LEXINGTON WORLDWIDE EMERGING MARKETS FUND INC, DEF 14A, 1995-03-15

LEXINGTON WORLDWIDE EMERGING MARKETS FUND INC
DEF 14A, 1995-03-15

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LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
PARK 80 WEST PLAZA TWO
SADDLE BROOK, NEW JERSEY 07663

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.

TO BE HELD APRIL 19, 1995

A Special Meeting of Shareholders of Lexington Worldwide Emerging Markets
Fund, Inc. (the "Fund") will be held at 10:30 a.m. on April 19, 1995 at the
offices of the Fund, Park 80 West Plaza Two, Saddle Brook, New Jersey 07663 for
the following purposes:

1. To elect ten (10) Directors to hold office until the election and
qualification of their successors;

2. To consider and act upon a proposal to ratify or reject the
selection of KPMG Peat Marwick LLP, as independent certified public
accountants for the Fund for the fiscal year ending December 31, 1995;

3. To consider and act upon a proposal to approve an amended
Investment Management Agreement between the Fund and Lexington Management
Corporation;

4. To consider and act upon a proposal to amend the Fund's fundamental
investment restriction concerning senior securities;

5. To consider and act upon a proposal to amend the Fund's fundamental
investment restriction concerning underwriting;

6. To consider and act upon a proposal to amend and separate the
Fund's fundamental investment restriction concerning real estate and
commodity contracts;

7. To consider and act upon a proposal to amend the Fund's fundamental
investment restriction concerning lending;

8. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning securities of other
investment companies;

9. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning margin and short sales;

10. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning sales of securities to the
Fund's officers, directors, investment adviser or distributor;

11. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning the Fund's ability to
contract to sell securities;

12. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning securities of affiliates;

13. To consider and act upon a proposal to amend the Fund's
fundamental investment restriction concerning diversification;

<PAGE>

14. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning securities of issuers in
operation for less than three (3) years;

15. To consider and act upon a proposal to eliminate the Fund's
fundamental investment restriction concerning investment for control;

16. To consider and act upon a proposal to amend the Fund's
fundamental investment restriction concerning concentration;

17. To consider and act upon a proposal to amend the Fund's
fundamental investment restriction concerning borrowing;

18. To consider and act upon a proposal to amend the Fund's
fundamental investment restriction concerning puts and calls; and

19. To transact such other business as may properly come before the
Meeting.

Shareholders of record at the close of business on February 1, 1995 will be
entitled to vote at the Meeting or any adjournment thereof.

If you cannot attend in person, please sign, date and return promptly the
enclosed proxy in the envelope provided. You are requested to do this at your
earliest convenience so the Fund may avoid the expense and time involved in
sending follow-up letters to shareholders. Any proxy may be revoked at any time
before it is voted.

By Order of the Board of Directors

Lisa Curcio
Secretary

February 27, 1995

- - --------------------------------------------------------------------------------
YOU ARE URGED TO DATE, VOTE, SIGN AND MAIL THE PROXY PROMPTLY TO AVOID A
FURTHER SOLICITATION WHICH WOULD BE AN ADDITIONAL EXPENSE TO THE FUND.
- - --------------------------------------------------------------------------------

<PAGE>

LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663

Special Meeting of Shareholders
of the
Lexington Worldwide Emerging Markets Fund, Inc.
April 19, 1995

---------------
PROXY STATEMENT
---------------

This proxy statement is furnished by the Board of Directors of Lexington
Worldwide Emerging Markets Fund, Inc. (the "Fund"), a corporation under the laws
of the State of Maryland, in connection with the solicitation of proxies to be
voted at the Special Meeting of Shareholders (the "Meeting") to be held at 10:30
a.m. on April 19, 1995 at the offices of the Fund, Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. The purpose of the Meeting and the matters to be
acted upon are set forth in the accompanying Notice of Special Meeting.

If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted FOR the election of each of the nominees named below unless
authority to vote for a particular nominee is withheld and in favor of the
proposals set forth in the attached Notice of the Special Meeting. The Board of
Directors of the Fund knows of no business, other than that mentioned in the
Notice of Meeting, which will be presented for consideration at the Meeting. If
any other matter is properly presented, it is the intention of the persons named
in the enclosed proxy to vote in accordance with their best judgment. A Proxy
may be revoked at any time prior to the time it is voted by written notice to
the Secretary of the Fund or by attendance at the Meeting.

The close of business on February 1, 1995 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting and at any adjournment thereof. On that date, the Fund had outstanding
24,419,816 shares of common stock. Each shareholder is entitled to one vote for
each full share and an appropriate fraction of a vote for each fractional share
held. The shares do not have cumulative voting rights.

The audited financial statements of the Fund are found in its Annual Report
for the fiscal year ended December 31, 1994 which was mailed to shareholders
prior to the date of this Proxy Statement. A free copy of the annual report is
available upon request from LexingtonWorldwide Emerging Markets Fund, Inc., P.O.
Box 1515/Park 80 West Plaza Two, Saddle Brook, New Jersey 07663, Toll Free:
1-800-526-0056.

The favorable vote of the holders of a simple majority of the shares
represented at the Meeting is required for the election of Directors (Proposal
1, below) and the ratification of the selection of KPMG Peat Marwick LLP as
independent certified public accountants (Proposal 2, below). The favorable vote
of the holders of a majority of the outstanding voting securities of the Fund,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act") is
required to approve an amended investment management agreement between the Fund
and Lexington Management Corporation (proposal 3, below); to approve an
amendment to the Fund's fundamental investment restriction concerning senior
securities (Proposal 4, below); to approve an amendment to the Fund's
fundamental

1
<PAGE>

investment restriction concerning underwriting (Proposal 5, below); to approve
an amendment to and separation of the Fund's fundamental investment restriction
concerning real estate and commodity contracts (Proposal 6, below); to approve
an amendment to the Fund's fundamental investment restriction concerning lending
(Proposal 7, below); to approve the elimination of the Fund's fundamental
investment restriction concerning securities of other investment companies
(Proposal 8, below); to approve the elimination of the Fund's fundamental
investment restriction concerning margin and short sales (Proposal 9, below); to
approve the elimination of the Fund's fundamental investment restriction
concerning sales of securities to the Fund's officers, directors, investment
adviser or distributor (Proposal 10, below); to approve the elimination of the
Fund's fundamental investment restriction concerning its ability to contract to
sell securities (Proposal 11, below); to approve the elimination of the Fund's
fundamental investment restriction concerning securities of affiliates (Proposal
12, below); to approve an amendment to the Fund's fundamental investment
restriction concerning diversification (Proposal 13, below); to approve the
elimination of the Fund's fundamental investment restriction concerning
securities of issuers in operation for less than three years (proposal 14,
below); to approve the elimination of the Fund's fundamental investment
restriction concerning investment for control (Proposal 15, below); to approve
an amendment to the Fund's fundamental investment restriction concerning
concentration (Proposal 16, below); to approve an amendment to the Fund's
fundamental investment restriction concerning borrowing (Proposal 17, below); to
approve the elimination the Fund's fundamental investment restriction concerning
puts and calls (Proposal 18, below).

The 1940 Act defines a "majority of the outstanding voting securities" to
mean the lesser of (a) the vote of the holders of 67% or more of the shares of
the Fund represented by proxy, or (b) the vote of the holders of more than 50%
of the outstanding voting securities of the Fund.

In the event that a quorum of shareholders is not represented at the Meeting
or at any adjournment thereof, or, even though a quorum is so represented, in
the event that sufficient votes in favor of any of the proposals set forth in
the Notice of the Meeting are not received, the persons named as proxies may
propose and vote for one or more adjournments of the Meeting to be held within a
reasonable time after the date originally set for the Meeting (but not more than
120 days after the original record date for the Meeting), and further
solicitation of proxies may be made without the necessity of further notice. The
persons named as proxies will vote in favor of any such adjournment those
proxies which instruct them to vote in favor of any of the proposals to be
considered at the adjourned meeting, and will vote against any such adjournment
those proxies which instruct them to vote against or to abstain from voting on
all of the proposals to be considered at the adjourned meeting.

The shares represented by the enclosed proxy will be voted as directed or,
in the absence of direction, for the election of 10 directors as set forth in
Proposal 1; for the ratification of the selection of the independent certified
public accountants as set forth in Proposal 2; for the approval of the amended
investment management agreement between the Fund and Lexington Management
Corporation as set forth in Proposal 3; and for each amendment or elimination of
the Fund's fundamental investment restrictions (Proposals 4 through 18).

THE FUND INTENDS TO INFORM SHAREHOLDERS OF THE VOTING RESULTS WITH RESPECT
TO EACH PROPOSAL IN THE FUND'S NEXT SEMI-ANNUAL REPORT.

2
<PAGE>

PROPOSAL 1: ELECTION OF DIRECTORS

Ten directors are to be elected at the Special Meeting as the entire Board
of Directors, to hold office until the next meeting and until their successors
shall have been elected and shall have qualified. If authority is granted on the
accompanying proxy to vote in the election of Directors, it is the intention of
the persons named in the proxy to vote at the Special Meeting for the election
of the nominees named below, each of whom has consented to serve if elected. If
any of the nominees is unavailable to serve for any reason, the persons named as
proxies will vote for such other nominee or nominees selected by the Board of
Directors or the Board may reduce the number of Directors as provided in the
Fund's By-Laws. The Fund currently knows of no reason why any of the nominees
listed below will be unable to serve if elected.

<TABLE>
<CAPTION>
Year First Shares Owned
Director's Name Became A Beneficially
and Age Principal Occupation for Past 5 Years Director February 1, 1995***
- - ------- ------------------------------------- -------- -------------------
<S> <C> <C> <C>

*Robert M. DeMichele President and Chairman; Chairman and Chief Executive 1981 -
(50) Offlcer, LMC; Chairman and Chief Executive Officer,
Lexington Funds Distributor, Inc.; President and
Director, Piedmont Management Company Inc.; Director,
Reinsurance Corporation of New York; Director, Unione
Italiana Reinsurance; Vice Chairman of Board of Trustees,
Union College; Director, Continental National
Corporation; Director, The Navigator's Group, Inc.;
Chairman, Lexington Capital Management, Inc.; Chairman,
LCM Financial Services, Inc.; Director, Vanguard Cellular
Systems, Inc.; Chairman of the Board, Market Systems
Research, Inc. and Market Systems Research Advisors, Inc.
(registered investment advisors); Trustee, Smith
Richardson Foundation.

Beverley C. Duer Director. Private Investor. Formerly, Manager of 1987 729
(65) Operations Research Department-CPC International, Inc.

*Barbara R. Evans Director. Private Investor. Formerly, Assistant Vice 1991 2,596
(34) President and Securities Analyst, Lexington Management
Corporation.

*Lawrence Kantor Vice President and Director. Executive Vice President, 1986 -
(47) Managing Director and Director, Lexington Management
Corporation; Executive Vice President and Director,
Lexington Funds Distributor, Inc.

Donald B. Miller Director. Chairman, Horizon Media, Inc.; Trustee, Galaxy 1969 2,677
(69) Funds (registered investment companies); Director,
Maguire Group of Connecticut.

Francis Olmsted Director. Private Investor. 1986 404
(81)

John G. Preston Director. Associate Professor of Finance, Boston College. 1987 -
(62)

</TABLE>

3
<PAGE>

Margaret W. Russell Director. Private Investor. 1981 -
(74)

Philip C. Smith Director. Private Investor; Director, Southwest Investors 1970 437
(83) Income Fund, Inc., Government Income Fund, Inc., U. S.
Trend Fund, Inc., Investors Cash Reserve and Plimony
Fund, Inc. (registered investment companies).

Francis A. Sunderland Director. Private Investor. 1986 -
(83)

*"Interested persons," of the Fund as defined by the Investment Company Act of
1940, as amended.

**Beneficial ownership is defined in accordance with the rules of the Securities
and Exchange Commission and means generally the power to vote or dispose of
shares, regardless of any economic interest therein.

</TABLE>

All of the Directors hold similar offices with some or all of the other
registered investment companies advised and/or whose shares are distributed by
Lexington Management Corporation and Lexington Funds Distributor, Inc.

Directors not employed by the Fund or its affiliates receive an annual fee
of $600 and a meeting fee of $150 plus reimbursement of expenses for attendance
at regular meetings. For the fiscal year ending December 31, 1994 an aggregate
of $10,879 in fees and expenses was paid to Directors not employed by the Fund's
affiliates. The Board of Directors held five meetings in the past fiscal year.
All Directors attended at least 75 % of such meetings.

As of February 1, 1995, the Directors and executive officers of the Fund as
a group beneficially owned a total of 6,843 Fund shares, constituting less than
1% of all issued and outstanding shares of the Fund.

Number of Directorships
Name of Director in the Fund Complex
---------------- -------------------

Robert M. DeMichele 14

Beverley C. Duer 14

Barbara R. Evans 14

Lawrence Kantor 14

Donald B. Miller 14

Francis Olmsted 13

John G. Preston 14

Margaret W. Russell 13

Philip C. Smith 14

Francis A. Sunderland 13

4
<PAGE>

Aggregate
Name of Director Compensation from Fund
---------------- ----------------------

Robert M. DeMichele $ 0

Beverley C. Duer 1350

Barbara R. Evans 0

Lawrence Kantor 0

Donald B. Miller 1350

Francis Olmsted 1350

John G. Preston 1350

Margaret W. Russell 1350

Philip C. Smith 1350

Francis A. Sunderland 1200

Officers of the Fund
<TABLE>
<CAPTION>

Principal Occupation; Shares Beneficially Owned
Name and Age Other Associations February 1, 1995**
- - ------------ ------------------ ------------------
<S> <C> <C>

Robert M. DeMichele* Chairman of the Board (see page 3). 0
(50)

Richard M. Hisey* Vice President and Treasurer. Managing Director, Chief 0
(36) Financial Officer and Director, Lexington Management
Corporation; Vice President, Chief Financial Officer and
Director, Lexington Funds Distributor, Inc.

Lawrence Kantor* Vice President and Director (see page 3). 0
(47)

Richard T. Saler* Vice President and Portfolio Manager. Senior Vice 0
(33) President, Lexington Management Corporation. Mr. Saler
joined Lexington in 1986. In 1991, Mr. Saler left
Lexington and worked for Nomura Securities as a
strategist and in 1992, Mr. Saler rejoined Lexington.

Lisa Curcio* Vice President and Secretary. Vice President and 0
(35) Secretary, Lexington Management Corporation; Vice
President and Secretary, Lexington Funds Distributor,
Inc.
</TABLE>

*Messrs. DeMichele, Hisey, Kantor and Saler and Ms. Curcio hold similar offices
with some or all of the other registered investment companies advised and/or
whose shares are distributed by Lexington Management Corporation and Lexington
Funds Distributor, Inc.

The investment adviser to the Fund is Lexington Management Corporation,
P.O.Box 1515/Park 80 West Plaza Two, Saddle Brook, N.J. 07663. The distributor
of the Fund is Lexington Funds Distributor, Inc., P.O.Box 1515/Park 80 West
Plaza Two, Saddle Brook, N.J.
07663.

5
<PAGE>

PROPOSAL 2: RATIFICATION OR REJECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

The Directors of the Fund recommend that the shareholders ratify the
selection of KPMG Peat Marwick LLP, certified public accountants, to serve as
the independent auditors of the Fund for the fiscal year ending December 31,
1995. The Directors, including a majority of the Directors who are not
"interested persons" of the Fund, made their selection of the auditors on
December 6, 1994 subject to the approval of the shareholders; the shareholders
are being requested to ratify the selection of such auditors in accordance with
Section 32(a) of the Investment Company Act of 1940. Neither KPMG Peat Marwick
LLP, nor any of its partners or employees have had any direct or indirect
financial interest in the Fund or its affiliates in any capacity other than as
auditors. KPMG Peat Marwick LLP also serves as independent certified public
accountants to fourteen other Lexington investment companies.

A representative from KPMG Peat Marwick LLP is not expected to be present at
the Meeting.

PROPOSAL 3: APPROVAL OF AN AMENDED INVESTMENT MANAGEMENT AGREEMENT

The Board of Directors has approved, and recommend that the shareholders of
the Fund approve, a proposal to enter into an amended investment management
agreement (the "Amended Agreement") between the Fund and LMC. The Amended
Agreement will clarify LMC's responsibilities and will not result in a change in
advisory fees paid by the Fund. A copy of the existing management agreement
between the Fund and LMC (the "Existing Agreement") is attached hereto as
Exhibit A. A copy of the Amended Agreement is attached hereto as Exhibit B.

The Amended Agreement is the same in all material respects as the Existing
Agreement, except for the following:

(1) The Amended Agreement clarifies the ability of the Fund to obtain and
pay for various services that are not otherwise required in the management
arrangement. The Amended Agreement provides that upon the request of the Board
of Directors, LMC may perform certain accounting, shareholder servicing or other
administrative services on behalf of the Fund that are not required by the
Amended Agreement. Such services would be performed on behalf of the Fund and
LMC may receive from the Fund such reimbursement for costs or reasonable
compensation for such services as may be agreed upon between LMC and the Board
on a finding by the Board that the provision of such services by LMC is in the
best interests of the Fund and its shareholders. Payment or assumption by LMC of
any Fund expense that LMC is not otherwise required to pay or assume under the
Amended Agreement would not relieve LMC of any of its obligations to the Fund
nor obligate LMC to pay or assume any similar Fund expense on any subsequent
occasions. Such services may include, but are not limited to, (a) the services
of a principal financial officer of the Fund (including applicable office space,
facilities and equipment) whose normal duties consist of maintaining the
financial accounts and books and records of the Fund, and the services
(including applicable office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial officer; (b)
the services of staff to respond to shareholder inquiries concerning the status
of their accounts; providing assistance to shareholders in exchanges among the
investment companies managed or advised by LMC; changing account designations or
changing addresses; assisting in the purchase or redemption of shares; or
otherwise providing services to shareholders of the Fund; and (c) such other
administrative services as may be furnished from time to time by LMC to the Fund
at the request of the Board of Directors. Approval of the Amended Agreement by
shareholders will not result in any material increase in the expenses of the
Fund.

6
<PAGE>

(2) The Amended Agreement clarifies LMC's obligations to comply with the
requirements of the Securities Exchange Act of 1934, as amended, including its
obligation to execute portfolio transactions in the best interest of the Fund.
The Amended Agreement also confirms LMC's ability (at its own expense) to place
portfolio trades with brokers and dealers on behalf of the Fund and LMC's
ability to take advantage of the safe harbor afforded by Section 28(e) under the
Securities Exchange Act of 1934, as amended. It allows LMC to consider bona fide
research in deciding to allocate brokerage commissions. In addition, it
authorizes LMC to place trades through affiliated brokers, although this is not
the current policy of the Fund.

The Fund's primary policy will be to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with this policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and such other policies as the Directors may determine, LMC may consider sales
of shares of the Fund and of the other Lexington Funds as a factor in the
selection of broker-dealers to execute the Fund's portfolio transactions.
However, pursuant to the Amended Agreement, management consideration may be
given in the selection of broker-dealers to research provided and payment may be
made of a commission higher than that charged by another broker-dealer which
does not furnish research services or which furnishes research services deemed
to be of a lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934 are met. Section 28(e) of thc Securities
Exchange Act of 1934 was adopted in 1975 and specifies that a person with
investment discretion shall not be "deemed to have acted unlawfully or to have
breached a fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest available under certain circumstances,
provided that the person so exercising investment discretion makes a good faith
determination that the commissions paid are "reasonable in the relation to the
value of the brokerage and research services provided... viewed in terms of
either that particular transaction or his overall responsibilities with respect
to the accounts as to which he exercises investment discretion."

It is not possible to determine the exact extent to which commissions that
reflect an element of value for research services might exceed commissions that
would be payable for execution services alone. Nor generally can the value of
research services to the Fund be measured. Research services furnished might be
useful and of value to LMC and its affiliates in serving other clients as well
as the Fund. On the other hand, any research services obtained by LMC or its
affiliates from the placement of portfolio brokerage of other clients might be
useful and of value to LMC in carrying out its obligations to the Fund.

(3) The Amended Agreement clarifies the ability of LMC to appoint a
sub-adviser to the Fund, subject to the approval of the Fund's shareholders, and
clarifies the duties of any such sub-adviser.

As of December 31, 1994, the Fund had total net assets of $288,581,189. Fund
expenses not assumed by LMC pursuant to the Existing Agreement are paid by the
Fund. These expenses include the Fund's custodian charges, transfer agent fees,
legal and registration fees, auditing fees, cost of printing of prospectuses,
shareholder reports and communications, computation of net asset value, mailing
of shareholder reports and communications, portfolio brokerage, taxes and
"non-interested" Directors' fees. During the fiscal year ended December 31,
1994, LMC, the Fund's investment adviser, earned $3,028,315 as investment
advisory fee for services rendered.

LMC serves as investment manager to other investment companies in the
Lexington Family of Funds. The investment companies having substantially similar
investment objectives for which LMC serves as investment manager, together with
the fees charged by LMC for each investment company, are as follows:

7
<PAGE>

ANNUAL
NET ASSETS ADVISORY ON AMOUNTS
FUND AS OF 12/31/94 FEE OF UP TO:*
- - ---- -------------- -------- ---------

Lexington Global Fund, Inc. $67,392,249 1.00% unlimited

Lexington International Fund, Inc. $17,843,357 1.00% unlimited

Lexington Emerging Markets Fund, Inc. $ 4,623,816 0.85% unlimited

- - ----------
*The percentage of the fee declines if the average net assets of the Fund in
question exceed this amount.

The principal Executive Officers and Directors of LMC and their principal
occupations are:

Name Position with LMC Principal Occupation
- - ---- ----------------- --------------------
<S> <C> <C>

Robert M. DeMichele Chairman and See Page 3
Chief Executive Officer

Richard M. Hisey Managing Director, See Page 5
Chief Financial Officer,
and Director

Lawrence Kantor Executive Vice President, See Page 3
Managing Director and Director

James H. O'Leary Managing Director and Director Managing Director and Director, LMC

Peter Palenzona Director Senior Vice President and Chief Financial
Officer, Piedmont Management Company
Inc.

Stuart S. Richardson Director Vice Chairman, Piedmont Management
Company Inc.

John B. Waymire Vice President and Directo President and Director, Lexington Capital
Management Inc.

Lisa Curcio Vice President and Secretary See Page 5

</TABLE>

The address of all officers and directors of LMC is P.O. Box 1515, Saddle
Brook, New Jersey 07663, except for Messrs. Palenzona and Richardson whose
address is 80 Maiden Lane, New York, New York 10038 and Mr. Waymire whose
address is 2339 Gold Meadow Way, Gold River, CA 95670.

LMC is a wholly-owned subsidiary of Piedmont Management Company Inc., 80
Maiden Lane, New York, New York 10038, a publicly traded corporation.
Descendants of Lunsford Richardson, Sr., their spouses, trusts and other related
entities have a majority voting control of outstanding shares of Piedmont
Management Company Inc.

Reasons for the Proposal.

LMC proposed the Amended Agreement to clarify various obligations and
responsibilities of the Fund and LMC under their contractual relationship and
the ability of LMC to provide additional services, as described above. No
material changes in the nature of the services provided by LMC would be effected
under the Amended Agreement and no additional fees would be charged.

At a meeting on December 5, 1994, the disinterested Directors reviewed and
approved the Amended Agreement. The factors considered by the Directors
concerning the Amended Agreement between LMC and the Fund included,

8
<PAGE>

among other things, (i) the nature and quality of the services provided by LMC
to the Fund; (ii) the Fund's need for management services; (iii) the quality of
the personnel of LMC; (iv) the reasonableness of the fees to be charged by LMC
in relation to the quality of the services provided; (v) LMC's historical
relationship to the Fund; (vi) economies of scale; (vii) the profitability of
LMC; (viii) the ability to place portfolio trades with broker-dealers in
exchange for bona fide research services; and (ix) the fact that LMC would have
the ultimate responsibility for determination of the Fund's investment strategy
and implementation of that strategy.

Conclusion.

Based on the above discussion and the evaluation of additional materials
presented during the meeting, the Board of Directors concluded that the Amended
Agreement is fair and reasonable and is in the best interest of the shareholders
of the Fund. The Directors recommended voting FOR the Amended Agreement. If
approved by the Fund's shareholders, the Amended Agreement will take effect as
soon as practicable and will remain in effect subject to continuation by the
Fund's Board of Directors, including a majority of the disinterested Directors.
If the shareholders of the Fund do not approve the Amended Agreement, the
Existing Agreement will continue in effect.

ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS.

The primary purpose of Proposals 4 through 18 is to revise several of the
Fund's investment restrictions. In each case, the Board has reviewed the
proposed changes and believes that they are in the best interests of the Fund
and its shareholders for the following reasons:

Standardization. Some of the Fund's investment restrictions differ in
form and substance from similar restrictions of other funds advised by
LMC. LMC and the Board believe that increased standardized restrictions
among all Lexington Funds will help promote operational efficiencies and
facilitate the monitoring of portfolio compliance. In all cases, the
adoption of a new or amended restriction or the elimination of a
restriction is not expected to have any impact on the investment
techniques employed by the Fund at this time.

Modernization. The Fund's investment restrictions have been in effect,
without changes, for many years. LMC and the Board believe that the Fund
should modernize its investment restrictions, where appropriate, to
conform to regulatory developments and authorize the use of newer
financial instruments.

Clarification. Some of the Fund's investment restrictions contain
ambiguities that, if interpreted in a narrow way, would prevent the Fund
from following the original intent of the restriction. Accordingly, LMC
and the Board recommend that the Fund change its fundamental
restrictions, where appropriate, to eliminate any ambiguities.

Flexibility. Several of the Funds's fundamental investment restrictions
may need to be changed to allow it to respond to regulatory developments
and changes in the financial markets. For example, restrictions
prohibiting certain transactions have been changed or eliminated by a
federal or state securities regulator. Currently, to take advantage of
such a change, the Fund would need shareholder approval, which is time
consuming and costly to the Fund and its shareholders. To give the Fund
more flexibility in responding to regulatory and market developments,
LMC and the Board recommend changing, reclassifying or eliminating some
of the Fund's fundamental investment restrictions so that they can be
changed by the Board without shareholder vote. The Fund's prospectus and
statement of additional information will be amended to reflect any
changes.

9
<PAGE>

A comparison of the existing investment restrictions and the new
restrictions as they would exist after approval by shareholders is attached as
Exhibit C.

PROPOSAL 4: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS CONCERNING SENIOR SECURITIES

The Fund's current investment restriction concerning senior securities
provides that:

"The Fund shall not issue senior securities."

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including
reverse repurchase agreements, foreign exchange contracts, delayed
delivery and when-issued securities, which may be considered the
issuance of senior securities; (b) the Fund may engage in transactions
that may result in the issuance of a senior security to the extent
permitted under applicable regulations, interpretation of the 1940 Act
or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related
options shall not be considered to involve the issuance of senior
securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act."

Reasons for the Proposal.

Generally under the 1940 Act, an investment company cannot issue senior
securities except under certain conditions. The proposed fundamental restriction
modernizes the language concerning senior securities to conform to provisions of
the 1940 Act and clarifies that the Fund may issue senior securities to the
extent permitted under the Act. It is proposed that this restriction exclude
those transactions that current regulatory interpretations and policies allow
and are consistent with current investment marketplace practices. Although the
definition of a "senior security" involves complex statutory and regulatory
concepts, a senior security is generally thought of as an obligation of a fund
which has a claim to the fund's assets or earnings that takes precedence over
the claims of the fund's shareholders. The 1940 Act generally prohibits mutual
funds from issuing senior securities; however, mutual funds are permitted to
engage in certain types of transactions that might be considered "senior
securities" as long as certain conditions are satisfied. Therefore, the proposed
fundamental restriction will allow the following investments even though they
are senior securities, provided the Fund segregates cash or other high quality
securities with its custodian, or subcustodian: (a) enter into commitments,
including reverse repurchase agreements and delayed delivery and when-issued
securities; (b) engage in transactions that may result in the issuance of a
senior security to the extent permitted by applicable law or exemptive order;
(c) engage in short sales of securities; (d) purchase and sell futures contracts
and related options; and (e) borrow money, subject to other applicable
restrictions.

When-Issued or Delayed-Delivery Securities.

During any period that the Fund has outstanding a commitment to purchase
securities on a when-issued or delayed-delivery basis, the Fund will maintain a
segregated account consisting of cash, U.S. Government securities or

10
<PAGE>

other high-quality debt obligations with its custodian bank. To the extent that
the market value of securities held in this segregated account falls below the
amount that the Fund will be required to pay on settlement, additional assets
may be required to be added to the segregated account. Such segregated account
could affect the Fund's liquidity and ability to manage its portfolio. When the
Fund engages in when-issued or delayed-delivery transactions, it is effectively
relying on the seller of such securities to consummate the trade; failure of the
seller to do so may result in the Fund's incurring a loss or missing an
opportunity to invest funds held in the segregated account more advantageously.
The Fund will not pay for securities purchased on a when-issued or
delayed-deliver basis, or begin earning interest on such securities, until the
securities are actually received. However, any security so purchased will be
recorded as an asset of the Fund at the time the commitment is made. Because the
market value of securities purchased on a when-issued or delayed-delivery basis
may increase or decrease prior to settlement as a result of changes in interest
rates or other factors, such securities will be subject to changes in market
value prior to settlement and a loss may be incurred if the value of the
security to be purchased declines prior to settlement.

Conclusion.

The Board of Directors has concluded that the adoption of the new
restriction is in the best interest of the Fund and its shareholders. The
Directors recommend that shareholders of the Fund vote FOR the proposed
amendment. The amended restriction, upon shareholder approval, will become
effective as soon as practicable. If the proposal is not approved, the Fund's
current restriction will remain unchanged.

PROPOSAL 5: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING UNDERWRITING

The Fund's current fundamental investment restriction concerning
underwriting provides that:

"The Fund shall not underwrite securities of other issuers".

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund shall not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities
by the Fund, the Fund may be deemed to be an underwriter under the
provisions of the 1933 Act."

Reasons for the Proposal.

The proposed fundamental investment restriction modernizes the language
concerning underwriting to enable the Fund to act in any way which is not deemed
to be contrary to the 1940 Act. The Restriction is also being written to
increase standardization among all Lexington Funds.

Conclusion.

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<PAGE>

PROPOSAL 6: AMENDMENT TO AND SEPARATION OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING REAL ESTATE AND COMMODITY CONTRACTS

The Fund's current fundamental investment restriction concerning real estate
and commodity contracts provides that:

"The Fund shall not invest in real estate or purchase or sell commodity
contracts or commodities (however, the Fund may purchase interests in
real estate investment trusts whose securities are registered under the
Securities Act of 1933 and are readily marketable)."

Subject to shareholder approval, the Board of Directors intends to separate
the above restriction and replace it with two fundamental investment
restrictions, one concerning real estate and the other concerning commodity
contracts:

"The Fund shall not purchase real estate, interests in real estate or
real estate limited partnership interests except that, to the extent
appropriate under its investment program, the Fund may invest in
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which deal in real
estate or interests therein."

"The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase
securities of companies engaged in such activities, may enter into
transactions in financial and index futures contracts and related
options, may engage in transactions on a when-issued or forward
commitment basis, and may enter into forward currency contracts."

Reasons for the Proposal.

LMC, the Fund's investment adviser, has proposed the separation and
amendment of the Fund's fundamental investment restriction concerning real
estate and commodity contracts. These restrictions concern different matters and
belong in two different categories.

The primary purpose of the proposed fundamental restriction concerning real
estate is to clarify the types of securities in which the Fund is authorized to
invest and to conform the Fund's fundamental real estate restriction to a
restriction that is expected to become the standard for all funds managed by
LMC. If the proposal is approved, the new fundamental real estate restriction
may not be changed without a future vote of shareholders.

Adoption of the proposed restriction concerning real estate is not expected
to significantly affect the way in which the Fund is managed or the way in which
securities or instruments are selected for the Fund, which primarily invests in
equity securities of companies domiciled, or doing business in, emerging
countries and emerging markets. However, to the extent that the Fund invests in
real estate related securities, it will be subject to the risks of the real
estate market. This industry is sensitive to factors such as changes in real
estate values and property taxes, overbuilding, variations in rental income, and
interest rates. Performance could also be affected by the structure, cash flow
and management skill of real estate companies.

The Fund does not expect to acquire real estate. However, the proposed
restriction would clarify several points. First, the proposed restriction would
make it explicit that the Fund may acquire a security or other instrument that
is secured by a mortgage or other right to foreclose on real estate, in the
event of a default. Second, the proposed restriction would clarify the fact that
the Fund may invest without limitation in securities issued or guaranteed by

12
<PAGE>

companies engaged in acquiring, constructing, financing, developing, or
operating real estate projects (e.g., securities of issuers that develop various
industrial, commercial, or residential real estate projects such as factories,
office buildings, or apartments). Any investments in these securities or other
instruments are, of course, subject to the Fund's investment objective and
policies and to other limitations regarding diversification and concentration in
particular industries.

The proposed fundamental investment restriction concerning commodity
contracts involves a higher level of investment risk. In order to protect the
Fund against such risks, LMC believes it is desirable to have the ability to
enter into certain hedging transactions. The Directors believe that given the
increasing complexity and volatility of investment in international markets, it
is in the best interests of the Fund and its shareholders to have flexibility in
managing the Fund's investments. The Directors believe that the investment
strategies as described below will enable the Fund to hedge various market risks
associated with investing in global securities.

These changes, if approved by shareholders, would allow the Fund to have the
added investment flexibility to enter into forward currency contracts; financial
futures and other contracts and related options, traded both in U.S. and foreign
markets; cross-currency hedges; and transactions on delayed-delivery or
when-issued basis. Approval by shareholders also constitutes approval of any
amendments necessary to the Fund's Articles of Incorporation to effectuate these
changes. If the proposal is approved, the new fundamental restriction concerning
commodity contracts cannot be changed without a future vote of shareholders.

If the shareholders approve the above fundamental investment restrictions,
the Directors intend to adopt the following non-fundamental investment
restriction, which may be changed without shareholder approval:

"The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
Fund's total assets, at market value at the time of entering into a
contract, shall be committed to margin deposits in relation to futures
contracts."

Description of the Proposed Investment Techniques.

Futures contracts.

If approved by shareholders, the Fund may enter into financial or currency
futures contracts or options thereon as a hedge against changes in prevailing
levels of interest rates, or changes in prevailing currency exchange rates and
in anticipation of future purchases or sales of securities. Hedging transactions
may include sales of futures as an offset against the effect of expected
increases in interest rates or decreases in the value of foreign currencies.
Hedging transactions may also include purchases of futures contracts as an
offset against the effect of expected decreases in interest rates or an increase
in the value of a particular currency. Although techniques other than sales and
purchases of futures contracts could be used to reduce the exposure of the Fund
to market fluctuations, it may be able to hedge its exposure more effectively
and perhaps at a lower cost through using futures contracts. The Fund may enter
into futures contracts or options thereon that are traded on national futures
exchanges and are standardized as to maturity and underlying financial
instrument. Futures exchanges and trading are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission (the "CFTC"). In
addition, the Fund may enter into certain futures contracts traded on foreign
exchanges, provided that the futures contracts have been approved by the CFTC.

A futures contract provides for the future sale by one party of a and
purchase by another party of a specified amount of a specific financial
instrument or a specific market index for a specified price at a designated
date, time and

13
<PAGE>

place. Brokerage fees are incurred when a futures contract is bought or sold and
at expiration, and margin deposits must be maintained.

Although interest rate futures typically require actual future delivery of
and payment for the underlying instruments, those contracts are usually closed
out before the delivery dates. Index futures contracts do not contemplate actual
future delivery and will be settled in cash at expiration or closed out prior to
expiration. Closing out an open futures contract sale or purchase is effected by
entering into an offsetting futures contract purchase or sale, respectively, for
the same aggregate amount of the identical type of underlying instrument and the
same delivery date. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the contract.

Persons who engaged in futures contracts transactions may be broadly
classified as "hedgers" and "speculators." Hedgers, such as the Fund, whose
business activity involves investment in securities, use the futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities held or expected to be acquired by
them. Debtors and other obligors may also hedge the interest cost of their
obligations. The speculator, like the hedger, generally expects neither to
deliver nor to receive the financial instrument underlying the futures contract,
but, unlike the hedger, hopes to profit from fluctuations in prevailing interest
rates or currency exchange rates.

The prices of futures contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates and currency
exchange rates, which in turn are affected by fiscal and monetary policies and
national and international political and economic events.

At best, the correlation between changes in prices of futures contracts and
of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances such as: variations in
speculative market demand for futures and for securities, including technical
influences in futures trading; and differences between the financial instruments
being hedged and the instruments underlying the standard futures contracts
available for trading. Even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior or foreign currency or interest
rate trends.

Most United States futures exchanges limit the amount of fluctuation
permitted in interest rate futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of a futures
contract may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at a price beyond
that limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some persons engaging in futures transactions to substantial
losses.
The risk involved in writing options on futures contracts or market indices
is that there could be an increase in the market value of such contracts or
indices. If that occurred, the option would be exercised and the Fund would not
benefit from any increase in value above the purchase price. Usually, this risk
can be eliminated by entering into an offsetting transaction. However, the cost
to do an offsetting transaction and terminate the Fund's obligations might be
more or less than the premium received when it originally wrote the option.
Further, the Fund might occasionally not be able to close the option because of
insufficient activity in the options market.

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<PAGE>

"Margin" is the amount of funds that must be deposited by the Fund with a
commodities broker in a custodian account in order to initiate futures trading
and to maintain open positions in the Fund's futures contracts. A margin deposit
is intended to assure the Fund's performance of the futures contract. The margin
required for a particular futures contract is set by the exchanges on which the
contract is traded and may be significantly modified from time to time by the
exchange during the term of this contract.

If the price of an open futures contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the futures
contract reached a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
promptly pay the excess to the Fund. These daily payments to and from the Fund
are called variation margin. At times of extreme price volatility such as
occurred during the week of October 19, 1987, intra-day variation margin
payments may be required. In computing daily net asset values, the Fund will
mark to market the current value of its open futures contract. The Fund expects
to earn interest income on its initial margin deposits. Furthermore, in the case
of a futures contract purchase, the Fund has deposited in a segregated account
money market instruments sufficient to meet all futures contract initial margin
requirements.

Because of the low margin deposit required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate, substantial and
potentially unlimited loss, or gain, to the investor relative to the size of the
margin commitment. For example, if at the time of purchase 10% of the value of
the futures contract is deposited as margin, a subsequent 10% decrease in the
value of the futures contract would result in a total loss of the margin deposit
before any deduction for the transaction costs, if the contract were then closed
out. A 15% decrease in the value of the futures contract would result in a loss
equal to 150% of the original margin deposit, if the contract were closed out.
Thus, a purchase or sale of a futures contract may result in losses in excess of
the amount initially invested in the futures contract. However, the Fund would
presumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.

Forward Foreign Currency Exchange Contracts.

If approved by shareholders, the Fund may purchase or sell forward foreign
currency exchange contracts ("forward contracts") as part of its portfolio
investment strategy. A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date which is individually
negotiated and privately traded by currency traders and their customers. The
Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). Additionally, for example, when the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. Conversely, when the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge"). In this situation, the
Fund may, in the alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund believes that the
U.S. dollar value of the currency to be sold pursuant to the forward contract
will fall whenever there is a decline in the U.S. dollar value of the currency
in which portfolio securities of the Fund are denominated ("cross-hedge").

The Fund's custodian will place cash not available for investment or U.S.
government securities or other high quality debt securities in a segregated
account having a value equal to the aggregate amount of the Fund's

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<PAGE>

commitments under forward contracts entered into with respect to position hedges
and cross-hedges, to the extent they do not already own the security subject to
the transaction hedge. If the value of the securities placed in a segregated
account declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will equal the amount of the
Fund's commitments with respect to such contracts. As an alternative to
maintaining all or part of the segregated account, the Fund may purchase a call
option permitting it to purchase the amount of foreign currency being hedged by
a forward sale contract at a price no higher than the forward contract price or
the Fund may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high or
higher than the forward contract price. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it had not entered
into such contracts. If the party with which the Fund enters into a forward
contract becomes insolvent or breaches its obligation under the contract, then
the Fund may lose the ability to purchase or sell a currency as desired.

Investment Risks.

Currency Fluctuations. Because the Fund may invest in the securities of
foreign issuers which are denominated in foreign currencies, the strength or
weakness of the U.S. dollar against such foreign currencies will account for
part of the Fund's investment performance. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities dominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
any net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund.

The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the United States, and other economic and financial conditions affecting the
world economy.

Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.

Interest Rate Fluctuations. Generally, if interest rates decrease, the value
of debt securities held by the Fund will increase. Conversely, if interest rates
increase, the value of debt securities held by the Fund will decrease.

Conclusion.

The Board of Directors has concluded that the separation and amendment of
the restriction concerning real estate and commodity contracts is in the best
interest of the Fund and its shareholders. The Directors recommend that
shareholders of the Fund vote FOR the proposed amendment. The amended
restrictions, upon shareholder approval, will become effective as soon as
practicable. If the proposal is not approved, the Fund's current restriction
will remain unchanged.

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<PAGE>

PROPOSAL 7: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING LENDING

The Fund's current fundamental restriction concerning lending provides that:

"The Fund shall not make loans to other persons except: (a) through the
purchase of a portion or portions of publicly distributed bonds, notes,
debentures and evidences of indebtedness authorized by its investment
policy, or (b) through investments in "repurchase agreements" (which are
arrangements under which the Fund acquires a debt security subject to an
obligation of the seller to repurchase it at a fixed price within a
short period), provided that no more than 5% of the Fund's assets may be
invested in repurchase agreements which mature in more than seven days."

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund shall not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase transactions and (c) lend portfolio securities
provided that the value of such loaned securities does not exceed
one-third of the Fund's total assets."

Reasons for the Proposal.

The proposed fundamental restriction is materially the same as the current
fundamental restriction. However, the proposed restriction will increase the
Fund's ability to lend portfolio securities to up to one-third of its total
assets. The primary purpose of the proposal is to conform the language of the
fundamental restriction concerning lending to the provisions of the 1940 Act. It
is proposed that this restriction exclude those transactions that current
regulatory interpretations and policies allow and are consistent with current
investment marketplace practices. The restriction is also being written to
increase standardization among all Lexington Funds.

Although the Board proposes that the procedural requirements be removed from
this restriction, the Fund will not make loans, enter into repurchase agreements
or lend portfolio securities unless it receives collateral that is at least
equal to the value of the loan, including accrued interest. If the recipient of
the loan or the seller of the instrument defaults and the value of the
collateral securing the loan or the repurchase agreement declines, the Fund may
incur a loss. This risk is increased by the proposed restriction as it permits
the Fund to lend up to one-third of its total assets. If the proposal is
approved the new fundamental restriction concerning lending can not be changed
without a future vote of the shareholders.

Conclusion.

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<PAGE>

PROPOSAL 8: ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION CONCERNING
SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund's current fundamental restriction concerning securities of other
investment companies provides that:

"The Fund shall not purchase the securities of another open-end
management type investment company or investment trust except in
connection with a merger."

The Directors recommend that shareholders of the fund vote to eliminate the
above fundamental investment restriction. If the proposal is approved, the
Directors intend to replace the current fundamental restriction with a
non-fundamental restriction, which could be changed without a vote of
shareholders. The proposed non-fundamental investment restriction is set forth
below with a brief analysis of the substantive differences between it and the
current investment restriction:

"The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act."

Reasons for the Proposal.

The proposed non-fundamental investment restriction is materially the same
as the current fundamental restriction. The ability of mutual funds to invest in
other investment companies is restricted by rules under the 1940 Act and by some
state regulations. The Fund's current fundamental investment restriction recites
certain of the applicable federal and former state restrictions. The federal
restrictions will remain applicable to the Fund whether or not they are recited
in a fundamental restriction. As a result, elimination of the above fundamental
restriction is not expected to have any impact on the Fund's investment
practices, except to the extent that regulatory requirements may change in the
future. However, the Board of Directors believes that the efforts to standardize
the Fund's investment restrictions will facilitate LMC's investment compliance
efforts and are in the best interests of the shareholders. The change will
modernize the language concerning the purchase of securities of other investment
companies to enable the Fund to act in any way which is not deemed to be
contrary to the 1940 Act. The restriction is also being written to increase
standardization among all Lexington Funds.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning securities of other investment companies is in the best
interest of the Fund and its shareholders. The Directors recommend that
shareholders of the Fund vote FOR the proposal. If the proposal is approved, the
Fund's current fundamental restriction will be eliminated as soon as
practicable. If the proposal is not approved, the Fund's current restriction
will remain unchanged.

PROPOSAL 9: ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION
CONCERNING MARGIN AND SHORT SALES

The Fund's current fundamental investment restriction concerning margin and
short sales provides that:

"The Fund shall not purchase any securities on margin or effect a short
sale of a security."

The Directors recommend that the shareholders vote to eliminate the above
fundamental investment restriction. If the proposal is approved, the Directors
intend to replace the Fund's current restriction with a non-fundamental

18
<PAGE>

investment restriction which may be changed without shareholder approval. The
proposed non-fundamental restriction is set forth below, with a brief analysis
of the substantive differences between it and the current restriction:

"The Fund will not purchase any securities on margin or make short sales
of securities, other than short sales "against the box," or purchase
securities on margin except for short-term credits necessary for
clearance of portfolio transactions, provided that this restriction will
not be applied to limit the use of options, futures contracts and
related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.

Reasons for the Proposal.

Margin purchases involve the purchase of securities with money borrowed from
a broker. "Margin" is the cash or eligible securities that the borrower places
with a broker as collateral against the loan. Except for obtaining short-term
credits as may be necessary for the clearance of transactions and margin
payments made in connection with the purchase and sale of futures contracts and
options on futures contracts, mutual funds are prohibited from entering into
most margin purchases by applicable SEC policies.

In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. A short
sale "against the box" is an investment technique where the Fund owns an equal
amount of such securities or, by virtue of ownership of convertible or
exchangeable securities (or otherwise), has the right to obtain an equal amount
of the securities sold short without the payment of future consideration, and it
will retain such securities so long as it is in a short position as to them.

Certain state regulations currently prohibit mutual funds from entering into
any short sales, other than short sales against the box. If the proposal is
approved, however, the Board of Directors would be able to change the Fund's
proposed non-fundamental restriction in the future, without a vote of
shareholders, if state regulations were to change to permit other types of short
sales, or if waivers from existing requirements were available, subject to
appropriate disclosure to investors. The proposed non-fundamental restriction
modernizes the language concerning short sales to enable the Fund to act in any
way which is not deemed to be contrary to the 1940 Act and excludes those
transactions that current regulatory interpretations and policies allow. It also
clarifies the circumstances under which the Fund can make margin purchases. In
addition, the reclassification as non-fundamental will provide the Fund with
additional flexibility to carry out its investment program without an increase
in the relative risks involved. The restriction is also being written to
increase standardization among all Lexington Funds.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning margin and short sales is in the best interest of the
Fund and its shareholders. The Directors recommend that shareholders of the Fund
vote FOR the proposal. If the proposal is approved, the Fund's current
fundamental restriction will be eliminated as soon as practicable. If the
proposal is not approved, the Fund's current restriction will remain unchanged.

PROPOSAL 10: ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING SALES OF SECURITIES TO THE FUND'S OFFICERS, DIRECTORS, INVESTMENT
ADVISER OR DISTRIBUTOR

The Fund's current fundamental investment restriction concerning sales of
securities to its officers, directors, investment adviser or distributor
provides that:

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<PAGE>

"The Fund shall not buy securities from or sell securities (other than
securities issued by the Fund) to any of its officers, directors or its
investment adviser or distributor as principal."

The Directors recommend that shareholders of the Fund vote to eliminate the
above fundamental investment restriction. If the proposal is approved, the
Directors intend to replace the current fundamental restriction with a
non-fundamental investment restriction containing the same language, which could
be changed without a vote of shareholders.

Reasons for the Proposal.

The proposed non-fundamental restriction concerning sales of securities to
its officers, directors, investment adviser or distributor, is precisely the
same as the current fundamental restriction. The reclassification will provide
the Fund with additional flexibility without an increase in the relative risks
involved and allow the Fund to respond quickly to changes in the financial
markets.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning sales of securities to the Fund's officers, directors,
investment adviser or distributor is in the best interest of the Fund and its
shareholders. The Directors recommend that shareholders of the Fund vote FOR the
proposal. If the proposal is approved, the Fund's current fundamental
restriction will be eliminated as soon as practicable. If the proposal is not
approved, the Fund's current restriction will remain unchanged.

PROPOSAL 11: ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING THE FUND'S ABILITY TO CONTRACT TO SELL SECURITIES

The Fund's current fundamental investment restriction concerning the Fund's
ability to contract to sell securities provides that:

"The Fund shall not contract to sell any security or evidence of
interest therein, except to the extent that the same shall be owned by
the Fund."

The Directors recommend that shareholders of the Fund vote to eliminate the
above fundamental investment restriction. If the proposal is approved, the
Directors intend to replace the current fundamental investment restriction with
a non-fundamental investment restriction containing the same language, which
could be changed without a vote of shareholders.

Reasons for the Proposal.

The proposed non-fundamental restriction concerning the Fund's ability to
contract to sell securities is precisely the same as the current fundamental
restriction. The reclassification will provide the Fund with additional
flexibility without an increase in the relative risks involved and allow the
Fund to respond quickly to changes in the financial markets.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning the Fund's ability to contract to sell securities is in
the best interest of the Fund and its shareholders. The Directors recommend

20
<PAGE>

that shareholders of the Fund vote FOR the proposal. If the proposal is
approved, the Fund's current fundamental restriction will be eliminated as soon
as practicable. If the proposal is not approved, the Fund's current restriction
will remain unchanged.

PROPOSAL 12: ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION
CONCERNING SECURITIES OF AFFILIATES

The Fund's current fundamental investment restriction concerning securities
of affiliates provides that:

"The Fund shall not purchase or retain securities of an issuer when one
or more of the officers and directors of the Fund or its investment
adviser, or a person owning more than 10% of the stock of the Fund or
its investment adviser owns beneficially more than 1/2 of 1% of the
securities of such issues and all such persons each owning more than 1/2
of 1% of such securities together own beneficially more than 5% of the
securities of such issuer."

The Directors recommend that the shareholders approve the elimination of the
above fundamental investment restriction. If the proposal is approved, the
Directors intend to replace the current fundamental investment restriction with
a non-fundamental investment restriction, which may be changed without
shareholder approval. The proposed non-fundamental investment restriction is set
forth below with a brief analysis of the substantive differences between it and
the current investment restriction:

"The Fund will not purchase securities of an issuer if to the Fund's
knowledge, one or more of the Directors or officers of the Fund or LMC
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer nor will the
Fund hold the securities of such issuer."

Reasons for the Proposal.

The proposed non-fundamental restriction concerning securities of affiliates
is materially the same as the current fundamental restriction. The purpose of
this restriction is to comply with state laws. The proposal will have no current
impact on the Fund. However, adoption of a standard non-fundamental limitation
will facilitate LMC's compliance efforts and will enable the Fund to respond
more promptly if applicable state laws change in the future. In addition, the
reclassification will provide the Fund with additional flexibility without an
increase in the relative risks involved. The restriction is also being written
to increase standardization among all Lexington Funds.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning securities of affiliates is in the best interest of the
Fund and its shareholders. The Directors recommend that shareholders of the Fund
vote FOR the proposal.
If the proposal is not approved, the Fund's current restriction will remain
unchanged.

PROPOSAL 13: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING DIVERSIFICATION

The Fund's current fundamental restriction concerning diversification
provides that:

"the Fund shall not purchase any securities if such purchase would cause
the Fund to own at the time of purchase more than 10% of the voting
securities of any issuer.

The Fund shall not invest more than 5% of the value of its total assets
in the securities of any one issuer."

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<PAGE>

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund will not hold more than 5% of the value of its total assets in
the securities of any one issuer or hold more than 10% of the
outstanding voting securities of any one issuer. This restriction
applies only to 75% of the value of the Fund's total assets. Securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities are excluded from this restriction."

Reasons for the Proposal.

The current restriction is more limited than is necessary for a Fund to be
classified as "diversified" for purposes of the 1940 Act. The proposed
fundamental restriction applies the diversification limits to 75% of the Fund's
total assets which mirrors current securities law. The current 5% limitation
applicable to purchases of securities of a single issuer and 10% limitation
applicable to purchases of voting securities of a single issuer will remain in
effect with respect to this 75% of the Fund's total assets.

Certain state securities regulations (Blue Sky regulations) at one time
prohibited a fund from registering shares for sale if the fund intended to
invest more than 5% of total assets in a single issuer or to hold more than 10%
of the voting securities of a single issuer. The Fund has fundamental
restrictions that incorporate these Blue Sky restrictions. Because the Blue Sky
regulations regarding these limitations have been eliminated, shareholder
approval is sought to permit the Fund to invest a higher proportion of its
assets in securities issued by a single issuer and to hold a higher proportion
of voting securities of a single issuer.

If the proposal is approved, the Fund would be required to invest 75% of its
total assets so that no more than 5% of total assets would be inverted in any
one issuer, and so that the Fund owned no more than 10% of the voting securities
of any such issuer. As to the remaining 25% of total assets, there would be no
fundamental investment restriction on the amount of assets the Fund could invest
in any single issuer or the amount of voting securities of a single issuer the
Fund could hold. This would permit the Fund, for example, to invest 25% of its
total assets in a single issuer's securities, or to invest 10% of its total
assets in securities of one issuer and 15% in securities of another issuer. The
primary purpose of the proposal is to give the Fund greater investment
flexibility by permitting it to acquire large positions in the securities of
individual issuers.

LMC believes that this increased flexibility may provide opportunities to
enhance the Fund's performance. At the same time, invested a larger percentage
of the Fund's assets in a single issuer's securities increases the Fund's
exposure to credit and other risks associated with that issuer's financial
conditions and business operations, including risk of default on debt
securities. LMC will only invest more than 5% of the Fund's total assets in an
issuer's securities when it believes the securities' potential return justifies
subjecting the Fund to the risks associated with the higher level of investment.
LMC does not currently expect that approval of this proposal will materially
affect the way in which the Fund is managed with regard to the Fund holding more
than 10% of the voting securities of an issuer. The proposed restriction is also
consistent with restrictions contained in similarly managed funds and would
enable the Fund to act in any way which is not deemed to be contrary to the 1940
Act. If the proposal is approved, the new fundamental diversification
restriction can not be changed without a future vote of shareholders.

Conclusion.

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<PAGE>

The amended restriction, upon shareholder approval, will become effective as
soon as practicable. If the proposal is not approved, the Fund's current
restriction will remain unchanged.

PROPOSAL 14. ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION CONCERNING
SECURITIES OF ISSUERS IN OPERATION FOR LESS THAN THREE YEARS

The Fund's current fundamental investment restriction concerning securities
of issuers in operation for less than three years provides that:

"The Fund shall not invest more than 5% of the value of its total assets
in securities of a company or companies having a record of less than
three years' continuous operation."

The Directors recommend that the shareholders approve the elimination of the
above fundamental investment restriction. If the proposal is approved, the
Directors intend to replace the current fundamental restriction with a
non-fundamental investment restriction, which may be changed without shareholder
approval. The proposed non-fundamental investment restriction is set forth below
with a brief analysis of the substantive differences between it and the current
investment restriction:

"The Fund will not, except for investments which, in the aggregate, do
not exceed 5% of the Fund's total assets taken at market value, purchase
securities unless the issuer thereof or any company on whose credit the
purchase was based has a record of at least three years continuous
operations prior to the purchase."

Reasons for the Proposal.

The proposed non-fundamental restriction is materially the same as the
current fundamental restriction. The purpose of the fundamental restriction on
investments in unseasoned issuers is to comply with state laws and limit the
risks associated with investing in companies that have no proven track record in
business and whose prospects are uncertain. The proposed restriction clarifies
that securities of business enterprises, such as pools of asset-backed
securities, with a record of less than three years of continuous operation will
be limited to 5% of the Fund's total assets. The proposal will have no current
impact on the Fund. However, adoption of a standard non-fundamental limitation
will facilitate LMC's compliance efforts and will enable the Fund to respond
more promptly if applicable state laws change in the future. The proposal
modernizes language of the restriction concerning securities of issuers in
operation for less than three years to enable the Fund to act in any way which
is not deemed to be contrary to the 1940 Act and will provide the Fund with
additional flexibility without an increase in the relative risks involved. The
restriction is also being written to increase standardization among all
Lexington Funds.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning securities of issuers in operation for less than three
years is in the best interest of the Fund and its shareholders. The Directors
recommend that shareholders of the Fund vote FOR the proposal. If the proposal
is approved, the Fund's current fundamental restriction will be eliminated as
soon as practicable. If the proposal is not approved, the Fund's current
restriction will remain unchanged.

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<PAGE>

PROPOSAL 15: ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION
CONCERNING INVESTMENT FOR CONTROL

The Fund's current fundamental investment restriction concerning investment
for control provides that:

"The Fund shall not invest in companies for the purpose of exercising
management or control."

"The Fund will not invest for the purpose of exercising control over or
management of any company."

Reasons for the Proposal.

The proposed non-fundamental restriction is materially the same as the
current fundamental restriction. It modernizes and standardizes the Fund's
investment restriction concerning investment for control to enable the Fund to
act in any way which is not deemed to be contrary to the 1940 Act. In addition,
the reclassification will provide the Fund with additional flexibility without
an increase in the relative risks involved and allow the Fund to respond quickly
to changes in the financial markets. The restriction is also being written to
increase standardization among all Lexington Funds.

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning investment for control is in the best interest of the
Fund and its shareholders. The Directors recommend that shareholders of the Fund
vote FOR the proposal. If the proposal is approved, the Fund's current
fundamental restriction will be eliminated as soon as practicable. If the
proposal is not approved, the Fund's current restriction will remain unchanged.

PROPOSAL 16: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING CONCENTRATION

The Fund's current fundamental restriction concerning concentration provides
that:

"the Fund shall not concentrate its investments in a particular industry
to an extent greater than 25% of the value of its total assets."

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund will not concentrate its investments in any one industry
except that the Fund may invest up to 25% of its total assets in
securities issuers principally engaged in any one industry. This
limitation, however, will not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, securities
invested in, or repurchase agreements for, U.S. Government securities,
and certificates of deposit, or bankers' acceptances, or securities of
U.S. banks and bank holding companies."

24
<PAGE>

Reasons for the Proposal.

The basic 25% limit is not changed. However, the proposed restriction
clarifies that government securities, securities invested in, or repurchase
agreements for, U.S. Government securities, and certificates of deposit, or
bankers' acceptances, or securities of U.S. banks and holding companies are
excluded from this restriction. The proposed restriction will not result in any
material change in the way in which the Fund is managed. The restriction is also
being written to increase standardization among all Lexington Funds.

Conclusion.

PROPOSAL 17: AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
CONCERNING BORROWING

The Fund's current fundamental restriction concerning borrowing provides
that:

"the Fund shall not borrow in excess of 5% of the value of its total
assets; and any such borrowing may be undertaken only from a bank and as
a temporary measure for extraordinary or emergency purposes (in
connection with any such borrowing it will have the right to pledge,
mortgage or hypothecate its assets, valued at market but not to an
extent greater than 15% of its total assets, valued at cost)."

Subject to shareholder approval, the Board of Directors intends to replace
this restriction with the following fundamental investment restriction:

"The Fund shall not borrow money, except that (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the Fund
may enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements (reverse repurchase
agreements are limited to 5% of the Fund's total assets); (c) for
temporary emergency purposes, the Fund may borrow money in amounts not
exceeding 5% of the value of its total assets at the time when the loan
is made; (d) the Fund may pledge its portfolio securities or receivables
or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for
purposes of leveraging, the Fund may borrow money from banks (including
its custodian bank), only if, immediately after such borrowing, the
value of the Fund's assets, including the amount borrowed, less its
liabilities, is equal to at least 300% of the amount borrowed, plus all
outstanding borrowings. If at any time, the value of the Fund's assets
fails to meet the 300% asset coverage requirement relative only to
leveraging, the Fund will, within three days (not including Sundays and
holidays), reduce its borrowings to the extent necessary to meet the
300% test."

Reasons for the Proposal.

The current fundamental investment restriction prohibits borrowing in excess
of 5% of the value of the Fund's assets and restricts such borrowing to certain
situations. The proposed fundamental restriction incorporates recent

25
<PAGE>

regulatory changes by excluding from the restriction certain securities that
could be considered borrowing, such as certain futures contracts and when-issued
securities, which do not represent the same kinds of risk as unrestricted
borrowing. The proposed fundamental restriction would allow borrowing up to 5%
of the value of the Fund's assets for temporary emergency purposes. This
provision is necessary to address excessive or unanticipated liquidations of
Fund shares that exceed available cash. The Fund could also borrow with
limitations on the amounts that can be borrowed. This change would allow the
investment adviser to leverage if it is believed to be in the best interest of
the Fund, however, the investment adviser has no present intention to do so.
Leveraging involves certain risks. For example, leveraging by means of borrowing
will exaggerate the effect of any increase or decrease in the value of portfolio
securities on the Fund's net asset value. The proposed fundamental restriction
is written to enable the Fund to borrow to meet redemptions. Money borrowed will
be subject to interest and other costs. In addition, the proposed fundamental
restriction would further increase the Fund's ability to pledge its portfolio
securities to up to one-third of its total assets. The proposed restriction
would also modernize the Fund's investment restriction concerning borrowing to
enable the Fund to act in any way which is not deemed to be contrary to the 1940
Act. The restriction is also being written to increase standardization among all
Lexington Funds.

Conclusion.

The Board of Directors has concluded that the adoption of the new
restriction concerning borrowing is in the best interest of the Fund and its
shareholders. The Directors recommend that shareholders of the Fund vote FOR the
proposed amendment. The amended restriction, upon shareholder approval, will
become effective as soon as practicable. If the proposal is not approved, the
Fund's current restriction will remain unchanged.

PROPOSAL 18: ELIMINATION OF THE FUND'S FUNDAMENTAL RESTRICTION
CONCERNING PUTS AND CALLS

The Fund's current fundamental investment restriction concerning puts and
calls provides that:

"The Fund shall not buy or sell puts, calls or other options."

The Directors recommend that the shareholders vote to eliminate the above
fundamental restriction. If the proposal is approved, the Directors intend to
replace the current fundamental restriction with a non-fundamental restriction,
which may be changed without shareholder approval. The proposed non-fundamental
restriction is set forth below, with a brief analysis of the substantive
differences between it and the current fundamental restriction.

"The Fund shall not write, purchase or sell puts, calls or combinations
thereof. However, the Fund may invest up to 15% of the value of its
assets in warrants. This restriction on the purchase of warrants does
not apply to warrants attached to, or otherwise included in, a unit with
other securities."

Reasons for the Proposal.

The proposed non-fundamental restriction clarifies that the Fund can not
invest in puts and calls but may invest 15% of the value of its assets in
warrants. Since non-fundamental restrictions can be changed by a vote of the
Directors, the reclassification would provide greater flexibility should changes
in investment instruments make it advantageous to change those limitations
quickly without an increase in the relative risks involved and would enable the
Fund to act in any way which is not deemed contrary to the 1940 Act.

26
<PAGE>

Conclusion.

The Board of Directors has concluded that the elimination of the fundamental
restriction concerning puts and calls is in the best interest of the Fund and
its shareholders. The Directors recommend that shareholders of the Fund vote FOR
the proposal. If the proposal is approved, the Fund's current fundamental
restriction will be eliminated as soon as practicable. If the proposal is not
approved, the Fund's current restriction will remain unchanged.

ADDITIONAL INFORMATION

Brokerage and Portfolio Turnover Rate.

As a general matter, purchases and sales of portfolio securities by the Fund
are placed by LMC with brokers and dealers who in its opinion will provide the
Fund with the best combination of price (inclusive of brokerage commissions) and
execution for its orders. However, pursuant to the Fund's investment management
agreement, management consideration may be given in the selection of
broker-dealers to research provided and a fee higher than that charged by
another broker-dealer which does not furnish research services or which
furnishes research services deemed to be of lesser value, so long as the
criteria of Section 28(e) of the Securities Exchange Act of 1934 are met.
Section 28(e) of the Securities Exchange Act of 1934 was adopted in 1975 and
specifies that a person with investment discretion shall not be "deemed to have
acted unlawfully or to have breached a fiduciary duty" solely because such
person has caused the account to pay a higher commission than the lowest
available under certain circumstances, provided that the person so exercising
investment discretion makes a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided...viewed in terms of either that particular transaction or his overall
responsibilities with respect to the accounts as to which he exercises
investment discretion."

Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for execution services alone. Nor generally can the value
of research services to the Fund be measured. Research services furnished might
be useful and of value to LMC and its affiliates, in serving other clients as
well as the Fund. On the other hand, any research services obtained by LMC or
its affiliates from the placement of portfolio brokerage of other clients might
be useful and of value to LMC in carrying out its obligations to the Fund. No
formula has been established for the allocation of business to brokers who
furnish research and statistical information or render other services to LMC.

The Fund paid brokerage commissions and portfolio turnover rates are as
follows:

Brokerage Portfolio
Commissions Turnover Rate
----------- -------------

1992 ................. $ 201,739 91.27%
1993 ................. 958,179 38.35%
1994 ................. 2,815,460 79.56%

Other Services.

LMC provides additional services to the Fund that are in addition to the
services provided under the investment management agreement. Such services
include the services of a principal financial officer and personnel operating
under his direction and other administrative services. Such services are
provided to the Fund at cost. For the year ended December 31, 1994, the Fund
reimbursed LMC $399,880 for costs in providing such administrative services.

27
<PAGE>

OTHER BUSINESS

LMC knows of no other business to be presented at the Meeting other than the
matters set forth in this Proxy Statement. If any other business properly comes
before the Meeting, the proxies will exercise their best judgment in deciding
how to vote such matters.

SHAREHOLDER PROPOSALS

The Fund does not hold annual shareholder meetings, except as required by
the Investment Company Act of 1940 or other applicable law. Therefore, it is
probable that no annual meeting of shareholders will be held in 1995 or in
subsequent years until so required. For those years in which annual shareholder
meetings are held, proposals that shareholders of the Fund intend to present for
inclusion in the proxy material with respect to the annual meeting of
shareholders must be received by the Fund within a reasonable time before the
solicitation is made.

Please complete the enclosed proxy card and return it promptly in the enclosed
self-addressed postage-paid envelope. You may revoke your proxy at any time
prior to the Meeting by written notice to the Fund or by submitting a proxy card
bearing a later date.

Lisa Curcio
Secretary

28
<PAGE>

EXHIBIT A

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made this 14th day of June, 1991 by and between LEXINGTON
WORLDWIDE EMERGING MARKETS FUND, INC., a Maryland corporation (the "Fund"), and
LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the "Manager"), with
respect to the following recital of fact:

RECITAL

WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations promulgated thereunder; and

WHEREAS, the Manager is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and

WHEREAS, the Fund and the Manager desire to enter an agreement to provide
for management services for the Fund on the terms and conditions hereinafter set
forth.

NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:

1. Management. The Manager shall act as investment advisor for the Fund and
shall, in such capacity, supervise the investment and reinvestment of the cash,
securities or other properties comprising the Fund's assets subject at all times
to the policies and control of the Fund's Board of Directors. The Manager shall
give the Fund the benefit of its best judgment, efforts and facilities in
rendering its services as investment advisor.

2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Manager shall:

(a) determine which issuers and securities shall be represented in the Fund
and regularly report thereon to the Fund's Board of Directors;

(b) formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the Fund's
Board of Directors;

(c) continuously review the portfolio security holdings, the investment
programs and the investment policies of the Fund; and

(d) take, on behalf of the Fund, all actions which appear to the Fund
necessary to carry into effect such purchase and sale programs and supervisory
functions aforesaid, including the placing of orders for the purchase and sale
of portfolio securities.

Broker-Dealer Relationships. The Manager's primary policy is to execute all
purchases and sales of portfolio instruments at the most favorable prices
consistent with best execution, considering all the costs of the transaction

1-A
<PAGE>

including brokerage commissions. This policy governs the selection of brokers
and dealers and the market in which a transaction is executed. Consistent with
this policy, the rules of fair practice of the National Association of
Securities Dealers, Inc. and such other policies as the Directors may determine,
the Manager may consider sales of shares of the Fund and of the other funds
advised by the Manager as a factor in the selection of broker-dealers to execute
the Fund's portfolio transactions. However, in selecting a broker-dealer to
execute each transaction, the Manager may consider research provided and payment
may be made of a commission higher than that charged by another broker-dealer
which does not furnish research services or which furnishes research services
deemed to be of lesser value, in accordance with Section 28(e) of the Securities
Exchange Act of 1934 are met. Section 28(e) of the Securities Exchange Act of
1934 1975 and specifies that a person with investment discretion shall not be
"deemed to have acted unlawfully or to have breached a fiduciary duty" solely
because such person has caused the account to pay a higher commission than the
lowest available under certain circumstances, provided that the person so
exercising investment discretion makes a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided...viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion."

The Manager cannot determine the extent to which commissions that reflect an
element of value for research services might exceed commissions that would be
payable for execution services along. Research services furnished may be useful
and of value to the Manager and its affiliates, in serving other clients as well
as the Fund. Similarly, any research services obtained by the Manager or its
affiliates from the placement of portfolio brokerage of other clients might be
useful and of value to the Manager in carrying out its obligations to the Fund.

Brokerage transactions involving securities of companies domiciled in
countries other than the United States will be normally conducted on the
principal stock exchanges of those countries.

4. Control by Board of Directors. Any investment program undertaken by the
Manager pursuant to this agreement, as well as any other activities undertaken
by the Manager on behalf of the Fund pursuant thereto, shall at all times be
subject to any directives of the Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Manager shall at all times conform to:

(a) all applicable provisions of the Investment Company Act of 1940 and any
rules and regulations adopted thereunder as amended; and

(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and the Investment Company Act of 1940, as amended; and

(d) the provisions of the By-Laws of the Fund; and

(e) any other applicable provisions of state and federal law.

6. Expenses. The expenses connected with the Fund shall be allocable between
the Fund and the Manager as follows:

(a) The Manager shall maintain, at its expense and without costs to the
Fund, a trading function in order to carry out its obligations under
subparagraph (d) of paragraph 2 hereof to place orders for the purchase and sale
of portfolio securities for the Fund.

2-A
<PAGE>

(b) The Manager shall pay the Fund's expenses for office rent, utilities,
telephone, furniture and supplies utilized at the Fund's principal office.

(c) The Manager shall pay the salaries and payroll expenses of persons
serving as officers or Directors of the Fund who are also employees of the
Manager or any of its affiliates.

(d) Nothing in paragraph (a) through (e) hereof shall be construed to
require the Manager to bear other expenses.

(e) Any of the other expenses incurred in the operation of the Fund, shall
be borne by the Fund including, among other things, fees of its custodian,
transfer and shareholder servicing agent; cost of pricing and calculating its
daily net asset value and of maintaining its books and accounts required by the
Investment Company Act of 1940; expenditures in connection with meetings of the
Fund's directors and shareholders, except those called to accommodate the
Manager; fees and expenses of Directors who are not affiliated with or
interested persons of the Manager; in maintaining registration of its shares
under state securities laws or in providing shareholder and dealer services;
insurance premiums on property or personnel of the Fund which inure to its
benefit; costs of preparing and printing reports, proxy statements and
prospectuses of the Fund for distribution to its shareholders; legal, auditing
and accounting fees; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws; and all other expenses in connection with issuance,
registration and transfer of its shares.

7. Delegation of Responsibilities. Upon request of the Fund's Board of
Directors, the Manager may perform services on behalf of the Fund which are not
required by this agreement. Such services will be performed on behalf of the
Fund and the Manager's cost in rendering such services may be billed monthly to
the Fund, subject to examination by the Fund's independent accountants. Payment
or assumption by the Manager of the Fund expense that the Manager is not
required to pay or assume under this Agreement shall not relieve the Manager of
any of its obligations to the Fund nor obligate the Manager to pay or assume any
similar Fund expense on any subsequent occasions.

8. Compensation. The Fund shall pay the Manager in full compensation for
services rendered hereunder an annual investment advisory fee, payable monthly
equal to 1% of the Fund's average daily net assets. The average daily net asset
value of the Fund shall be determined in the manner set forth in the Articles of
Incorporation and Prospectus of the Fund. The initial expenses of forming the
Fund will be advanced and paid by the Manager. The Fund will reimburse the
Manager for such expenses after the commencement of the Fund's operations. The
expenses will be amortized over a period not to exceed five years from the
effective date of the Fund's Registration Statement.

9. Expense Limitation. If, for any fiscal year, the total of all ordinary
business expenses of the Fund, including all investment advisory fees but
excluding brokerage commissions and fees, taxes, interest and extraordinary
expenses such as litigation, would exceed the most restrictive expense limits
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are offered for sale, the investment advisory fee shall be
reduced by the amount of such excess. The amount of any such reduction to be
borne by the Manager shall be deducted from the monthly investment advisory fee
otherwise payable to the Manager during such fiscal year; and if such amount
should exceed such monthly fee, the Manager agrees to pay to the Fund such
expenses no later than the last day of the first month of the next succeeding
fiscal year. For purposes of this paragraph, the term "fiscal year" shall
exclude the portion of the current fiscal year which shall have elapsed prior to
the date hereof and shall include the portion of the then current fiscal year
which shall have elapsed at the date of termination of this Agreement.

10. Non-Exclusivity. The services of the Manager to the Fund are not to be
deemed to be exclusive, and the Manager shall be free to render investment
advisory and corporate administrative or other services to others

3-A
<PAGE>

(including other investment companies) and to engage in other activities. It is
understood and agreed that officers and directors of the Manager may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of the Manager to the extent permitted by
law; and that the officers and directors of the Manager are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, trustees or directors of any
other firm or corporation, including other investment companies.

11. Term and Approval. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect until the first
regular or special meeting of the Fund's shareholders following the Fund's
initial public offering. If approved at such meeting, this Agreement shall
thereunder continue to force and effect from year to year, provided that such
continuance is specifically approved at least annually;

(a) (i) by the Fund's Board of Directors or (ii) by the vote of a majority
of the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and

(b) by the affirmative vote of a majority of the directors who are not
parties of this Agreement or interested persons of a party to the Agreement
(other than as a Director of the Fund), by votes cast in person at a meeting
specifically called for such purposes.

12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of a
majority of the Fund's outstanding voting securities or by the Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for the purposes
having the meaning defined in Section 2(a)(42) of the Investment Company Act of
1940, as amended.

13. Liability of Manager and Indemnification. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Manager or any of its officers, directors or
employees, it shall not be subject to liability to the Fund or to any
shareholder of the Fund for any commission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.

14. Notices. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Manager shall be Park
80 West, Plaza Two, Saddle Brook, New Jersey 07663, and that of the Fund for
this purpose shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663.

15. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act of 1940, as amended, shall be
resolved by reference to such term or provision of the act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Investment Company Act of
1940, as amended, reflected in any provision of this Agreement is released by
rules, regulations or order of the Securities and Exchange Commission, such
provisions shall be deemed to incorporate the effect of such rule, regulation or
order.

4-A
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.

LEXINGTON WORLDWIDE EMERGING
MARKETS FUND, INC.

By________________________________________

President

Attest:

- - ------------------------

LEXINGTON MANAGEMENT CORPORATION

By________________________________________

President

Attest:

- - ------------------------

5-A
<PAGE>

EXHIBIT B

FORM OF
INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made this 5th day of December, 1994 by and between
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC., a Maryland corporation (the
"Fund"), and LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the
"Manager"), with respect to the following recital of fact:

RECITALS

WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations promulgated thereunder; and

WHEREAS, the Manager is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and

WHEREAS, the Fund and the Manager desire to enter an agreement to provide
for management services for the Fund on the terms and conditions hereinafter set
forth.

NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:

2. Investment Analysis and Implementation. In carrying out its obligation
under paragraph 1 hereof, the Manager shall:

(a) determine which issuers and securities shall be represented in the Fund
and regularly report thereof to the Fund's Board of Directors;

(b) formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the Fund's
Board of Directors;

(c) continuously review the portfolio security holdings, the investment
programs and the investment policies of the Fund; and

3. Broker-Dealer Relationships. The Manager's primary policy is to execute
all purchases and sales of portfolio instruments at the most favorable prices
consistent with the best execution, considering all of the costs of the

1-B
<PAGE>

transaction including brokerage commissions. This policy governs the selection
of brokers and dealers and the market in which a transaction is executed.
Consistent with this policy, the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and such other policies as the
Directors may determine, the Manager may consider sales of shares of the Fund
and of the other funds advised by the Manager as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. However, in
selecting a broker-dealer to execute each transaction, the Manager may consider
research provided and payment may be made of the commission higher than that
charged by another broker-dealer which does not furnish research services or
which furnishes research services deemed to be of lesser value, in accordance
with Section 28(e) of the Securities Exchange Act of 1934. Section 28(e) of the
Securities Exchange Act of 1934 specifies that a person with investment
discretion shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay a
higher commission than the lowest available under certain circumstances,
provided that the person so exercising investment discretion makes a good faith
determination that the commissions paid are "reasonable in relation to the value
of the brokerage and research services provided...viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion."

The Manager cannot determine the extent to which commissions that reflect an
element of value for research services might exceed commissions that would be
payable for execution services alone. Research services furnished may be useful
and of value to the Manager and its affiliates, in serving other clients as well
as the Fund. Similarly, any research services obtained by the Manager or its
affiliates from the placement of portfolio brokerage of other clients might be
useful and of value to the Manager in carrying out its obligations to the Fund.

Brokerage transactions involving securities of companies domiciled in
countries other than the United States will be normally conducted on the
principal stock exchanges of those countries.

4. Control by Board of Directors. Any investment program undertaken by the
Manager pursuant to this Agreement, as well as any other activities undertaken
by the Manager on behalf of the Fund pursuant thereto, shall at all times be
subject to any directives of the Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Manager shall at all times conform to:

(a) all applicable provisions of the 1940 Act and any rules and regulations
adopted hereunder as amended; and

(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933, as amended, and the 1940 Act; and

(d) the provisions of the By-Laws of the Fund; and

(e) any other applicable provisions of state and federal law.

6. Expenses. The expenses connected with the Fund shall be allocable between
the Fund and the Manager as follows:

(a) The Manager shall maintain, at its expense and without cost to the Fund,
a trading function in order to carry out its obligations under subparagraph (d)
of paragraph 2 hereof to place orders for the purchase and sale of portfolio
securities for the Fund.

2-B
<PAGE>

(b) The Manager shall pay the Fund's expenses for office rent, utilities,
telephone, furniture and supplies utilized at the fund's principal office.

(c) The Manager shall pay the salaries and payroll expenses of persons
serving as officers or Directors of the Fund who are also employees of the
Manager or any of its affiliates in carrying out its duties under the Investment
Advisory Agreement.

(d) Nothing in subparagraph (a) through (e) hereof shall be construed to
require the Manager to bear other expenses.

(e) Any of the other expenses incurred in the operation of the Fund shall be
borne by the Fund, including, among other things, fees of its custodian,
transfer and shareholder servicing agent; cost of pricing and calculating its
daily net asset value and of maintaining its books and accounts required by the
1940 Act; expenditures in connection with meetings of the Fund's Directors and
shareholders, except those called to accommodate the Manager; fees and expenses
of Directors who are not affiliated with or interested persons of the Manager;
in maintaining registration of its shares under state securities laws or in
providing shareholder and dealer services; insurance premiums on property or
personnel of the Fund which inure to its benefit; costs of preparing and
printing reports, proxy statements and prospectuses of the Fund for distribution
to its shareholders; legal, auditing and accounting fees; fees and expenses of
registering and maintaining registration of its shares for sale under Federal
and applicable state securities laws; and all other expenses in connection with
issuance, registration and transfer of its shares.

7. Delegation of Responsibilities. Upon the request of the Fund's Board of
Directors, the Manager may perform services on behalf of the Fund which are not
required by this Agreement. Such services will be performed on behalf of the
Fund and the Manager's cost in rendering such services may be billed monthly to
the Fund, subject to examination by the Fund's independent accountants. Payment
or assumption by the Manager of any Fund expense that the Manager is not
required to pay or assume under this Agreement shall not relieve the Manager of
any of its obligations to the Fund nor obligate the Manager to pay or assume any
similar Fund expense on any subsequent occasions.

8. Compensation. The Fund shall pay the Manager in full compensation for
services rendered hereunder an annual investment advisory fee payable monthly
equal to 1.00% of the Fund's average daily net assets after deduction of the
Funds' expenses, if any, in excess of the expense limitations set forth below.
The average daily net asset value of the Fund shall be determined in the manner
set forth in the Articles of Incorporation and Prospectus of the Fund.

9. Expense Limitation. If, for any fiscal year, the total of all ordinary
business expenses of the Fund, including all investment advisory fees but
excluding brokerage commissions and fees, taxes, interest and extraordinary
expenses such as litigation, would exceed the most restrictive expense limits
imposed by any statute or regulatory authority of any jurisdiction in which the
Fund's securities are offered as determined in the manner described above as of
the close of business on each business day during such fiscal year, the
aggregate of all such investment management fees shall be reduced by the amount
of such excess but will not be required to reimburse the Fund for any ordinary
business expenses which exceed the amount of its advisory fee for such fiscal
year. The amount of any such reduction to be borne by the Adviser shall be
deducted from the monthly investment advisory fee otherwise payable to the
Adviser during such fiscal year; and if such amount should exceed such monthly
fee, the Adviser agrees to repay to the Fund such amount of its investment
management fee previously received with respect to such fiscal year as may be
required to make up the deficiency no later than the last day of the first month
of the next succeeding fiscal year. For purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have

3-B
<PAGE>

elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.

10. Additional Services. Upon the request of the Board, the Adviser may
perform certain accounting, shareholder servicing or other administrative
services on behalf of the Fund that are not required by this Agreement. Such
services will be performed on behalf of the Fund and the Adviser may receive
from the Fund such reimbursement for costs or reasonable compensation for such
services as may be agreed upon between the Adviser and the Board on a finding by
the Board that the provision of such services by the Adviser is in the best
interests of the Fund and its shareholders. Payment or assumption by the Adviser
of any Fund expense that the Adviser is not otherwise required to pay or assume
under this Agreement shall not relieve the Adviser of any of its obligations to
the Fund nor obligate the Adviser to pay or assume any similar Fund expense on
any subsequent occasions. Such services may include, but are not limited to, (a)
the services of a principal financial officer of the Fund (including applicable
office space, facilities and equipment) whose normal duties consist of
maintaining the financial accounts and books and records of the Fund, and the
services (including applicable office space, facilities and equipment) of any of
the personnel operating under the direction of such principal financial officer;
(b) the services of staff to respond to shareholder inquiries concerning the
status of their accounts; providing assistance to shareholders in exchanges
among the investment companies managed or advised by the Adviser; changing
account designations or changing addresses; assisting in the purchase or
redemption of shares; or otherwise providing services to shareholders of the
Fund; and (c) such other administrative services as may be furnished from time
to time by the Adviser to the Fund at the request of the Board.

11. Non-Exclusivity. The services of the Manager to the Fund are not to be
deemed to be exclusive, and the Manager shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities. It is understood
and agreed that officers and Directors of the Manager may serve as officers or
Directors of the Fund, and that officers or Directors of the Fund may serve as
officers or Directors of the Manager to the extent permitted by law; and that
the officers and directors of the Manager are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm or
corporation, including other investment companies. The Manager, subject to the
approval of the Fund's shareholders, may appoint a sub-adviser to the Fund to
provide to the Fund certain investment advisory and related services.

12. Term and Approval. This Agreement shall become effective at the close of
business on the date hereof and shall thereunder continue in force and effect
from year to year, provided that such continuance is specifically approved at
least annually:

(a) (i) by the Fund's Board of Directors; or (ii) by the vote of a majority
of the Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and

(b) by the affirmative vote of a majority of the Directors who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a Director of the Fund), by votes cast in person at a meeting
specifically called for such purpose.

13. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of a
majority of the Fund's outstanding voting securities or by the Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate in the event of its

4-B
<PAGE>

assignment, the term "assignment" for the purposes having the meaning defined in
Section 2(a)(4) of the 1940 Act, as amended.

14. Liability of Manager and Indemnification. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Manager or any of its officers, directors or
employees, it shall not be subject to liability to the Fund or to any
shareholder of the Fund for any commission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.

15. Notices. Any notices under this agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
of the other party, it is agreed that the address of the Manager shall be Park
80 West, Plaza Two, Saddle Brook, New Jersey 07663.

16. Questions of Interpretation. Any question of interpretation of any term
or provision of this agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission issued
pursuant to said Act. In addition, where the effect of a requirement of the 1940
Act reflected in any provision of this agreement is revised by rules,
regulations or order of the Securities and Exchange Commission, such provisions
shall be deemed to incorporate the effect of such rule, regulation or order.

In witness whereof, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.

LEXINGTON WORLDWIDE EMERGING
MARKETS FUND, INC.

By________________________________________

President

Attest:

- - ------------------------

LEXINGTON MANAGEMENT CORPORATION

By________________________________________

President

Attest:

- - ------------------------

5-B
<PAGE>

EXHIBIT C
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.

Comparison of certain existing fundamental investment restrictions, and
corresponding proposed fundamental investment restrictions of Lexington
Worldwide Emerging Markets Fund, Inc.

Left Column

Current Fundamental Restriction
-------------------------------

SENIOR SECURITIES.
The Fund shall not issue senior securities.

UNDERWRITING.
The Fund shall not underwrite securities of other
issuers.

REAL ESTATE AND COMMODITY
CONTRACTS.
The Fund shall not invest in real estate or purchase
or sell commodity contracts or commodities (however,
the Fund may purchase interests in real estate
investment trusts whose securities are registered
under the Securities Act of 1933 and are readily
marketable).

Right Column
Proposed Restriction
--------------------

Fundamental Restriction
The Fund will not issue any senior security (as
defined in the 1940 Act), except that (a) the Fund
may enter into commitments to purchase securities in
accordance with the Fund's investment program,
including reverse repurchase agreements, foreign
exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of
senior securities; (b) the Fund may engage in
transactions that may result in the issuance of a
senior security to the extent permitted under
applicable regulations, interpretations of the 1940
Act or an exemptive order; (c) the Fund may engage in
short sales of securities to the extent permitted in
its investment program and other restrictions; (d)
the purchase or sale of futures contracts and related
options shall not be considered to involve the
issuance of senior securities; and (e) subject to
fundamental restrictions, the Fund may borrow money
as authorized by the 1940 Act.

Fundamental Restriction
The Fund shall not act as an underwriter of
securities except to the extent that, in connection
with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter
under the provisions of the 1933 Act.

Fundamental Restriction
The Fund shall not purchase real estate, interests in
real estate or real estate limited partnership
interests except that, to the extent appropriate
under its investment program, the Fund may invest in
securities secured by real estate or interests
therein or issued by companies, including real estate
investment trusts, which deal in real estate or
interests therein.

C-1
<PAGE>

Left Column

Current Fundamental Restriction
-------------------------------

LENDING.

The Fund shall not make loans to other persons
except: (a) through the purchase of a portion or
portions of publicly distributed bonds, notes,
debentures and evidences of indebtedness authorized
by its investment policy, or (b) through investments
in "repurchase agreements" (which are arrangements
under which the Fund acquires a debt security subject
to an obligation of the seller to repurchase it at a
fixed price within a short period), provided that no
more than 5% of the Fund's assets may be invested in
repurchase agreements which mature in more than seven
days.

SECURITIES OF OTHER INVESTMENT
COMPANIES.
The Fund shall not purchase the securities of another
open-end management type investment company or
investment trust except in connection with a merger.

MARGIN AND SHORT SALES.
The Fund shall not purchase any securities on margin
or effect a short sale of a security.

Right Column
Proposed Restriction
--------------------

Fundamental Restriction
The Fund will not invest in commodity contracts,
except that the Fund may, to the extent appropriate
under its investment program, purchase securities of
companies engaged in such activities, may enter into
transactions in financial and index futures contracts
and related options, may engage in transactions on a
when-issued or forward commitment basis, and may
enter into forward currency contracts.

Non-Fundamental Restriction
The Fund may purchase and sell futures contracts and
related options under the following conditions: (a)
the then-current aggregate futures market prices of
financial instruments required to be delivered and
purchased under open futures contracts shall not
exceed 30% of the Fund's total assets, at market
value; and (b) no more than 5% of the assets, at
market value at the time of entering into a contract,
shall be committed to margin deposits in relation to
futures contracts.

Fundamental Restriction
The Fund shall not make loans, except that, to the
extent appropriate under its investment program, the
Fund may (a) purchase bonds, debentures or other debt
securities, including short-term obligations, (b)
enter into repurchase transactions and (c) lend
portfolio securities provided that the value of such
loaned securities does not exceed one-third of the
Fund's total assets.

Non-Fundamental Restriction
The Fund will not purchase the securities of any
other investment company, except as permitted under
the 1940 Act.

Non-Fundamental Restriction
The Fund will not purchase any securities on margin
or make short sales of securities, other than short
sales "against the box," or purchase securities on
margin except for short-term credits necessary for
clearance of

C-2
<PAGE>

Left Column

Current Fundamental Restriction
-------------------------------

SALES TO OFFICERS AND DIRECTORS.
The Fund shall not buy securities from or sell
securities (other than securities issued by the Fund)
to any of its officers, directors or its investment
adviser or distributor as principal.

CONTRACT TO SELL SECURITIES.
The Fund shall not contract to sell any security or
evidence of interest therein, except to the extent
that the same shall be owned by the Fund.

SECURITIES OF AFFILIATES.
The Fund shall not purchase or retain securities of
an issuer when one or more of the officers and
directors of the Fund or its investment adviser, or a
person owning more than 10% of the stock of the Fund
or its investment adviser owns beneficially more than
1/2 of 1% of the securities of such issues and all
such persons each owning more than 1/2 of 1% of such
securities together own beneficially more than 5% of
the securities of such issuer.

DIVERSIFICATION.
The Fund shall not purchase any securities if such
purchase would cause the Fund to own at the time of
purchase more than 10% of the voting securities of
any issuer.

The Fund shall not invest more than 5% of the value
of its total assets in the securities of any one
issuer.

SECURITIES OF ISSUERS IN OPERATION FOR LESS THAN
THREE YEARS.
The Fund shall not invest more than 5% of the value
of its total assets in securities of a company or
companies having a record of less than three years'
continuous operation.

Right Column
Proposed Restriction
--------------------

portfolio transactions, provided that this
restriction will not be applied to limit the use of
options, futures contracts and related options, in
the manner otherwise permitted by the investment
restrictions, policies and investment programs of the
Fund.

Non-Fundamental Restriction
Same.

Non-Fundamental Restriction
The Fund will not purchase securities of an issuer if
to the Fund's knowledge, one or more of the Directors
or officers of the Fund or LMC individually owns
beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such
issuer nor will the Fund hold the securities of such
issuer.

Fundamental Restriction
The Fund will not hold more than 5% of the value of
its total assets in the securities of any one issuer
or hold more than 10% of the outstanding voting
securities of any one issuer. This restriction
applies only to 75% of the value of the Fund's total
assets. Securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities are
excluded from this restriction.

Non-Fundamental Restriction
The Fund will not, except for investments which, in
the aggregate, do not exceed 5% of the Fund's total
assets taken at market value, purchase securities
unless the issuer thereof or any company on whose
credit the purchase was based has a record of at
least three years continuous operations prior to the
purchase.

C-3
<PAGE>

Left Column

Current Fundamental Restriction
-------------------------------

INVESTMENT FOR CONTROL.
The Fund shall not invest in companies for the
purpose of exercising management or control.

CONCENTRATION.
The Fund shall not concentrate its investments in a
particular industry to an extent greater than 25% of
the value of its total assets.

BORROWING.
The Fund shall not borrow in excess of 5% of the
value of its total assets; and any such borrowing may
be undertaken only from a bank and as a temporary
measure for extraordinary or emergency purposes (in
connection with any such borrowing it will have the
right to pledge, mortgage or hypothecate its assets,
valued at market but not to an extent greater than
15% of its total assets, valued at cost).

Right Column
Proposed Restriction
--------------------

Non-Fundamental Restriction
The Fund will not invest for the purpose of
exercising control over or management of any company.

Fundamental Restriction
The Fund will not concentrate its investments in any
one industry except that the Fund may invest up to
25% of its total assets in securities issuers
principally engaged in any one industry. This
limitation, however, will not apply to securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, securities invested
in, or repurchase agreements for, U.S. Government
securities, and certificates of deposit, or bankers'
acceptances, or securities of U.S. banks and bank
holding companies.

Fundamental Restriction
The Fund shall not borrow money, except that (a) the
Fund may enter into certain futures contracts and
options related thereto; (b) the Fund may enter into
commitments to purchase securities in accordance with
the Fund's investment program, including delayed
delivery and when-issued securities and reverse
repurchase agreements (reverse repurchase agreements
are limited to 5% of the Fund's total assets); (c)
for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its
total assets at the time when the loan is made; (d)
the Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise
encumber them in an amount not exceeding one-third of
the value of its total assets; and (e) for purposes
of leveraging, the Fund may borrow money from banks
(including its custodian bank), only if, immediately
after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed,
plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300%
asset coverage requirement relative only to
leveraging, the Fund will, within three days (not
including Sundays and holidays), reduce its
borrowings to the extent necessary to meet the 300%
test.

C-4
<PAGE>

Left Column

Current Fundamental Restriction
-------------------------------

PUTS AND CALLS.
The Fund shall not buy or sell puts, calls or other
options.

Right Column
Proposed Restriction
--------------------

Non-Fundamental Restriction
The Fund shall not write, purchase or sell puts,
calls or combinations thereof. However, the Fund may
invest up to 15% of the value of its assets in
warrants. This restriction on the purchase of
warrants does not apply to warrants attached to, or
otherwise included in, a unit with other securities.

C-5

<PAGE>

APPENDIX D

LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
LEXINGTON FUNDS C/O NFDS
PO BOX 419648 KANSAS CITY MO 64141

JOHN HORATIO DOE TAX I.D. OR SOC. SEC. NO. 99-9999999
AND JANE DORENE DOE ACCOUNT NO. 9999999999
ANYBODY'S CORPORATION FUND NO. 0000273
999 W 99TH ST RECORD DATE SHARES 9999999999.9999
PO BOX 99999
KANSAS CITY MO 64999-9999
PROPOSAL DESCRIPTION
PROPOSAL(S) MAY BE CONTINUED ON BACK

LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
Proxy for a Special Meeting of Shareholders, April 19, 1995
The undersigned hereby appoints Peter Corniotes and Richard J. Lavery, and
each of them separately, as proxies, with power of substitution to each and
hereby authorizes them to represent and to vote, as designated below, at a
Special Meeting of Shareholders of Lexington Worldwide Emerging Markets
Fund, Inc. on April 19, 1995 at 10:30 a.m. Eastern time, and at any
adjournments thereof, all of the shares of the Lexington Worldwide Emerging
Markets Fund, Inc. which the undersigned would be entitled to vote if
personally present. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 2 THROUGH 18 AND FOR ELECTING
DIRECTORS AS SET FORTH IN PROPOSAL 1. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
meeting. The Directors recommend a vote FOR electing all of the nominees for
Directors and FOR the other proposals below.

PROPOSAL(S)

In order to hold the Special Meeting of Shareholders, one-third of the Fund's
shares must be represented in person or by proxy. You can help reduce the
cost of additional mailings by promptly returning your signed proxy. No
matter how many shares you own, your vote counts! This proxy is for the
account as stated below. If you have shares of this Fund in more than one
account, a separate proxy is enclosed for each account. The multiple proxies
are not duplicates: you should sign, date and return all proxies in the
single postage paid envelope provided. PLEASE SIGN YOUR NAME(S) EXACTLY AS IT
(THEY) APPEAR ON THE PROXY.

PROXY VOTING

ELECTION OF DIRECTORS Nominees: To withhold authority to vote for any
individual nominee(s), draw a line through that nominee s name.

__ For all nominees listed below
__ Vote withheld for all nominees listed below
__ For all nominees listed below (except as marked to the contrary below)

Robert M. DeMichele Beverley C. Duer Barbara R. Evans Lawrence Kantor
Donald B. Miller Francis Olmsted John G. Preston Margaret W. Russell
Philip C. Smith Francis Sunderland

PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON THIS PROXY. If the shares
are registered in more than one name, each joint owner or each fiduciary
should sign personally. Only Authorized persons should sign for
corporations.

Dated:____________________________, 19_____

__________________________________________

__________________________________________
Signature/Signature(s) (if held jointly)

PROPOSALS

FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1) 11)
2) 12)
3) 13)
4) 14)
5) 15)
6) 16)
7) 17)
8) 18)
9)
10)

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1) ELECTION OF DIRECTORS
2) PROPOSAL TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS AUDITORS
3) PROPOSAL TO APPROVE THE AMENDED INVESTMENT MANAGEMENT AGREEMENT
PROPOSALS TO APPROVE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICY
RELATING TO:
4) SENIOR SECURITIES
5) UNDERWRITING
6) REAL ESTATE AND COMMODITY CONTRACTS
7) LENDING
8) OTHER INVESTMENT COMPANIES
9) MARGIN AND SHORT SALES
10) SALES OF SECURITIES TO THE FUND'S OFFICERS, DIRECTORS, INVESTMENT ADVISER
OR DISTRIBUTOR
11) ABILITY TO CONTRACT TO SELL SECURITIES
12) SECURITIES OF AFFILIATES
13) DIVERSIFICATION
14) SECURITIES OF ISSUERS IN OPERATON FOR LESS THAN THREE YEARS
15) INVESTMENT FOR CONTROL
16) CONCENTRATION
17) BORROWING
18) PUTS AND CALLS
19) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

FIRST CLASS MAIL PERMIT NO. 2108
KANSAS CITY, MO
POSTAGE WILL BE PAID BY ADDRESSEE

PROXY TABULATION SERVICES
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
P.O. BOX 5229
KANSAS CITY, MO 64112-9771