of the distributions. You are not guaranteed any distributions.
Tax Issues. The Fund and Lexington Goldfund, Inc. have each elected and
intends to continue to qualify to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), by distributing substantially all of its net investment income and net
capital gains to its shareholders and meeting other requirements of the Code
relating to the sources of its income and diversification of its assets.
Accordingly, Lexington Goldfund, Inc. generally will not be liable for federal
income tax or excise tax based on net income except to the extent its earnings
are not distributed or are distributed in a manner that does not satisfy the
requirements of the Code. If Lexington Goldfund, Inc. is unable to meet certain
Code requirements, it may be subject to taxation as a corporation. Funds
investing in foreign securities also may incur tax liability to the extent they
invest in "passive foreign investment companies."
For federal income tax purposes, any dividends derived from net
investment income and any excess of net short-term capital gain over net
long-term capital loss that investors (other than certain tax-exempt
organizations that have not borrowed to purchase fund shares) receive from
Lexington Goldfund, Inc. are considered ordinary income. Distributions by
Lexington Goldfund, Inc. of the excess of its net long-term capital gain over
its net short-term capital loss are treated by shareholders as long-term capital
gains regardless of the length of time the shareholder has owned his or her
shares. Distributions of income and capital gains are taxed in the manner
described above, whether they are taken in cash or are reinvested in additional
shares of Lexington Goldfund, Inc.
9
<PAGE>
Lexington Goldfund, Inc. will inform its investors of the source of
their dividends and distributions at the time they are paid, and will promptly
after the close of each calendar year advise investors of the tax status of
those distributions and dividends. Investors (including tax-exempt and foreign
investors) are advised to consult their own tax advisers regarding the
particular tax consequences to them of an investment in shares of the Lexington
Goldfund, Inc.
Distribution of the Funds' Shares. Lexington Goldfund, Inc has adopted
a plan under Rule 12b-1 for the sale and distribution of shares. Under the
distribution plan, Lexington Goldfund, Inc may pay fees up to 0.25% of their
average daily net assets for distribution services.
Directors. The Boards of Directors of the Fund and Lexington Goldfund,
Inc. are responsible for the direction and supervision of the Funds' operations.
Comparison of Shareholder Rights
Your Shareholder Rights will remain the same with Lexington Goldfund,
Inc.
Capitalization of the Funds
The table below shows existing capitalization as of December 31, 1998,
as well as pro forma capitalization as of that date, which reflects the impact
of any corporate actions, including stock splits and accounting adjustments,
required to facilitate the reorganization. For these reasons, the total pro
forma combined Total Net Assets may differ from the combined net assets of the
Funds prior to the reorganization.
<TABLE>
<CAPTION>
Total Net Assets (000) Shares Outstanding (000)
---------------------- ------------------------
<S> <C> <C>
Lexington Strategic Investments Fund, Inc. $ 17,473,659 $ 16,149,619
Lexington Goldfund, Inc. $50,841,296 $ 16,754,890
Pro Forma Combined $68,314,955 $ 22,521,774
</TABLE>
Required Vote
The Fund's organizational documents require a vote of a majority of the
shareholders that are present, whether in person or by proxy, at a meeting to
approve the Proposal so long as there is a quorum at the meeting. A quorum is
present when one-third of the total votes entitled to be cast are represented in
person or by proxy at the Special Meeting of Shareholders.
Board Recommendation
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL.
10
<PAGE>
PART 3 - MORE ON PROXY VOTING AND SHAREHOLDER MEETINGS
General Information About Proxy Voting
The Board of Directors of the Fund is soliciting your proxy to vote on
the matters described in this Combined Proxy Statement and Prospectus. We expect
to solicit proxies primarily by mail, but representatives of Lexington or its
affiliates or others may communicate with you by mail or by telephone or other
electronic means to discuss your vote. The cost of the solicitation, the
printing and mailing of proxy material and the cost of holding the meeting will
be borne by both the Fund and Lexington Goldfund, Inc. in equal proportions. We
will ask broker-dealers and other institutions that hold shares for the benefit
of their customers to send the proxy materials to the beneficial owners and to
obtain authorization to vote on their behalf.
You may vote directly over the telephone by calling (800) 526-0056. You
may also fax your ballot to (201) 845-3534 or return it by mail.
Only shareholders of record of the Fund at the close of business on the
record date, ____________, 1999, may vote at the special meeting. As of the
record date, the Fund had______________ shares issued and outstanding, each
share being entitled to one vote.
As of ____________, 1999, the record date, the Directors and officers
of the Fund, as a group, owned less than 1% of the Fund's outstanding shares
You may cast one vote for the proposal for each whole share that you
own of the Fund. We count your fractional shares as fractional votes. If we
receive your proxy before the special meeting date, we will vote your shares as
you instruct the proxies. If you sign and return your proxy, but do not specify
instructions, we will vote your shares in favor of the proposal. You may revoke
your proxy at any time before the special meeting if you notify us in writing,
or if you attend the special meeting in person and vote in person.
If a broker or nominee returns a proxy indicating that it did not
receive voting instructions from the beneficial owner, or if the beneficial
owner marked an abstention, we will count those shares when we determine if a
quorum is present, but those proxies, in effect, will count as a vote "against".
If shareholders of the Fund do not approve the reorganization relating
to the Fund, then the reorganization of the Fund will not proceed. If this
occurs, the Fund will continue operating as an investment company and will not
dissolve.
No Dissenter's Right of Appraisal
Shareholder's of the Fund objecting to the reorganization have no
appraisal rights under the Fund's Articles of Incorporation or under the laws of
the State of Maryland. Shareholders have the right, however, to redeem the
Fund's shares at net asset value until the Closing Date, and thereafter
11
<PAGE>
you may redeem shares of Lexington Goldfund, Inc. acquired by you in the
reorganization at net asset value.
Quorum and Adjournments
The Fund requires that a quorum at the special meeting be present, in
person or by proxy, to conduct the special meeting. The presence, in person or
by proxy, of stockholders entitled to cast one-third of the votes entitled to be
cast at the meeting constitutes a quorum. A majority of all votes cast at a
meeting where a quorum is present is needed to approve the proposal. If a quorum
is not present at the special meeting, the persons named as proxies may propose
one or more adjournments of the special meeting to permit further solicitation
of proxies. An affirmative vote of a majority of the shares of the Fund present
at the special meeting may adjourn the special meeting without further notice,
until the Fund obtains a quorum. In the event a quorum is present but sufficient
votes to approve a proposal are not received, the persons named as proxies may
propose one or more adjournments to permit further solicitation of proxies. If
this should occur, we will vote proxies for or against a motion to adjourn in
the same proportion to the votes received in favor or against the proposal.
Other Business
The Board of Directors of the Fund knows of no other business to be
brought before the special meeting. If any other matters come before the special
meeting, they will be voted on by the named proxies using their best judgment
unless specific restrictions to the contrary have been provided.
Future shareholder proposals
The Fund is not required to hold annual meetings, unless required to do
so by law. If you have a proposal you wish to be considered by shareholders,
send your proposal to Lexington Funds, P.O. Box 1515, Park 80 West, Plaza Two,
Saddle Brook, New Jersey 07663. We must receive your proposal in sufficient time
before the next meeting of shareholders for it to be included. We do not
guarantee that we will be able to include any proposal in a proxy statement.
PART 4 - FUND INFORMATION
Lexington Goldfund, Inc. is a corporation established under the laws of
the State of Maryland on May 11, 1988.
12
<PAGE>
You should be aware of the following features of Lexington Goldfund,
Inc.:
o Shares participate equally in dividends and other distributions,
including any distributions in the event of a liquidation.
o Each share is entitled to one vote for all purposes.
o Maryland law does not require annual meetings of shareholders, and it
is anticipated that shareholder meetings will be held only when
specifically required by federal or state law.
o Shareholders have available certain procedures for the removal of
Directors.
o Lexington Goldfund, Inc indemnifies Directors and officers to the
fullest extent permitted under federal and Maryland law.
Financial Statements
KPMG LLP, independent auditors of Lexington Goldfund, Inc, has audited
the financial statements for the year ended December 31, 1998, included in the
Statement of Additional Information for Lexington Goldfund, Inc.
PART 5 - PROSPECTUS FOR SHARES OF LEXINGTON GOLDFUND, INC.
This prospectus can be found under separate cover provided with your
proxy materials.
PART 6 - FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION (this
"Agreement") is made as of the 18th day of February, 1999, by and among
Lexington Strategic Investments Fund, Inc. ("Target"), a Maryland corporation,
and Lexington Goldfund, Inc. ("Acquiring Fund"), a Maryland corporation.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of Target be transferred to
Acquiring Fund, in exchange for shares in Acquiring Fund (the "Acquiring Fund
Shares") and the assumption by Acquiring Fund of the Liabilities (as defined in
paragraph 1.3) of Target, and that such Acquiring Fund Shares be distributed pro
rata by Target to its shareholders of record in complete liquidation of Target
immediately following the Closing, as defined in this Agreement, and in complete
cancellation of all issued and outstanding shares of Target (the "Target
Shares").
In consideration of the premises and of the covenants and agreements
herein contained, the parties hereto agree as follows:
13
<PAGE>
1. Reorganization of Target and Subsequent Liquidation
1.1 Subject to the terms and conditions, and based on the
representations and warranties contained in this Agreement, on the Closing Date,
as described in paragraph 3.1, Target shall assign, deliver and otherwise
transfer its assets as described in paragraph 1.2 (the "Target Assets") to
Acquiring Fund, and Acquiring Fund shall, as consideration therefor, (i) deliver
to Target such number of full and fractional Acquiring Fund Shares as results
from dividing (a) the value of the Target Assets, net of Target's Liabilities,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by (b) the net asset value of one Acquiring Fund Share, computed in the manner
and as of the time and date set forth in paragraph 2.2, and (ii) assume all of
Target's Liabilities.
1.2 The Target Assets shall consist of all property and assets of any
nature whatsoever, including, without limitation, all cash, cash equivalents,
securities, claims and receivables (including dividend and interest receivables)
owned by Target, and any deferred or prepaid expenses shown as an asset on
Target's books on the Closing Date, as defined in paragraph 3.1.
At least fifteen (15) days prior to the Closing Date, Target will
provide Acquiring Fund with (i) a list of the Portfolio Assets and (ii) a list
of Target's known Liabilities, and Acquiring Fund will provide Target with a
copy of the investment objectives, policies and restrictions applicable to it.
Target reserves the right to sell any of the securities or other assets shown on
the list of Target's Assets prior to the Closing Date.
1.3 Liabilities include all liabilities and obligations whether absolute
or contingent, known or unknown, accrued or unaccrued.
1.4 Upon Target's consummation of the transaction described in paragraph
1.1, Target will distribute the Acquiring Fund Shares it received pursuant to
paragraph 1.1 to its shareholders of record determined as of the close of
business on the Valuation Date ("Participating Shareholders of Record"). The
distribution will be made pro rata based upon the ratio that the percentage of
the outstanding Target shares owned by each Participating Shareholder of Record
on the Valuation Date bears to the total number of Acquiring Fund Shares
received by Target from Acquiring Fund. Fractional shares will be carried to the
third decimal place. In exchange for the Acquiring Fund Shares distributed, all
Target Shares will be canceled simultaneously therewith on Target's books; any
outstanding share certificates representing interests in Target thereafter will
represent the right to receive such number of Acquiring Fund Shares after the
Closing(s) as determined in accordance with paragraph 1.1.
1.5 The transactions described in paragraphs 1.1 and 1.4 above as they
relate to Target and Acquiring Fund are collectively referred to as the
"Reorganization." It is intended by the parties hereto that the Reorganization
constitute a reorganization within the meaning of section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"). The parties hereto
hereby adopt this Agreement as a "plan of reorganization" within the meaning of
Treasury regulation sections 1.368-2(g) and 1.368-3(a).
14
<PAGE>
1.6 As soon as reasonably practicable after the Closing (as defined in
paragraph 3.1) of the Reorganization, Target will take all necessary steps under
and subject to its Charter and Maryland law to effect a liquidation of Target
and to terminate the qualification, classification and registration of Target at
all appropriate federal and state agencies. All reporting and other obligations
of Target shall remain the exclusive responsibility of Target up to and
including the date on which Target is liquidated and deregistered, subject to
any reporting or other obligations described in paragraph 4.10.
2. Valuation
2.1 The value of the Target Assets shall be the value of such assets
computed as of the close of business on the business day immediately preceding
the Closing Date (such time and date being referred to as the "Valuation Date"),
using the valuation procedures set forth in Acquiring Fund's then-current
Prospectus and Statement of Additional Information.
2.2 The net asset value of each Acquiring Fund Share shall be its net
asset value per share computed on the Valuation Date, using the valuation
procedures set forth in Acquiring Fund's then-current Prospectus and Statement
of Additional Information.
2.3 All computations of value contemplated by this Article 2 shall be
made by Acquiring Fund's fund accountant. Acquiring Fund shall cause its fund
accountant to deliver a copy of its valuation report to Target at the Closing.
3. Closing and Closing Date
3.1 The closing for the Reorganization (the "Closing") shall occur on
April 30, 1999, or on such other date or dates as may be mutually agreed upon by
the parties to the Reorganization (the "Closing Date"). The Closing shall be
held at the offices of Target or at any other location mutually agreeable to the
parties hereto. All transactions taking place at the Closing shall be deemed to
take place simultaneously as of the close of business, generally 4:00 p.m.
Eastern time on the Closing Date unless otherwise provided.
3.2 The custodian of Acquiring Fund shall be given access to the
portfolio securities held by Target for the purpose of examination no later than
five (5) business days prior to the Valuation Date. Target's securities
(together with any cash or other assets) shall be delivered by Target to such
custodian for the account of Acquiring Fund on the Closing Date, in accordance
with applicable custody provisions under the Investment Company Act of 1940, as
amended (the "1940 Act"), and duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof. The portfolio securities shall
be accompanied by any necessary federal and state stock transfer stamps or a
check for the appropriate purchase price of such stamps. The cash delivered
shall be in any such form as is reasonably directed by Acquiring Fund.
3.3 Notwithstanding anything herein to the contrary, in the event that
on the Valuation Date (a) the New York Stock Exchange shall be closed to trading
or trading thereon shall be
15
<PAGE>
restricted or (b) trading or the reporting of trading on such exchange or
elsewhere shall be disrupted so that, in the judgment of Acquiring Fund or
Target, accurate appraisal of the value of the net assets of Acquiring Fund or
Target is impracticable, the Valuation Date for the Reorganization shall be
postponed until the first business day after the day when trading shall have
been fully resumed without restriction or disruption and reporting shall have
been restored and the Closing Date shall be postponed to the day after the
Valuation Date as so postponed.
3.4 If requested by Acquiring Fund and to the extent reasonably
necessary to enable Acquiring Fund and its transfer agent and shareholder
servicing agent to perform and provide all necessary and appropriate shareholder
accounting, communications and related services, Target shall deliver at the
Closing: (a) a list, certified by its Secretary, of the names, addresses and
taxpayer identification numbers of all Participating Shareholders of Record and
the number and percentage ownership of outstanding Target Shares owned by each
such shareholder, all as of the Valuation Date, and (b) such other documentation
relating to such shareholders as is reasonably requested. Acquiring Fund shall
issue and deliver to such Secretary a confirmation evidencing the Acquiring Fund
Shares to be credited on the Closing Date or shall provide evidence satisfactory
to Target that the Acquiring Fund Shares have been credited to Target's account
on the books of Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents of transfer, assignment or conveyance as such other
party or its counsel may reasonably request.
4. Covenants with Respect to Acquiring Fund and Targets
4.1 Target will call a special meeting of shareholders (the "Meeting")
for the purposes of (i) considering the approval of the transaction contemplated
by this Agreement by the shareholders of Target; and (ii) considering such other
business as may properly come before such Meeting.
4.2 Target covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in connection with the Reorganizations contemplated by this
Agreement.
4.3 Target will assist Acquiring Fund in obtaining such information as
Acquiring Fund reasonably requests concerning the ownership of the Target
Shares.
4.4 Subject to the provisions hereof, each of Acquiring Fund and Target
will take, or cause to be taken, all actions, and do or cause to be done, all
things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated herein, including the obtaining of any
required regulatory approvals.
4.5 Target shall furnish to Acquiring Fund within 15 days after the
Closing Date, a final statement of Target's assets and liabilities as of the
Closing Date, which statement shall be certified by Target as being determined
in accordance with generally accepted accounting principles consistently applied
or in accordance with another mutually agreed upon standard.
16
<PAGE>
4.6 Acquiring Fund has prepared and filed, or will prepare and file,
with the Securities and Exchange Commission (the "SEC") a registration statement
on Form N-14 under the Securities Act of 1933, as amended (the "1933 Act"),
relating to the Acquiring Fund Shares, which, without limitation, shall include
a proxy statement of Target and the prospectus of Acquiring Fund relating to the
transactions contemplated by this Agreement (the "Registration Statement").
Target has provided or will provide Acquiring Fund with such information and
documents relating to Target as are requested by Acquiring Fund and as are
reasonably necessary for the preparation of the Prospectus/Proxy Statement set
forth in the Registration Statement, and information relating to the notice of
meeting and form of proxy, other information needed for the Registration
Statement and any other proxy solicitation materials to be used in connection
with the Meeting (collectively, the "Proxy Materials"). Acquiring Fund will use
all reasonable efforts to have the Registration Statement become effective under
the 1933 Act as soon as practicable, and will take all actions, if any, required
by law to qualify the Acquiring Fund Shares to be issued in the Reorganization
under the laws of the states in which such qualification is required.
4.7 Target shall: (a) as soon after the Closing Date as is reasonably
practicable, prepare and file all federal and other tax returns and reports of
Target as may be required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed and (b) submit for
payment to Acquiring Fund the amount of any federal and other taxes, if any,
shown as due thereon which were not paid on or before the Closing Date and shall
reflect on the unaudited statement of assets and liabilities of Target referred
to in paragraphs 1.3 and 4.5 all federal and other taxes, if any, that remain
unpaid as of the Closing Date.
4.8 Acquiring Fund agrees to use all reasonable efforts to maintain in
effect the approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state securities laws as may be necessary and as it may deem
appropriate in order to continue to conduct its operations through the Closing
Date and to consummate the Reorganization, as contemplated herein. Acquiring
Fund agrees to use all reasonable efforts to operate substantially in accordance
with its then current Prospectus and Statement of Additional Information,
including qualifying as a regulated investment company under Subchapter M of the
Code through the Closing Date and for at least one (1) year thereafter, although
Acquiring Fund may merge or consolidate during such one-year period with an
investment company with investment objectives, policies and restrictions and
other characteristics comparable to those of Acquiring Fund.
4.9 If Target consummates the Reorganization, then Target will file with
the SEC as soon as reasonably practicable thereafter an application for
deregistration under the 1940 Act and will seek to obtain an order declaring
that Target has ceased to be an investment company under the 1940 Act, and will
file any final regulatory reports, including, but not limited to, any Form N-SAR
and Rule 24f-2 filings, and also will take all other steps as are necessary and
proper to effect the liquidation of Target in accordance with the laws of the
State of Maryland and other applicable requirements. Any reporting or other
responsibility of Target is and shall remain the responsibility of Target up to
and including the date on which Target is liquidated and deregistered.
17
<PAGE>
4.10 If Target consummates the Reorganization, Acquiring Fund agrees to
indemnify and hold harmless each Director of Target at the time of execution of
this Agreement, whether or not such person is or becomes an Director of
Acquiring Fund subsequent to the Closing Date of the Reorganization, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by such Director in connection with
any claim that is asserted against such Director arising out of such person's
service as a Director of Target, provided that such indemnification shall be
limited to the full extent of the indemnification that is available to Directors
of Acquiring Fund pursuant to the provisions of Acquiring Fund's Corporate
Charter, By-Laws and applicable law.
4.11 For the period beginning at the Closing Date of the Reorganization
and ending not less than three years thereafter, Acquiring Fund shall provide
for a liability policy covering the actions of the current Directors of Target
for the period they served as such, which may be accomplished by causing such
persons to be added as insured under the liability policy of Acquiring Fund.
5. Representations and Warranties
5.1 Acquiring Fund represents and warrants to Target, as follows:
(a) Acquiring Fund is a corporation validly existing under the
laws of the State of Maryland, and is duly registered as an
open-end, management investment company under the 1940 Act;
(b) Acquiring Fund is not in violation of, and the execution,
delivery and performance of this Agreement will not result in
a violation of, Acquiring Fund's Charter or By-Laws, each as
amended to date, or result in a material breach or violation
of, or constitute a material default under, any agreement or
other undertaking to which Acquiring Fund is a party or by
which Acquiring Fund or its assets is bound;
(c) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part
of Acquiring Fund, and assuming this Agreement is enforceable
against Target, this Agreement is a valid and binding
obligation of Acquiring Fund enforceable in accordance with
its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights and to general
equity principles;
(d) Except as disclosed in writing to and accepted by Target,
no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending
or to its knowledge threatened against Acquiring Fund or any
of its properties or assets, and Acquiring Fund knows of no
facts that might form the basis for the institution of any
such proceedings (other than routine inquiries and
examinations), and Acquiring Fund is not a party to or subject
to the
18
<PAGE>
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects, or is
reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions
contemplated herein;
(e) All of Acquiring Fund's issued and outstanding shares
representing interests in the Acquiring Fund are, and on the
Closing Date will be, duly authorized and validly issued and
outstanding, and fully paid and non-assessable by Acquiring
Fund and no shareholder has any preemptive rights to purchase
any such shares, and Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or
purchase any of its shares (other than dividend reinvestment
plans of Acquiring Fund or as set forth in this Agreement),
nor are there outstanding any securities convertible into any
shares of Acquiring Fund (except pursuant to exchange
privileges described in the current Prospectus and Statement
of Additional Information of the Acquiring Fund);
(f) The Acquiring Fund Shares to be issued and delivered by
Acquiring Fund to Target pursuant to the terms hereof will
have been duly authorized as of the Closing Date and, when so
issued and delivered, will be duly authorized and validly
issued, fully paid and non-assessable, and have been or will
be duly registered under the 1933 Act and qualified for sale
under the laws of such states where such qualification is
required;
(g) All issued and outstanding shares of Acquiring Fund have
been offered and sold in compliance in all material respects
with applicable registration requirements of the 1933 Act and
applicable state securities laws;
(h) From the effective date of the Registration Statement
through the time of the Meeting and the Closing Date, the
Registration Statement (exclusive of those portions that are
based upon written information regarding Target and furnished
by Target which fully and fairly disclose such information)
(i) complies in all material respects with the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the 1940 Act, and the rules and regulations thereunder and
(ii) does not and will not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, and as of such dates and times, any written
information furnished by Acquiring Fund to Target for use in
the Proxy Materials does not contain and will not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the information provided not
misleading;
(i) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of Acquiring
Fund as of and for that Acquiring Fund's most recent fiscal
year, certified by Acquiring Fund's fund accountant, and the
unaudited Statement of Assets and Liabilities, Statement of
19
<PAGE>
Operations and Statement of Changes in Net Assets for
Acquiring Fund's most current completed six month period
within the fiscal year, if any (copies of which have been or
will be furnished to Target, if available) fairly present, in
all material respects, Acquiring Fund's financial condition as
of such dates and its results of operations for such periods
in accordance with generally accepted accounting principles
consistently applied, and as of such dates there were no
liabilities of Acquiring Fund (contingent or otherwise) known
to Acquiring Fund that were not disclosed therein but that
would be required to be disclosed therein in accordance with
generally accepted accounting principles;
(j) Since the date of the most recent audited financial
statements, there has not been any material adverse change in
Acquiring Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course
of business, except as otherwise disclosed in writing to and
accepted by Acquiring Fund prior to the Closing Date (for the
purposes of this subparagraph (j), neither a decline in
Acquiring Fund's net asset value per share nor a decrease in
Acquiring Fund's size due to redemptions shall be deemed to
constitute a material adverse change);
(k) All federal and other tax returns and reports of Acquiring
Fund required by law to be filed on or before the Closing
Date, if any, shall have been filed, and all federal and other
taxes owed by Acquiring Fund shall have been paid so far as
due, and to the best of Acquiring Fund's knowledge, no such
return is as of the date hereof under audit and no material
assessment has been asserted with respect to any such return;
(l) For each full and partial taxable year from its inception
through the Closing Date, Acquiring Fund has qualified as a
regulated investment company under Subchapter M of the Code;
and
(m) Acquiring Fund will provide to Target the Form N-1A
registration statement concerning Acquiring Fund, which will
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make any statements therein, in light of the
circumstances under which such statements were made, not
materially misleading.
5.2 Target represents and warrants to Acquiring Fund as follows:
(a) Target is a corporation validly existing under the laws of
the State of Maryland, and is duly registered as an open-end,
management investment company under the 1940 Act;
(b) Target is not in violation of, and the execution, delivery
and performance of this Agreement will not result in a
violation of, Target's Charter or By-Laws, each as amended to
date, or result in a material breach or violation of, or
constitute a
20
<PAGE>
material default under, any agreement or other undertaking to
which Target is a party or by which it or its assets is bound;
(c) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part
of Target, and assuming this Agreement is enforceable against
Acquiring Fund, this Agreement is a valid and binding
obligation of Target, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to
or affecting creditors' rights and to general equity
principles;
(d) Except as otherwise disclosed in writing to and accepted
by Acquiring Fund, no litigation or administrative proceeding
or investigation of or before any court or governmental body
is presently pending or to its knowledge threatened against
Target or any of its properties or assets, and Target knows of
no facts that might form the basis for the institution of any
such proceedings (other than routine inquiries and
examinations), and Target is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects, or is
reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions
contemplated herein;
(e) All of Target's issued and outstanding shares representing
interests in Target are, and on the Closing Date will be, duly
authorized and validly issued and outstanding, and fully paid
and non-assessable and all such shares will, at the time of
the Closing, be held by the Participating Shareholders of
Record as set forth on the books and records of Target's
transfer agent (and in the amounts set forth therein) and as
set forth in any list of Participating Shareholders of Record
provided to Acquiring Fund pursuant to paragraph 3.4, and no
Participating Shareholders of Record will have any preemptive
rights to purchase any of such shares and Target does not have
outstanding any options, warrants or other rights to subscribe
for or purchase any of their shares (other than dividend
reinvestment plans of Target or as set forth in this
Agreement), nor are there outstanding any securities
convertible into any shares of the Target (except pursuant to
exchange privileges described in the current Prospectus and
Statement of Additional Information of Target);
(f) All of Target's issued and outstanding shares representing
interests in Target have been offered and sold in compliance
in all material respects with applicable registration
requirements of the 1933 Act and applicable state securities
laws;
(g) From the effective date of the Registration Statement
through the time of the Meeting and the Closing Date, Target's
Proxy Materials (exclusive of any written information
furnished by Acquiring Fund for use in the Proxy Materials
which fully and fairly discloses such information) (i) comply
in all material respects with
21
<PAGE>
the applicable provisions of the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) do not and will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
as of such dates and time, any written information furnished
by Target to Acquiring Fund for use in the Registration
Statement does not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary
to make the information provided not misleading;
(h) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of Target as
of and for Target's most recent fiscal year, certified by
Target's fund accountant and the unaudited Statement of Assets
and Liabilities, Statement of Operations and Statement of
Changes in Net Assets for Target's most recently completed six
month semi-annual fiscal period (copies of which have been or
will be furnished to Acquiring Fund) fairly present, in all
material respects, Target's financial condition as of such
dates and its results of operations for such periods in
accordance with generally accepted accounting principles
consistently applied, and as of such dates there were no
liabilities of Target (contingent or otherwise) known to
Target that were not disclosed therein but that would be
required to be disclosed therein in accordance with generally
accepted accounting principles;
(i) Since the date of the most recent audited financial
statements, there has not been any material adverse change in
Target's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of
business, except as otherwise disclosed in writing to and
accepted by Acquiring Fund prior to the Closing Date (for the
purposes of this subparagraph (i), neither a decline in
Target's net asset value per share nor a decrease in Target's
size due to redemptions shall be deemed to constitute a
material adverse change);
(j) All federal and other tax returns and reports of Target
required by law to be filed on or before the Closing Date
shall have been filed, and all federal and other taxes owed by
Target shall have been paid so far as due, and to the best of
Target's knowledge, no such return is as of the date hereof
under audit and no material assessment has been asserted with
respect to any such return;
(k) For each full and partial taxable year from its inception
through the Closing Date, Target has qualified as a regulated
investment company under Subchapter M of the Code; and
(l) At the Closing Date, Target will have good and marketable
title, through its custodian, to its Portfolio Assets and full
right, power and authority to assign, deliver and otherwise
transfer such Portfolio Assets hereunder, and upon delivery
and payment for such Portfolio Assets as contemplated herein,
Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the
22
<PAGE>
ownership or transfer thereof other than such restrictions as
might arise under the 1933 Act.
6. Conditions Precedent to Obligations of Target
The obligations of Target to complete the Reorganization shall be
subject, at Target's election (subject to the limitations of paragraph 13), to
the performance by Acquiring Fund of all the obligations to be performed by it
hereunder on or before the Closing Date, and in addition thereto, the
satisfaction of the following conditions with respect to Acquiring Fund:
6.1 All representations and warranties of Acquiring Fund contained
herein shall be true and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions contemplated herein, as
of the Closing Date, with the same force and effect as if made on and as of the
Closing Date.
6.2 Acquiring Fund shall have delivered to Target at the Closing a
certificate executed by one of its officers, dated as of the Closing Date, to
the effect that the representations and warranties of Acquiring Fund made herein
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated herein, and as to such other matters
as Target shall reasonably request.
6.3 Target shall have received at the Closing an opinion of legal
counsel to Acquiring Fund, dated as of the Closing Date, in form (including
reasonable and customary qualifications and assumptions) reasonably satisfactory
to Target, substantially to the effect that:
(i) Acquiring Fund is a corporation duly incorporated and
validly existing under the laws of the State of Maryland and
is duly registered as an open-end, management investment
company under the 1940 Act; (ii) the execution, delivery and
performance of this Agreement will not result in a violation
of Acquiring Fund's Charter or By-Laws, each as amended to
date; (iii) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on
the part of Acquiring Fund, and this Agreement has been duly
executed and delivered by Acquiring Fund and is a valid and
binding obligation of Acquiring Fund, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to
or affecting creditors' rights or remedies and to general
equity principles (regardless of whether considered at a
proceeding in law or equity), equitable defenses or waivers
and the discretion of the court before which any proceeding
for specific performance, injunctive and other forms of
equitable relief may be brought; and (iv) the Acquiring Fund
Shares to be issued and delivered pursuant to the terms of
this Agreement will have been duly authorized as of the
Closing Date and, when so issued and delivered, will be
validly issued, fully paid and non-assessable (except as
disclosed in Acquiring Fund's then current Prospectus and
Statement of Additional Information).
23
<PAGE>
In rendering such opinion, legal counsel to Acquiring Fund may rely on
an opinion of Maryland counsel (with respect to matters of Maryland law) and on
certificates of officers or Directors of Acquiring Fund, in each case reasonably
acceptable to Target.
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions of Acquiring Fund nor any
increase in the rate of permissible investment advisory or other fees or charges
payable by Acquiring Fund or its shareholders to Acquiring Fund's investment
adviser, distributor and/or administrator from those fees and charges described
in the current Prospectus of Acquiring Fund delivered to Target, and there shall
have been no change in any fee waiver or expense reimbursement undertakings
described in the Proxy Materials.
6.5 The Board of Directors of Acquiring Fund, including a majority of
its Directors who are not "interested persons" of Acquiring Fund (as defined in
the 1940 Act), shall have determined that this Agreement and the transactions
contemplated hereby are in the best interests of Acquiring Fund and that the
interest of shareholders of Acquiring Fund would not be diluted as a result of
such transactions.
7. Conditions Precedent to Obligations of Acquiring Fund
The obligations of Acquiring Fund to complete the Reorganization shall
be subject, at Acquiring Fund's election (subject to the limitations of
paragraph 13), to the performance by Target, of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the satisfaction of the following conditions with respect to Target:
7.1 All representations and warranties of Target contained herein shall
be true and correct in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated herein, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date.
7.2 Target shall have delivered, in accordance with Article 1 hereof, to
Acquiring Fund a Statement of Portfolio Assets and Stated Liabilities of Target,
together, if required by Acquiring Fund, with a list of Target's securities and
other assets showing the respective adjusted bases and holding periods thereof
for federal income tax purposes, as of the Closing Date, certified by an
appropriate officer of Target.
7.3 Target shall have delivered to Acquiring Fund at the Closing a
certificate executed by one of its officers, and dated as of the Closing Date,
to the effect that the representations and warranties of Target made herein are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated herein, and as to such other matters as
Acquiring Fund shall reasonably request.
7.4 Acquiring Fund shall have received at the Closing an opinion of
legal counsel to Target, dated as of the Closing Date, in form (including
reasonable and customary qualifications and assumptions) reasonably satisfactory
to Acquiring Fund, substantially to the effect that:
24
<PAGE>
(i) Target is a corporation duly incorporated and validly
existing under the laws of the State of Maryland and is duly
registered as an open-end, management investment company under
the 1940 Act; (ii) the execution, delivery and performance of
this Agreement will not result in a violation of Target's
Charter or By-laws, each as amended to date; and (iii) the
execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of
Target, and this Agreement has been duly authorized and
delivered by Target and is a valid and binding obligation of
Target, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights or remedies
and to general equity principles (regardless of whether
considered in a proceeding in law or equity), equitable
defenses or waivers and the discretion of the court before
which any proceeding for specific performance, injunctive and
other forms of equitable relief may be brought.
In rendering such opinion, legal counsel to Target may rely on an
opinion of Maryland counsel (with respect to matters of Maryland law) and on
certificates of officers or Directors of Target, in each case reasonably
acceptable to Acquiring Fund.
7.5 On the Closing Date, the Target Assets shall include no assets that
Acquiring Fund, by reason of Acquiring Fund's Charter or By-Laws, the 1940 Act
requirements or otherwise, may not legally acquire.
7.6 The Board of Directors of Target, including a majority of the
Directors who are not "interested persons" of Target (as defined by the 1940
Act) shall have determined that this Agreement and the transactions contemplated
hereby are advisable and in the best interests of Target and that the interests
of the shareholders in Target would not be diluted as a result of such
transactions, and Target shall have delivered to Acquiring Fund at the Closing,
a certificate, executed by an officer, to the effect that the condition
described in this subparagraph has been satisfied.
7.7 Prior to the Valuation Date, Target shall have declared a dividend
or dividends, with a record date and ex-dividend date prior to the Valuation
Date, which together with all previous dividends, shall have the effect of
distributing to its shareholders all of its net investment company taxable
income, if any, for the taxable periods or years ending on or before the Closing
(computed without regard to any deduction for dividends paid), and all of its
net capital gain, if any, realized in taxable periods or years ending on or
before the Closing Date.
8. Further Conditions Precedent to Obligations of Target and Acquiring Fund
25
<PAGE>
The obligations herein of each of Target and Acquiring Fund to effect
the Reorganization are each subject to the further conditions that on or before
the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the shareholders of Target, and insofar
as such transactions are to be consummated and require the approval of the
shareholders of Target voting together as a single class, the requisite vote of
the shareholders of Target, all in accordance with the applicable provisions of
Target's Charter and By-laws and the requirements of the 1940 Act, and evidence
of such approval shall have been delivered to Acquiring Fund.
8.2 No action, suit or other proceeding shall be pending or threatened
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
as it relates to the Reorganization or any of the transactions related thereto.
8.3 All consents of other parties and all other consents, approvals and
permits of federal, state and local regulatory authorities (including, without
limitation, those of the SEC and of state securities authorities, including
"no-action" positions of or exemptive orders from such federal and state
authorities, and those of the Office of the Comptroller of the Currency ("OCC")
and the Department of Labor with respect to the Employee Retirement Income
Security Act of 1974 ("ERISA") or the Internal Revenue Service with respect to
the Code), deemed necessary by Acquiring Fund or Target to permit consummation,
in all material respects, of the Reorganization and transactions related thereto
shall have been obtained, except where failure to obtain any such consent, order
or permit would not, in the reasonable opinion of the party asserting that the
condition to Closing has not been satisfied, involve a risk of a material
adverse effect on the assets or properties of Acquiring Fund or Target involved
in the Reorganization.
8.4 The Registration Statement and Acquiring Fund's registration
statement on Form N- 1A covering the continuous offering of shares of Acquiring
Fund shall have become and shall be effective under the 1933 Act, no stop orders
suspending the effectiveness thereof shall have been issued and, to the best
knowledge of Target and Acquiring Fund, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the 1933 Act.
8.5 Acquiring Fund and Target each shall receive an opinion of legal
counsel of Acquiring Fund, dated the Closing Date of the Reorganization, with
respect to Target and Acquiring Fund, addressed to, and in form and substance
satisfactory to, Acquiring Fund and Target, to the effect that the
Reorganization will constitute a reorganization within the meaning of section
368(a)(1) of the Code, and Target and Acquiring Fund will each be a "party to a
reorganization" within the meaning of section 368(b) of the Code. Each party
agrees to make reasonable covenants and representations as to factual matters
that are true and correct as of the Closing Date in connection with the
rendering of such opinion.
9. Expenses
26
<PAGE>
Acquiring Fund and Target confirm their understanding that each party
will be responsible for its own expenses in connection with the Reorganization.
10. Entire Agreement; Survival of Provisions of this Agreement
10.1 This Agreement together with the documents contemplated herein
constitute the entire agreement between the parties and supersede any prior or
contemporaneous understanding or arrangement with respect to the subject matter
hereof.
10.2 The representations and warranties contained in this Agreement or
in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated herein. The covenants
contained in this agreement shall not survive the consummation of such
transactions, except as otherwise provided herein.
11. Termination
11.1 This Agreement may be terminated, and the Reorganization and any
related transactions involving Target and Acquiring Fund contemplated hereby may
be abandoned, at any time prior to the Closing:
(a by the mutual written consent of Acquiring Fund and Target;
(b) by either Acquiring Fund or Target by written notice to
the other, without liability to the terminating party on
account of such termination (provided the terminating party is
not otherwise in material default or breach of this Agreement)
upon a finding by the Board of Directors of the terminating
party that in the judgment of such Board of Directors,
proceeding with the Reorganization would be inadvisable; or
(c) by either Acquiring Fund or Target by written notice to
the other, without liability to the terminating party on
account of such termination (provided the terminating party is
not otherwise in material default or breach of this Agreement)
if: (i) the other party shall fail to perform in any material
respect its agreements contained herein required to be
performed prior to the Closing Date; (ii) the other party
materially breaches or shall have materially breached any of
its representations, warranties or covenants contained herein;
or (iii) any other condition herein expressed to be precedent
to the obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot be met.
11.2 Termination of this Agreement pursuant to paragraph 11.1(a) shall
terminate all obligations of the parties hereto with respect to Target and
Acquiring Fund affected by such termination and there shall be no liability for
damages on the part of Acquiring Fund, Target, or any of their directors,
officers or employees, or any other party or its directors, officers or
employees.
27
<PAGE>
12. Amendments and Waivers
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of
Acquiring Fund and Target; provided, however, that following the approval of
this Agreement by the shareholders of Target, no such amendment may have the
effect of changing the provisions for determining the number of Acquiring Fund
Shares to be issued to Participating Shareholders of Record, or otherwise
materially and adversely affecting Target, without further approval by
shareholders of Target in accordance with paragraph 8.1 hereof. The parties may
not waive the opinion described in paragraph 8.5, and no waiver may materially
and adversely affect the rights of the shareholders of any Target without the
approval by the shareholders of Target in accordance with paragraph 8.1 hereof.
13. Notices
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
certified mail or overnight express courier, addressed as follows:
a. if to Target:
Name and Address
Attention: Name
with a copy to:
Name and Address
Attention: Name
and an additional copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Elliot S. Cohan, Esq.
b. if to Acquiring Fund:
Name and Address
Attention: Name
28
<PAGE>
with a copy to:
Name and Address
Attention: Name
and an additional copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Elliot S. Cohan, Esq.
or to such other person or address as Acquiring Fund or Target, respectively,
shall furnish to the other in writing.
14. Headings; Counterparts; Governing Law; Assignment; Limitation of Liability
14.1 The headings of Articles contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All references herein to Articles, paragraphs or subparagraphs
shall be construed as referring to the Articles, paragraphs and subparagraphs
hereof, respectively, except as is otherwise expressly provided. Whenever the
terms hereto, hereunder, herein or hereof are used in the Agreement, they shall
be construed as referring to this entire Agreement, rather than to any
individual paragraph, subparagraph or sentence.
14.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance
with the law of the State of New York, without reference to the conflict of laws
provisions or principles of its laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed that the obligations of Acquiring Fund and
Target hereunder shall not be binding upon any of the directors, nominees,
officers, agents or employees of
29
<PAGE>
Acquiring Fund or Target, personally, but shall bind only the assets and
property of Acquiring Fund as provided in its Charter and Target as provided in
its Charter.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
Lexington Strategic Fund, Inc.
ATTEST: By:_____________________________
Name:
By: Title:
Name:
Title:
Lexington Goldfund, Inc.
By: ________________________________
Name:
Title:
ATTEST:
By:____________________
Name:
Title:
PART 7 - FINANCIAL INFORMATION ABOUT LEXINGTON GOLDFUND, INC.
The Annual Report of Lexington Goldfund, Inc. for the period ended
December 31, 1998, is included with the Combined Proxy Statement and
Prospectus for shareholders of the Fund.
31
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
______________, 1999
Acquisition of the Assets of
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
by and in exchange for shares of
LEXINGTON GOLDFUND, INC.
This Statement of Additional Information dated _________, 1999, is not a
prospectus, but should be read in conjunction with the Combined Proxy Statement
and Prospectus dated ______, 1999. This Statement of Additional Information is
incorporated by reference in its entirety into the Combined Proxy Statement and
Prospectus. Copies of the Combined Proxy Statement and Prospectus may be
obtained by writing Lexington Strategic Investments Fund, Inc, at P.O. Box 1515,
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663 or by calling toll free
800-526-0056.
<PAGE>
TABLE OF CONTENTS
1. Statement of Additional Information of Lexington Goldfund, Inc., dated
May 1, 1998.
2. Statement of Additional Information of Lexington Strategic Investments
Fund, Inc. dated October 28, 1998.
3. Audited Financial Statements of Lexington Goldfund, Inc., dated December
31, 1998
4. Audited Financial Statements of Lexington Strategic Investments Fund, Inc.,
dated June 30, 1998.
5. Unaudited Financial Statements of Lexington Strategic Investments Fund,
Inc. dated December 31, 1998.
6. Pro Forma Financial Statements as of December 31, 1998, which give effect
to the Reorganization of Lexington Strategic Investments Fund, Inc.
2
<PAGE>
ADDITIONAL INFORMATION ABOUT THE REGISTRANT
The Statement of Additional Information dated May 1, 1998, of
Lexington Goldfund, Inc., is incorporated by reference to Post-Effective
Amendment No. 22 to its Registration Statement on Form N-1A (File No. 2-72428).
A copy may be obtained by writing Lexington Goldfund, Inc. P.O. Box 1515, Park
80 West Plaza Two, Saddle Brook, New Jersey 07633 or by calling toll free
800-526-0056.
ADDITIONAL INFORMATION ABOUT LEXINGTON STRATEGIC INVESTMENTS FUND, INC
The Statement of Additional Information dated October 28, 1998, of
Lexington Strategic Investments Fund Inc. is incorporated by reference to
Post-Effective Amendment No. 28 to its Registration Statement on Form N-1A (File
No. 811-2506) which was filed with the Securities and Exchange Commission (SEC)
on October 28, 1998. A copy may be obtained by writing Lexington Strategic
Investments Fund, Inc. P.O. Box 1515, Park 80 West Plaza Two, Saddle Brook, New
Jersey 07633 or by calling toll free 800-526-0056.
FINANCIAL STATEMENTS
The audited Financial Statements of Lexington Goldfund, Inc., are
incorporated by reference to its Annual Report (File No. 811-2881) dated
December 31, 1998.
The audited Financial Statements of Lexington Strategic Investments
Fund, Inc., are incorporated by reference to the Annual Report dated June 30,
1998 (File No. 811-2506).
The unaudited Financial Statements of Lexington Strategic Investments
Fund, Inc., are incorporated by reference to the Semi-Annual Report (File No.
811-2506) dated December 31, 1998.
Unaudited Pro Forma Financial Statements as of December 31, 1998, which
give effect to the Reorganization of Lexington Strategic Investments Fund, Inc.
follow.
3
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Pro Forma Schedule of Portfolio Investments
December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Shares or Principal Amount Market Value
---------------------------------------------------------------------------------------------
Lexington Lexington
Strategic Strategic
Lexington Investments Lexington Investments
Security Goldfund, Inc. Fund, Inc. Combined Goldfund, Inc. Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOLD BULLION: 10.7%
25,458 fine ounces (cost $9,832,907)2 $7,338,142 $ - $7,338,142
------------------ --------------- ---------------
COMMON STOCKS: 83.9%
AUSTRALIA: 11.5%
Acacia Resources, Ltd. 2 805,000 - 805,000 1,192,418 - 1,192,418
Delta Gold NL 900,000 - 900,000 1,369,020 - 1,369,020
Emperor Mines, Ltd. 2 607,900 - 607,900 223,717 - 223,717
Great Central Mines, Ltd. 280,000 - 280,000 200,937 - 200,937
Lihir Gold, Ltd. 2 550,000 - 550,000 617,347 - 617,347
Lihir Gold, Ltd. (ADR) 2 15,000 - 15,000 341,250 - 341,250
Menzies Gold NL2 1,470,000 - 1,470,000 112,705 - 112,705
Newcrest Mining, Ltd. 2 100,000 - 100,000 138,742 - 138,742
Niugini Mining, Ltd.2 493,750 - 493,750 690,490 - 690,490
Normandy Mining, Ltd. 1,752,539 - 1,752,539 1,623,155 - 1,623,155
Otter Gold Mines, Ltd. 2 450,000 - 450,000 253,931 - 253,931
Otter Gold Mines, Ltd. (Options, 70,000 - 70,000 4,294 - 4,294
due 10/31/01) 2
Otter Gold Mines, Ltd. (Options, 180,000 - 180,000 25,945 - 25,945
due 06/30/03) 2
Ranger Minerals, Ltd. 207,713 - 207,713 509,611 - 509,611
Resolute, Ltd. 292,857 - 292,857 206,571 - 206,571
Sons of Gwalia, Ltd. 114,285 - 114,285 325,254 - 325,254
------------------ --------------- ---------------
7,835,387 - 7,835,387
------------------ --------------- ---------------
GHANA: 3.8%
Ashanti Goldfields Company, Ltd. 133,709 - 133,709 1,173,296 - 1,173,296
Ashanti Goldfields Company, Ltd. 72,642 81,969 154,611 681,019 768,459 1,449,478
(GDR)
------------------ --------------- ---------------
1,854,315 768,459 2,622,774
------------------ --------------- ---------------
NORTH AMERICA: 43.6%
Barrick Gold Corporation 74,407 47,200 121,607 1,450,936 920,400 2,371,336
Barrick Gold Corporation Installment 100,000 - 100,000 1,240,281 - 1,240,281
Receipts1
Battle Mountain Gold Company 150,000 - 150,000 618,750 - 618,750
Battle Mountain Gold Company 100,344 - 100,344 431,182 - 431,182
Cambior, Inc. 95,400 - 95,400 471,037 - 471,037
Canyon Resources Corporation2 226,586 - 226,586 56,646 - 56,646
Colony Pacific Exploration, Ltd. 50,000 - 50,000 - - -
(Warrants) 1,2
Dayton Mining Corporation 1, 2 100,000 - 100,000 22,136 - 22,136
Dayton Mining Corporation 2 210,000 - 210,000 46,486 - 46,486
Etruscan Resources, Inc. 2 - 50,000 50,000 - 19,858 19,858
Francisco Gold Corporation2 30,000 - 30,000 167,975 - 167,975
Franco Nevada Mining Corporation, Ltd. 55,000 - 55,000 1,050,984 - 1,050,984
Freeport McMoran Copper & Gold "A" 132,600 45,000 177,600 1,284,563 435,938 1,720,501
Freeport McMoran Copper & Gold "B" 100,000 42,100 142,100 1,043,750 439,419 1,483,169
Geomaque Explorations, Ltd. 2 433,400 - 433,400 423,258 - 423,258
Golden Knight Resources, Inc. 2 - 100,000 100,000 - 29,298 29,298
Gold Reserve Corporation2 100,000 - 100,000 117,192 - 117,192
Goldcorp, Inc. "A"2 170,000 - 170,000 962,927 - 962,927
Homestake Mining Company 490,000 83,400 573,400 4,501,875 766,237 5,268,112
IAMGOLD, International African 110,600 - 110,600 288,032 - 288,032
Mining Gold Corporation2
Kinross Gold Corporation2 400,000 - 400,000 919,306 - 919,306
Meridian Gold, Inc. 2 200,000 - 200,000 1,171,919 - 1,171,919
Namibian Minerals Corporation2 - 50,000 50,000 - 60,156 60,156
New Venoro Gold Corporation2 22,750 - 22,750 1,185 - 1,185
Newmont Mining Corporation 111,670 46,500 158,170 2,017,039 839,906 2,856,945
Pengea Goldfields, Inc. 2 50,000 - 50,000 63,479 - 63,479
Pioneer Group, Inc. 15,000 - 15,000 296,250 - 296,250
Page 1
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Pro Forma Schedule of Portfolio Investments
December 31, 1998 (unaudited)
Shares or Principal Amount Market Value
---------------------------------------------------------------------------------------------
Lexington Lexington
Strategic Strategic
Lexington Investments Lexington Investments
Security Goldfund, Inc. Fund, Inc. Combined Goldfund, Inc. Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA (continued):
Placer Dome, Inc. 296,000 75,000 371,000 3,404,000 862,500 4,266,500
Steppe Gold Resources, Ltd. 1, 2 500,000 - 500,000 13,021 - 13,021
Stillwater Mining Company2 75,000 - 75,000 3,075,000 - 3,075,000
Sutton Resources, Ltd. 2 - 30,000 30,000 - 128,911 128,911
Vista Gold Corporation2 250,000 - 250,000 37,436 - 37,436
X-Cal Resources, Ltd. 2 500,000 - 500,000 91,149 - 91,149
------------------ --------------- ---------------
25,267,794 4,502,623 29,770,417
------------------ --------------- ---------------
SOUTH AFRICA: 24.9%
Anglo American Corporation of South - 15,000 15,000 - 422,771 422,771
Africa, Ltd.
Anglo American Investment Trust, Ltd. - 703 703 - 8,395 8,395
Anglo American Platinum Corporation, 71,600 70,149 141,749 982,236 962,331 1,944,567
Ltd.
Anglo American Platinum Corporation, 2,045 - 2,045 27,505 - 27,505
Ltd. (ADR)
Anglogold, Ltd. 72,672 68,576 141,248 2,831,464 2,671,875 5,503,339
Anglogold, Ltd. (ADR) - 5,795 5,795 - 113,365 113,365
Anglovaal Mining, Ltd. - 136,363 136,363 - 417,252 417,252
Avgold, Ltd 2 - 447,918 447,918 - 243,656 243,656
Barnato Exploration, Ltd 2 - 150,000 150,000 - 50,998 50,998
Driefontein Consolidated, Ltd. 261,000 142,500 403,500 1,058,177 577,740 1,635,917
Durban Roodepoort Deep, Ltd. - 262,080 262,080 - 723,963 723,963
Durban Roodepoort Deep, Ltd. - 154,480 154,480 - 68,146 68,146
(Options) 2
Durban Roodepoort Deep, Ltd. - 33,700 33,700 - 12,603 12,603
(Warrants) 2
Free State Development & Investment 150,000 - 150,000 46,535 - 46,535
Corporation, Ltd. 2
Gencor, Ltd. - 116,000 116,000 - 195,219 195,219
Gold Fields, Ltd. 2 56,808 162,696 219,504 313,850 898,855 1,212,705
Gold Fields of South Africa, Ltd. - 36,049 36,049 - 67,409 67,409
Harmony Gold Mining, Ltd. 2 - 213,656 213,656 - 987,901 987,901
Impala Platinum Holdings, Ltd. - 29,460 29,460 - 400,638 400,638
JCI Gold, Ltd. 2 - 27,352 27,352 - 21,388 21,388
New East Daggafontein Mines, Ltd. - 200,000 200,000 - 42,498 42,498
New Wits, Ltd. - 179,600 179,600 - 53,429 53,429
Northam Platinum, Ltd. - 33,123 33,123 - 17,737 17,737
Randfontein Estates, Ltd. - 198,566 198,566 - 442,187 442,187
Randfontein Estates, Ltd. (Options) 2 9,405 22,451 31,856 6,635 15,838 22,473
Randgold and Exploration Company, - 324,500 324,500 - 159,971 159,971
Ltd. 2
Sasol, Ltd. - 80,972 80,972 - 306,263 306,263
St. Helena Gold Mines, Ltd. 177,000 175,900 352,900 437,790 435,069 872,859
Vansa Vanadium S.A., Ltd. 2 - 45,818 45,818 - - -
Vogelstruisbult Metal Holdings, Ltd. - 22,219 22,219 - 38,148 38,148
West Rand Consolidated Mines, Ltd. 2 - 200,000 200,000 - 220,990 220,990
Western Areas, Ltd. 2 72,349 159,484 231,833 235,522 519,177 754,699
------------------ --------------- ---------------
5,939,714 11,095,812 17,035,526
------------------ --------------- ---------------
ZIMBABWE: 0.1%
Zimbabwe Platinum Mines, Ltd. 2 180,000 - 180,000 35,330 - 35,330
------------------ --------------- ---------------
TOTAL COMMON STOCKS
(cost $95,979,348) 40,932,540 16,366,894 57,299,434
------------------ --------------- ---------------
Page 2
<PAGE>
Shares or Principal Amount Market Value
---------------------------------------------------------------------------------------------
Lexington Lexington
Strategic Strategic
Lexington Investments Lexington Investments
Security Goldfund, Inc. Fund, Inc. Combined Goldfund, Inc. Fund Combined
- -----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 0.2%
GHANA: 0.2%
Ashanti Goldfields Company, Ltd. "B"
(due 3/31/99)2 80,000 - 80,000 $ 37,400 $ - 37,400
Ashanti Goldfields Company, Ltd. "C"
(due 3/31/00)2 80,000 - 80,000 37,400 - 37,400
Ashanti Goldfields Company, Ltd. "D"
(due 3/31/01)2 80,000 - 80,000 37,400 - 37,400
Ashanti Goldfields Company, Ltd. "E"
(due 3/31/02)2 80,000 - 80,000 37,400 - 37,400
TOTAL PREFERRED STOCKS
---------------- ------------
(cost $49,064) 149,600 - 149,600
---------------- --------------- ------------
CONVERTIBLE PREFERRED STOCK: 0.1%
AUSTRALIA: 0.1%
Gold and Resource Developments NL
(cost $383,201) 100,000 - 100,000 40,482 - 40,482
---------------- --------------- ------------
CONVERTIBLE NOTES: 0.5%
CANADA: 0.6%
Trizec Hahn Corporation, 3.0%,
due 1/29/211
(cost $500,000) $ 500,000 $ - $500,000 377,500 - 377,500
--------------- ----------------- ------------
SHORT-TERM INVESTMENTS: 3.7%
U.S. GOVERNMENT AGENCY OBLIGATIONS
Federal Home Loan Mortgage
Corporation,
4.25%, due 01/04/99 1,500,000 - 1,500,000 1,499,469 - 1,499,469
Federal Home Loan Mortgage
Corporation,
4.50%, due 01/04/99 - 1,000,000 1,000,000 - 999,625 999,625
------------------ --------------- ------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,499,094) 1,499,469 999,625 2,499,094
------------------ --------------- -------------
TOTAL INVESTMENTS: 99.1% 50,337,733 17,366,519 67,704,252
(cost $109,243,614)
Other assets in excess of 503,563 107,140 610,703
liabilities: 0.9% ------------------ ---------------- ------------
TOTAL NET ASSETS: 100.0% $50,841,296 $17,473,659 $68,314,955
================== ================ ============
</TABLE>
1 Restricted security.
2 Non-income producing security.
ADR - American Depository Receipt.
GDR - Global Depository Receipt.
Page
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Pro Forma Statement of Operations
YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Lexington
Strategic
Lexington Investments Combined
Goldfund, Inc. Fund, Inc.(a) Adjustments Totals
-----------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Dividends.................................................................... $ 913,135 $ 736,582 $ - $ 1,649,717
Interest..................................................................... 144,792 88,446 - 233,238
------------ ----------- ---------- -------------
1,057,927 825,028 1,882,955
Less: foreign tax expense.................................................... 20,822 2,079 - 22,901
------------ ----------- ---------- -------------
Total investment income............................................. 1,037,105 822,949 - 1,860,054
Expenses
Investment advisory fee .................................................. 552,325 208,399 (52,088) 708,636
Transfer agent and shareholder servicing expenses ........................ 126,197 145,364 (26,241) 271,561
Printing and mailing expenses............................................. 68,567 99,904 (23,000) 245,320
Professional fees......................................................... 30,954 36,599 (29,100) 38,453
Registration fees......................................................... 23,762 23,302 (15,000) 32,064
Custodian expenses........................................................ 24,064 23,408 - 47,472
Accounting expenses ...................................................... 50,219 30,898 - 81,117
Directors' fees and expenses.............................................. 16,954 17,807 (17,000) 17,761
Computer processing fees.................................................. 11,847 5,698 (3,505) 14,040
Distribution expenses .................................................... 41,125 - - 41,125
Other expenses............................................................ 45,393 44,236 (25,629) 64,000
------------ ----------- ---------- -------------
Total expenses...................................................... 991,407 635,615 (191,563) 1,435,459
Less: expenses recovered under contract with
investment adviser .............................................. - 114,638 (114,638) -
------------ ----------- ---------- -------------
Total net expenses................................................... 991,407 520,977 (76,925) 1,435,459
------------ ----------- ---------- -------------
Investment income before income tax expense.......................... 45,698 301,972 76,925 424,595
Income tax expense................................................... - 140,825 (140,825) -
------------ ----------- ---------- -------------
Net investment income................................................ 45,698 161,147 217,750 424,595
Realized and Unrealized Gain (Loss) on Investments Net realized gain (loss) on:
Investments........................................................... (9,781,557) (5,614,510) - (15,396,067)
Foreign currency transactions......................................... (16,099) (6,774) - (22,873)
------------ ----------- ---------- -------------
Net realized loss................................................ (9,797,656) (5,621,284) - (15,418,940)
Net change in unrealized appreciation (depreciation) on:
Investments........................................................... 6,902,745 4,583,816 - 11,486,561
Foreign currency translation of other assets and liabilities.......... 16,100 (290) - 15,810
------------ ----------- ---------- -------------
Net change in unrealized appreciation (depreciation)............. 6,918,845 4,583,526 - 11,502,371
------------ ----------- ---------- -------------
Net realized and unrealized (loss)............................ (2,878,811) (1,037,758) - (3,916,569)
------------ ----------- ---------- -------------
INCREASE (Decrease) in Net Assets Resulting from Operations.....................$(2,833,113) $ (876,611) $ 217,750 $(3,491,974)
============ =========== ========== =============
</TABLE>
(a) Lexington Strategic Investments Fund, Inc. has a fiscal year end of June
30, 1998. The amounts above reflect the period from January 1, 1998 to December
31, 1998, which combines amounts taken from two different fiscal years.
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Notes to Pro Forma Financial Statements
(Unaudited)
1. Organization Prior to Proposed Reorganization
The Lexington Goldfund, Inc ("Goldfund") and the Lexington Strategic Investments
Fund, Inc. ("Strategic Investments") are separate investment companies offered
by the Lexington Funds.
Goldfund is an open-end, non-diversified management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is capital appreciation as well as 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.
Strategic Investments is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is capital appreciation. The investment concentration is
currently in the common stock of gold and other precious metals mining companies
located primarily in South Africa.
Goldfund and Strategic Investments are referred to collectively herein as the
"Funds."
2. Basis of Combination
The unaudited Pro Forma combining Statement of Assets and Liabilities, Statement
of Operations, and Schedule of Portfolio Investments reflect the accounts of the
Funds as if the proposed merger occurred as of and for the year ended December
31, 1998. The accompanying statements give effect to the proposed transfer
described below and have been derived from the books and records of the Funds
utilized in calculating daily net asset value at December 31, 1998.
The Agreement and Plan of Reorganization provides that at the time the
reorganization becomes effective (the "Effective Time of Reorganization"), all
assets and liabilities will be transferred such that at and after the Effective
Time of Reorganization, the assets and liabilities of Strategic Investments will
become the assets and liabilities of Goldfund.
For accounting purposes, the historical basis of the assets and liabilities of
Goldfund will survive this reorganization. The Fund for which the basis of
assets and liabilities will survive the reorganization is hereafter referred to
as the "Survivor Fund."
In exchange for the transfer of assets and liabilities, Goldfund will issue to
Strategic Investments' shareholders full and fractional shares of the
corresponding Survivor Fund. The number of outstanding shares of the Survivor
Fund so issued will be equal in value to the full and fractional
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Notes to Pro Forma Financial Statements
(Unaudited)
Page 2
2. Basis of Combination (continued)
shares of Strategic Investments that are outstanding immediately prior to the
Effective Time of the Reorganization. At and after the Effective Time of the
Reorganization, all debts, liabilities and obligations of Strategic Investments
will attach to the Survivor Fund and may thereafter be enforced against the
Survivor Fund to the same extent as if they had been incurred by it.
Under generally accepted accounting principles, the Survivor Fund's basis, for
purposes of determining net asset value, of the assets and liabilities of
Strategic Investments will be the fair market value of such assets and
liabilities on the closing of the transaction. The Survivor Fund will recognize
no gain or loss for federal tax purposes on its issuance of shares in the
reorganization.
The accompanying pro forma financial statements represent the Survivor Fund, and
reflect the combined results of operations of the Funds. However, should such
reorganization be effected, the statement of operations of the Survivor Fund
will not be restated for pre-combination period results of the corresponding
Funds. The Pro Forma combining Statement of Assets and Liabilities, Statement of
Operations, and Schedule of Portfolio Investments should be read in conjunction
with the historical financial statements of the Funds.
Expenses
Lexington Management Corporation ("LMC") acts as investment advisor to the
Lexington Funds. Each Fund issues one class of shares, which have substantially
identical rights and privileges except with respect to sales charges and fees,
paid under shareholder servicing or distribution plans. Strategic Investments'
shares are subject to an initial sales charge upon purchase unless the
shareholder is subject to an applicable waiver. Shares of the Survivor Fund will
not be subject to any sales charges.
Under the terms of the investment advisory agreement for Goldfund, LMC is
entitled to receive fees computed at the annual rate of 1.00% of the Fund's
average daily net assets up to $50 million and at an annual rate of 0.75%
thereafter. For Strategic Investments, LMC is entitled to receive fees computed
at the annual rate of 1.00% of the Fund's average daily net assets up to $30
million and at an annual rate of 0.75% thereafter. At the time the
reorganization becomes effective, the investment advisory fees for the Survivor
Fund will be the same as Goldfund, which is the successor entity. Such fees, net
of voluntary expense reimbursement, as applicable, are accrued daily and paid
monthly.
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Notes to Pro Forma Financial Statements
(Unaudited)
Page 3
Expenses (continued)
For both Funds, LMC during 1998 has voluntarily agreed to limit the total
expenses of the Funds (including management fees and operating expenses, but
excluding interest, taxes, brokerage commissions, 12B-1 fees, and extraordinary
expenses) to an annual rate of 2.50% of the Funds' average daily net assets. At
the time the reorganization becomes effective, LMC will continue to maintain the
reimbursement practice as described above for the Survivor Fund.
For the year ended December 31, 1998, total LMC investment advisory fees
incurred by the Funds, and reimbursement received by the Funds, were as follows:
Total Fees Reimbursement
---------- -------------
Strategic Investments $208,399 $114,638
Goldfund 552,325 -
On a pro forma basis, the total advisory fees for the combined entity would have
been approximately $708,636, and there would have been no reimbursement.
Goldfund has a Distribution Plan (the "Plan") which allows payments to finance
the activities associated with the distribution of the Fund's share. The Plan
provides that the Fund may pay distribution fees on a reimbursement basis,
including payments to Lexington Funds Distributor Inc., ("LFD"), the Fund's
distributor, in amounts not exceeding 0.25% per annum of the Fund's average
daily net assets. Total distribution expenses for the year ended, December 31,
1998, were $41,125. At the time the reorganization becomes effective, the
Distribution Plan for Goldfund will continue.
Pro Forma Adjustments and Pro Forma Combined Columns
The pro forma adjustments and pro forma combined columns of the Statement of
Operations reflect the adjustments necessary to show expenses at the contractual
rates that would have been in effect if Strategic Investments were included in
Goldfund for the year ended December 31, 1998. Investment advisory fees and
distribution fees in the pro forma combined columns are calculated at the rates
in effect for the Survivor Fund based upon the combined net assets of the Funds.
The Pro Forma Schedule of Portfolio Investments gives effect to the proposed
transfer of such assets as if the organization had occurred at December 31,
1998.
<PAGE>
Lexington Goldfund, Inc./Lexington Strategic Investments Fund, Inc.
Notes to Pro Forma Financial Statements
(Unaudited)
Page 4
3. Portfolio Valuation, Securities Transactions and Related Income
Securities transactions are accounted for on a trade date basis. Realized gains
and losses from investment transactions are reported on the identified cost
basis. Securities traded on a recognized stock exchange are valued at the last
sales price reported by the exchange on which the securities are traded. If no
sales price is recorded, the mean between the last bid and asked prices is used.
Securities traded on the over-the-counter market and bullion are valued at the
mean between the last current bid and asked prices. Short-term securities having
a maturity of 60 days or less are stated at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
and other assets are valued by Fund management in good faith under the direction
of the Funds' Board of Directors. All investments quoted in foreign currencies
are valued in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the close of business. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income, adjusted for
amortization of premiums and accretion of discounts, is accrued as earned.
4. Capital Shares
In connection with the reorganization, the Survivor Fund will issue additional
shares. The shares of Strategic Investments have rights and privileges analogous
to those of the Survivor Fund. The shares will not be subject to an initial
sales charge upon purchase. The pro forma number of shares outstanding consists
of the following:
Shares Additional Shares Pro Forma
Outstanding at Issued in the Shares at
December 31, 1998 Reorganization December 31, 1998
----------------- -------------- ---------------
Lexington Goldfund, Inc. 16,754,890 5,766,884 22,521,774
<PAGE>
LEXINGTON - GOLDFUND, INC.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
The response to this item is incorporated by reference to Item 27 of
Part C of Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A as filed on March 1, 1999.
ITEM 16. Exhibits.
(1) Articles of Incorporation - Filed electronically 4/29/96 -
Incorporated by reference.
(2) By-Laws - Filed electronically 3/3/97 - Incorporated by reference.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization and Termination between
Registrant, on behalf of Lexington Strategic Investments Fund, Inc.
and Lexington Gold Fund, Inc.
(5) Rights of Holders - Filed electronically 3/2/98 - Incorporated by
reference.
(6) Investment Advisory Agreement between Registrant and Lexington
Management Corporation - Filed electronically 4/29/96 - Incorporated
by reference.
(7) Distribution Agreement, between Registrant and Lexington Funds
Distributor, Inc. - Filed electronically 3/3/97 - Incorporated by
reference.
(8) Not applicable.
(9) Custodian Agreement between Registrant and Chase Manhattan Bank -
Filed 4/29/96 - Incorporated by reference.
(10) Distribution Plan under Rule 12b-1 and Related Agreements - Filed
electronically 3/3/97 - Incorporated by reference.
(11)(a) Consent of Kramer Levin Naftalis & Frankel LLP ("Kramer Levin").
(b) Opinion of Kramer Levin as to the legality of the securities being
registered, to be filed by amendment.
(c) Opinion of Ballard Spahr Andrews & Ingersoll, Maryland counsel to
Registrant to be filed by amendment.
(12) Tax Opinion of Kramer Levin Naftalis & Frankel LLP to be filed by
amendment.
(13)(a) Form of Administrative Services Agreement between Registrant and
Lexington Managagement Corporation - Filed electronically 4/29/96 -
Incorporated by reference
C-1
<PAGE>
(b) Transfer Agency and Service Agreement between Registrant State Street
Bank and Trust Company - Filed electronically 4/29/96 - Incorporated
by reference.
(14) Consent of Independent Auditors.
(15) Not applicable.
(16) Not applicable.
(17)(a) Retirement Plans - Filed electronically 4/29/96 - Incorporated
by reference.
(b) Form of Proxy Card.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) under the Securities Act
of 1933, as amended (the "Securities Act"), the reoffering prospectus will
contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
C-2
<PAGE>
SIGNATURES
Pursuant to the Securities Act of 1933, the Registrant has duly caused
this Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 9th day of March, 1999.
Lexington Strategic Investments Fund, Inc.
(Registrant)
By:/s/ Robert M. DeMichele
--------------------------
Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert M. DeMichele Chairman of the Board March 9, 1999
- ----------------------- Principal Executive Officer
Robert M. DeMichele
/s/ Richard M. Hisey Principal Financial March 9, 1999
- --------------------- and Accounting Officer
Richard M. Hisey
/s/ Lisa Curcio Principal Compliance Officer March 9, 1999
- ----------------
Lisa Curcio
/s/ S.M.S. Chadha * Director March 9, 1999
- -------------------
S.M.S. Chadha
/s/ Beverly C. Duer, P.E. * Director March 9, 1999
- ---------------------------
Beverly C. Duer, P.E.
/s/ Barbara R. Evans * Director March 9, 1999
- ----------------------
Barbara R. Evans
/s/ Lawrence Kantor * Director March 9, 1999
- ---------------------
Lawrence Kantor
/s/ Jerard F. Maher* Director March 9, 1999
- --------------------
Jerard F. Maher
/s/ Andrew M. McCosh * Director March 9, 1999
- ----------------------
Andrew M. McCosh
/s/ Donald B. Miller* Director March 9, 1999
- ---------------------
Donald B. Miller
/s/ John G. Preston* Director March 9, 1999
- --------------------
John G. Preston
*By: /s/ Lisa Curcio
---------------
Lisa Curcio
Attorney-in-Fact
</TABLE>
<PAGE>
THE VICTORY PORTFOLIOS
INDEX TO EXHIBITS
Exhibit Number
Ex - 99.B11 Consent of Kramer Levin Naftalis & Frankel LLP.
Ex - 99.B14 Consent of Independent Auditors
Ex - 99.B17 Form of Proxy Card.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
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
March 9, 1999
Lexington Goldfund, Inc.
Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663
Re: Lexington Goldfund, Inc.
Registration Statement on Form N-14
-----------------------------------
Dear Ladies and Gentlemen:
We hereby consent to the reference of our firm as Counsel in this
Registration Statement on Form N-14.
Very truly yours,
AUDITORS CONSENT
The Board of Directors and Shareholders
Lexington Strategic Investments, Inc.:
In connection with the registration statement on Form N-14 dated March 4, 1999
for Lexington Strategic Investments, Inc. we consent to the incorporation by
reference of:
o our report dated August 10, 1998 in the June 30, 1998 Annual Report of
Lexington Strategic Investments Fund, Inc. and to the reference to our
firm under the heading "Independent Auditors" in the Lexington Strategic
Investments Fund, Inc. Statement of Additional Information and
o our report dated February 19, 1999 included in the December 31, 1998
Annual Report of Lexington Goldfund, Inc. and to the reference to our firm
under the heading "Shareholder Reports" in the Lexington Goldfund, Inc.
Statement of Additional Information dated May 1, 1998.
In addition, we consent to the reference to our firm under Part 4 "Fund
Information" in the Lexington Strategic Investments, Inc. Combined Proxy
Statement and Prospectus.
/s/KPMG LLP
KPMG LLP
New York, New York
March 4, 1999
<TABLE>
<CAPTION>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED
TO BE HELD ON APRIL 28, 1999
<S> <C>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC
P.O. BOX 1515 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PARK 80 WEST, PLAZA TWO LEXINGTON STRATEGIC INVESTMENTS FUND, INC. (the "Fund"),
SADDLE BROOK, NEW JERSEY 07663 for use at a Special Meeting of Shareholders to be held at
the offices of the Fund, P.O. Box 1515, Park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663, on APRIL 28, 1999,
at 9:30 a.m., eastern time. The undersigned hereby appoints
Richard J. Lavery and Enrique Faust and each of them with
full power of substitution, as Proxies of the undersigned to
vote at the above-stated Special Meeting, and at all
adjournments thereof, all shares of beneficial interest of
Fund that are held of record by the undersigned on the record
date for the Special Meeting upon the matter enumerated
below.
IF THIS RROXY CARD IS RETURNED, AND NO CHOICE IS INDICATED
AS TO ANY MATTER, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON
THE MATTERS PRESENTED. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE FOLLOWING PROPOSAL.
Please sign exactly as your name appears on this card. When
account is joint tenants, all should sign. When signing as
executor, administrator, trustee, or guardian, please give
title. If a corporation or partnership, sign entity's name
and by authorized person.
IMPORTANT NOTICE: Please take a moment now to vote your
shares. [You may vote directly over the phone by calling
800-526-0056. Representatives are available from 9:00 a.m.
to 5:00 p.m. eastern time. You may also fax your ballot
to 201-845-3534 or return it in the enclosed postage
paid envelope. Your vote is important. Thank you
for your prompt action.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X] KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
</TABLE>
<TABLE>
<CAPTION>
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------------------------------------------------
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
<S> <C> <C> <C>
Vote On Proposals For Against Abstain
1. To approve the Reorganization of [ ] [ ] [ ]
Lexington Strategic Investments Fund, Inc. as
is more fully described in the accompanying
Combined Prospectus/Proxy Statement.
2. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before the meeting.
- ------------------------------------ ------------- ------------------------------------ -------------
| | | | | |
| | | | | |
- ------------------------------------ ------------- ------------------------------------ -------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
