SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No.__)
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
LEXINGTON WORLWIDE EMERGING MARKETS FUND, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
__________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES
AND EXCHANGE COMMISSION ONLY
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
(800) 526-0056
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
August 12, 1998
A special meeting of the shareholders (the "Meeting") of Lexington
Worldwide Emerging Markets Fund, Inc. (the "Fund"), a Maryland
corporation, will be held on August 12, 1998 at 10:30 a.m. Eastern time.
The Meeting will be held at the offices of the Fund, Park 80 West, Plaza
Two, Saddle Brook, New Jersey. At the Meeting, we will ask shareholders
to vote on:
1. Electing eleven (11) Directors to hold office until the
election and qualification of their successors.
2. Approving or disapproving a sub-advisory agreement between
Lexington Management Corporation and Stratos Advisors, Inc.
with respect to the Fund.
3. Approving or disapproving a Plan of Distribution for the
Fund.
4. Ratifying or rejecting the selection of KPMG Peat Marwick
LLP as independent auditors of the Fund.
5. Any other business properly brought before the Meeting.
Any shareholder who owned shares of the Fund on the "record date,"
which was June 15, 1998, gets notice of the Meeting and gets to vote.
Please read the full text of the proxy statement for a complete
understanding of our proposals.
By Order of the Board of
Directors,
Lisa A. Curcio
Secretary
Dated: ____, 1998
You can help avoid the necessity and expense of sending follow-up
letters to ensure a quorum by promptly returning the enclosed proxy. If
you are unable to attend the Meeting, please mark, sign, date, and
return the enclosed proxy so that the necessary quorum may be
represented at the Meeting. The enclosed envelope requires no postage
if mailed in the United States.
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES
AND EXCHANGE COMMISSION ONLY
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
(800) 526-0056
PROXY STATEMENT
Dated _____, 1998
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
August 12, 1998
GENERAL INFORMATION
The Board of Directors of Lexington Worldwide Emerging Markets
Fund, Inc., a Maryland corporation (the "Fund"), has sent you this proxy
statement to ask you to vote on several proposals affecting your Fund.
A special meeting of shareholders (the "Meeting") will be held on August
12, 1998 at 10:30 a.m. Eastern time at the offices of the Fund, Park 80
West, Plaza Two, Saddle Brook, New Jersey. At the Meeting, we will ask
shareholders to vote on:
1. Electing eleven (11) Directors to hold office until the
election and qualification of their successors.
2. Approving or disapproving an investment sub-advisory
agreement (the "Sub-Advisory Agreement") between Lexington
Management Corporation (the "Adviser") and Stratos Advisors,
Inc. ("Stratos") with respect to the Fund.
3. Approving or disapproving a Plan of Distribution for the
Fund.
4. Ratifying or rejecting the selection of KPMG Peat Marwick
LLP as independent auditors of the Fund.
5. Any other business properly brought before the Meeting.
Revocation of your proxy. You may revoke your proxy at any time
up until voting results are announced at the Meeting. You may revoke
your proxy by giving written notice to the Secretary of the Fund prior
to the Meeting or by giving a subsequently dated proxy or by attending
and voting at the Meeting in person. If you sign and return the proxy
card, but do not vote on a proposal, the proxy attorneys will vote your
shares of beneficial interest "FOR" the proposal.
Proxy Solicitation. Your Fund will pay all costs of preparing and
mailing the notice of meeting, the proxy card, this proxy statement, and
any additional proxy solicitation material. All shareholders who are
entitled to vote will receive these proxy materials. Your Fund will
solicit shareholder proxies in a variety of ways. Employees or officers
of the Fund, the Fund's investment adviser, Lexington Management
Corporation, and the Fund's distributor, Lexington Funds Distributor,
Inc., and their affiliates, none of whom will receive additional
compensation, will solicit shareholder proxies primarily by mail, but
also by telephone, telegraph, facsimile, or personal interview. We may
also use an outside firm to solicit shareholder votes on behalf of the
Fund by mail, telephone, telegraph, facsimile, or personal interview.
The proxy solicitation services are expected to cost the Fund
approximately $50,000.
Record Date. The Board of Directors has fixed the close of
business on June 15, 1998 as the record date to determine the
shareholders who are entitled to notice of, and to vote at, the Meeting
(the "Record Date"). As of the Record Date, there were approximately
11,450,454 outstanding shares of the Fund. Shareholders are entitled to
cast one vote for each full share and a fractional vote for each
fractional share.
Ownership of 5% or More. Securities and Exchange Commission
rules require the Fund to tell you the name and address of any person
known to be the beneficial owner of 5% or more of the Fund's outstanding
shares. The Fund must also tell you how many shares such persons own
and what percentage of the Fund these shares represent. As of June 15,
1998, the Fund was not aware of any shareholder who beneficially owned
5% or more of the Fund's outstanding shares.
Required Vote. The election of Directors (Proposal 1) and the
ratification of the selection of KPMG Peat Marwick LLP as independent
auditors (Proposal 4) will require the affirmative vote of a majority of
the votes cast at the Meeting, provided that a quorum is present in
person or by proxy at the Meeting. Approval of the Sub-Advisory
Agreement (Proposal 2) and approval of the Plan of Distribution
(Proposal 3) for the Fund will require the affirmative vote of a
"majority of the outstanding voting securities" of the Portfolio, which
means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares of the
Fund present at the Meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy at
the Meeting.
Quorum. In order for the Meeting to proceed, your Fund must
achieve a quorum. This means that one-third of the Fund's shares must
be represented at the Meeting -- either in person or by proxy. All
returned proxies count towards a quorum, regardless of how they are
voted ("FOR," "AGAINST" or "ABSTAIN"). Your Fund will count broker non-votes
towards the quorum, but not towards the approval of any proposals.
(Broker non-votes are shares for which (1) the underlying owner has not
voted and (2) the broker holding the shares does not have discretionary
authority to vote on the particular matter.) Under the Investment
Company Act of 1940 (the "1940 Act"), the affirmative vote needed to
approve a proposal may be determined with reference to a percentage of
votes present at the Meeting, which would have the effect of counting
abstentions and non-votes as if they were votes against the proposal.
If the proposals are approved, it is anticipated that they will
become effective as soon as practicable after shareholder approval.
PROPOSAL 1
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Meeting as the entire Board
of Directors, to hold office until the next meeting and until the election
and qualification of their successors. If authority is granted on the
accompanying proxy to vote in the election of Directors, the persons named
in the proxy intend to vote at the 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 of Directors 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.
Year First Shares Owned
Nominee's Name Principal Occupation Became a Beneficially
and Age for Past 5 Years Director June 15, 1998**
- -------------- -------------------- --------- -------------
S.M.S. Chadha Director. Secretary, 1996 0
(61) Ministry of External Affairs,
New Delhi, India; Head of
Foreign Service Institute,
New Delhi, India; Special
Envoy of the Government of
India; Director, Special Unit
for Technical Cooperation
among Developing Countries,
United Nations Development
Program, New York.
*Robert M. President and Chairman of the 1981 0
DeMichele Board. Chairman of the Board
(53) and Chief Executive Officer,
Lexington Management
Corporation; President and
Director, Lexington Global
Asset Managers, Inc.;
Chairman and Chief Executive
Officer, Lexington Funds
Distributor, Inc.; Chairman
of the Board, Market Systems
Research, Inc. and Market
Systems Research Advisors,
Inc. (registered investment
advisors); Director,
Chartwell Re Corporation;
Director, Claredon National
Insurance Company; Director,
Unione Italiana Reinsurance;
Director, The Navigator's
Group, Inc.; Director,
Vanguard Cellular Systems,
Inc.; Director, Weeden & Co.;
Trustee, Smith Richardson
Foundation.
Beverley C. Duer Director. Private Investor; 1987 735
(69) Formerly, Manager of
Operations Research
Department, CPC
International, Inc.
*Barbara R. Evans Director. Private Investor; 1991 0
(37) Formerly, Assistant Vice
President and Securities
Analyst, Lexington Management
Corporation.
*Richard M. Hisey Vice President, Treasurer and ____ 1,658
(39) Director. Managing Director,
Director and Chief Financial
Officer, Lexington Management
Corporation; Chief Financial
Officer, Vice President and
Director, Lexington Funds
Distributor, Inc.; Chief
Financial Officer, Market
Systems Research Advisers,
Inc.; Executive Vice
President and Chief Financial
Officer, Lexington Global
Asset Managers, Inc.
*Lawrence Kantor Vice President and Director. 1986 33
(51) Managing Director, Executive
Vice President and Director,
Lexington Management
Corporation; Executive Vice
President and Director,
Lexington Funds Distributor,
Inc.; Executive Vice
President and General Manager
- Mutual Funds, Lexington
Global Asset Managers, Inc.
Jerard F. Maher Director. General Counsel, 1996 0
(52) Federal Business Centers;
Counsel, Ribis, Graham &
Curtis.
Andrew M. McCosh Director. Professor of the 1996 0
(57) Organisation of Industry and
Commerce, Department of
Business Studies, The
University of Edinburgh,
Scotland.
Donald B. Miller Director. Chairman, Horizon 1969 1,853
(72) Media, Inc.; Trustee, Galaxy
Funds (registered investment
companies); Director, Maguire
Group of Connecticut.
John G. Preston Director. Associate 1987 0
(65) Professor of Finance, Boston
College.
Allen H. Stowe Director. President, Dartmouth ____ 1,998
(60) Co-Operative Society Co., Inc.
_________
*An "interested person" as defined in Section 2(a)(19) of the 1940
Act.
**Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to
vote or dispose of shares, regardless of any economic interest
therein.
All of the Directors hold similar offices with some or all of the
other registered investment companies advised and/or whose shares are
distributed by the Adviser and Lexington Funds Distributor, Inc.
There are no standing audit, nominating or compensation committees
of the Board of Directors, or any committees performing similar functions.
The Board of Directors met four times during the twelve months ended
December 31, 1997, and each of the Directors attended at least 75% of those
meetings.
Senior Officers of the Fund
Year First Shares Owned
Principal Occupation; Became a Beneficially
Name and Age Other Associations Officer June 15, 1998**
- -------------- -------------------- --------- -------------
Robert M. DeMichele* President and Chairman 1981 0
(53) of the Board (see page __).
Richard M. Hisey* Vice President, Treasurer 1987 1,658
(39) and Director (see page __).
Lawrence Kantor* Vice President and Director 1984 33
(51) (see page __).
Lisa Curcio* Vice President and Secretary. 1985 0
(38) Senior Vice President and
Secretary, Lexington
Management Corporation;
Vice President and
Secretary, Lexington Funds
Distributor, Inc.; Secretary,
Lexington Global Asset
Managers, Inc.
Richard Lavery* Vice President. Senior 1990 0
(44) Vice President, Lexington
Management Corporation;
Vice President, Lexington
Funds Distributor, Inc.
Janice Carnicelli* Vice President. 1991 0
(38)
Richard T. Saler* Vice President and Portfolio 1994 3,532
(36) Manager. Senior Vice
President, Director of
International Investment
Strategy of Lexington
Management Corporation.
__________
*Messrs. DeMichele, Hisey, Kantor, Lavery, Saler and Mmes. Curcio and
Carnicelli hold similar offices with some or all of the other
registered investment companies advised and/or whose shares are
distributed by the Adviser and Lexington Funds Distributor, Inc.
**Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to
vote or dispose of shares, regardless of any economic interest
therein.
Remuneration of Directors and Certain Executive Officers
Each Director who is not an interested person is reimbursed for
expenses incurred in attending each meeting of the Board of Directors or
any committee thereof up to a maximum of $9,000 per year for Directors
living outside the U.S., and $6,000 per year for Directors living within
the U.S. Each Director who is not an affiliate of the Adviser is
compensated for his or her services according to a fee schedule which
recognizes the fact that each Director also serves as a Director (or
trustee) of other investment companies advised by the Adviser. Each
Director receives a fee, allocated among all investment companies for which
the Director serves. Each Director who served as a director or trustee for
all the funds in the Lexington Fund Complex and attended regular meetings
received an annualized compensation of $24,000.
The following chart outlines information regarding compensation paid
or accrued for the fiscal year ended December 31, 1997 for each Director:
<TABLE>
<CAPTION>
Aggregate Total Compensation From Number of Directorships
Name of Director Compensation from Fund Fund and Fund Complex in Fund Complex
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
S.M.S. Chadha $1,712 $26,821 15
- -----------------------------------------------------------------------------------------------------
Robert M. DeMichele 0 $0 16
- -----------------------------------------------------------------------------------------------------
Beverley C. Duer $1,712 $29,521 16
- -----------------------------------------------------------------------------------------------------
Barbara R. Evans 0 0 15
- -----------------------------------------------------------------------------------------------------
Richard M. Hisey 0 0 5
- -----------------------------------------------------------------------------------------------------
Lawrence Kantor 0 0 15
- -----------------------------------------------------------------------------------------------------
Jerard F. Maher $1,712 $29,521 16
- -----------------------------------------------------------------------------------------------------
Andrew M. McCosh $1,600 $25,029 15
- -----------------------------------------------------------------------------------------------------
Donald B. Miller $1,712 $26,821 15
- -----------------------------------------------------------------------------------------------------
Francis Olmsted* $1,319 $16,800 N/A
- -----------------------------------------------------------------------------------------------------
John G. Preston $1,712 $26,821 15
- -----------------------------------------------------------------------------------------------------
Margaret W. Russell $1,712 $27,045 15
- -----------------------------------------------------------------------------------------------------
Philip C. Smith* $1,220 $19,200 N/A
- -----------------------------------------------------------------------------------------------------
Allen M. Stowe 0 $2,574 5
- -----------------------------------------------------------------------------------------------------
Francis A. Sunderland* $1,140 $16,800 N/A
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Retired
Retirement Plan for Eligible Directors
Under the Retirement Plan for Eligible Directors (the "Retirement
Plan"), each Director who is not an employee of the Adviser, any of the
funds managed by the Adviser, the Fund's administrator, Lexington Funds
Distributor, Inc., or any of their affiliates may be entitled to certain
benefits upon retirement from the Board. Under the Retirement Plan, the
normal retirement date is the date on which the eligible Director has
attained age 65 and has completed at least ten years of continuous and
non-forfeited service with one or more of the investment companies advised by
the Adviser (or its affiliates) (collectively, the "Covered Funds"). Each
eligible Director is entitled to receive from the Covered Fund an annual
benefit commencing on the first day of the calendar quarter coincident with
or next following his date of retirement equal to 5% of his compensation
multiplied by the number of such Director's years of service (not in excess
of 15 years) completed with respect to any of the Covered Funds. Such
benefit is payable to each eligible Director in quarterly installments for
ten years following the date of retirement or the life of the Director.
The Retirement Plan establishes age 72 as a mandatory retirement age for
Directors; however, Directors who were serving the Covered Funds as of
September 12, 1995 are not subject to such mandatory retirement. Directors
who were serving the Covered Funds as of September 12, 1995 who elected
retirement under the Retirement Plan prior to September 12, 1996 receive
an annual retirement benefit at any increased compensation level if
compensation is increased prior to September 12, 1997 and receive spousal
benefits (i.e., in the event the Director dies prior to receiving full
benefits under the Retirement Plan, the Director's spouse (if any) will be
entitled to receive the retirement benefit within the 10 year period.)
Retiring Directors will be eligible to serve as Honorary Directors
for one year after retirement and will be entitled to be reimbursed for
travel expenses to attend a maximum of two meetings.
The following table shows the estimated annual benefits payable to
an eligible Director upon retirement assuming various compensation and
years of service classifications. As of December 31, 1997, the estimated
credited years of service for Directors Chadha, Duer, Maher, McCosh, Miller
and Preston are 2, 19, 2, 2, 23 and 19 respectively. This table below
refers to retirement compensation for the trustees and directors of the
entire Lexington Fund Complex (the investment companies managed by the
Adviser):
Highest Annual Compensation Paid by All Funds
---------------------------------------------
$20,000 $25,000 $30,000 $35,000
Years of
Service Estimated Annual Benefit Upon Retirement
------- ----------------------------------------
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
The Fund pays annual retirements benefits to Francis Olmsted,
Margaret W. Russell, Philip C. Smith and Francis A. Sunderland.
PROPOSAL 2
APPROVAL OR DISAPPROVAL OF SUB-ADVISORY AGREEMENT
The Fund has entered into an investment advisory agreement with
the Adviser, under which the Adviser provides investment advice and in
general conducts the management and investment program of the Fund under
the supervision and control of the Board of Directors of the Fund.
The Adviser has proposed to enter into a Sub-Advisory Agreement
with Stratos Advisors, Inc. ("Stratos"). A copy of the proposed Sub-Advisory
Agreement is attached as Exhibit A. Under the proposed Sub-Advisory
Agreement, Stratos will provide the Fund with investment advice
and management of the Fund's investment program. Stratos, an affiliate
of VZB Partners LLC ("VZB"), an offshore investment manager, is
registered with the Securities and Exchange Commission as an investment
adviser. As a newly formed investment adviser, Stratos currently does
not have any assets under management. Stratos intends to provides
investment management services to institutional investors or
sophisticated individual investors with a net worth in excess of $1
million. Stratos specializes in managing assets in emerging markets.
The Adviser believes that the addition of Stratos as subadviser to
the Fund will expand the investment expertise available to the Adviser
in managing the Fund's investments in emerging markets due to Stratos'
ability to investigate investment opportunities in emerging markets.
The Adviser believes that Stratos' expertise in managing assets in
emerging markets will help the Fund to better achieve its investment
objective of seeking long-term capital growth through investments in
emerging markets.
The proposed Sub-Advisory Agreement does not provide for any
increase in the investment advisory fees paid by the Fund. Rather, the
Adviser will pay the subadviser fees from its own resources. If the
proposed Sub-Advisory Agreement is approved, the Adviser will continue
to serve as investment adviser to the Fund and Stratos will serve as the
investment subadviser to the Fund.
If shareholders approve the proposed Sub-Advisory Agreement, it
will go into effect on August 12, 1998 and, unless earlier terminated in
accordance with their terms, will continue in effect from year to year
only so long as such continuance is specifically approved by the Board
of Directors. Either party may terminate the Sub-Advisory Agreement may
be terminated at any time without penalty on 60 days' written notice.
Based upon the recommendations of the Adviser, the Board of
Directors determined that the proposed Sub-Advisory Agreement was in the
best interests of shareholders. At a meeting held on June 15, 1998, the
Fund's Board of Directors, including a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of the Fund (the
"Disinterested Directors"), approved the proposed Sub-Advisory Agreement
between the Adviser and Stratos. The Board also directed that the
proposed Sub-Advisory Agreement be submitted to shareholders for
approval at this meeting. Shareholders are being asked to approve this
transaction.
Advisory Fees
As compensation for its services as investment adviser, the Fund
pays the Adviser a monthly advisory fee at the annual rate of 1.00% of
the average daily net assets of the Fund. Under the proposed Sub-Advisory
Agreement, the Adviser, from its own resources, will pay
Stratos an annual sub-advisory fee of 0.35% of the Fund's average daily
net assets (net of reimbursements and no transaction fee program fees
not borne by the Fund). For the fiscal year ended December 31, 1997,
the Fund paid the Adviser $2,373,753.
Portfolio Management Team
The Fund will be managed by a portfolio management team consisting
of investment professionals from both the Adviser and Stratos. The lead
managers will be Richard T. Saler, Alfredo M. Viegas and Mohammed Zaidi.
Mr. Saler is Senior Vice President, Director of International
Investment Strategy of the Adviser. Mr. Saler is responsible for
international investment analysis and portfolio management at the
Adviser. He has twelve years of investment experience. Mr. Saler has
focused on international markets since first joining the Adviser in
1986. In 1991 he was a strategist with Nomura Securities and rejoined
the Adviser in 1992. Mr. Saler is a graduate of New York University
with a B.S. Degree in Marketing and an M.B.A. in Finance from New York
University's Graduate School of Business Administration.
Mr. Viegas is Chief Executive Officer and Senior Portfolio Manager
of Stratos. In 1995, Mr. Viegas established VZB. He has been Senior
Portfolio Manager and Partner of VZB since its inception. Mr. Viegas
is responsible for corporate analysis and bottom-up research and has
concentrated on analyzing equity opportunities not only in emerging
markets but also in newly developing or frontier markets where quality
of publicly available information in scarce and direct research is
imperative. Prior VZB, Mr. Viegas was Vice President and Latin America
Equity Strategist for emerging markets with Salomon Brothers from 1993
to 1995. From 1991 to 1993, Mr. Viegas was a research analyst with
Morgan Stanley. Mr. Viegas is a graduate of Weslyan University with a
B.A. in Classics and Medieval History.
Mr. Zaidi is a Portfolio Manager at Stratos. Mr. Zaidi is
responsible for fundamental corporate analysis with a particular focus
on Asian and Middle Eastern Markets as well as the Risk Control Officer.
Mr. Zaidi has been a Portfolio Manager at VZB Partners LLC since 1997.
Mr. Zaidi was Chief Financial Officer and Partner at Paradigm Software,
Inc. from 1992 to 1995. Mr. Zaidi is a graduate of The University of
Pennsylvania with a B.S. in Economics from the Wharton School. Mr. Zaidi
also holds an M.B.A. in Finance from MIT Sloan School of Management.
The following persons are directors and/or senior officers of
Stratos: Alfredo M. Viegas, Chief Executive Officer and Senior
Portfolio Manager, Mohammed Zaidi, Portfolio Manager; and Michael Perry,
Chief Financial Officer. The business address of each of the directors
and officers listed above is 20 Exchange Place, 52nd Floor, New York,
New York 10005.
Board Considerations
In considering whether to recommend that the proposed Sub-Advisory
Agreement be approved by shareholders, the Board of Directors
considered, among other things, the investment philosophy, integrity,
experience in emerging markets and past performance of the investment
personnel of the subadviser. The Board of Directors also considered
information related to VZB's performance in emerging markets. In
addition, the Board requested and evaluated other information from
Stratos which the Board deemed to be relevant. The Board also
considered the fact that the proposed Sub-Advisory Agreement would not
result in additional fees to the Fund, and the Board weighed the
potential benefits offered by Stratos' expertise in emerging markets.
Finally, the Board also considered various alternatives, including
internalization of management, having the Adviser more fully assume the
sub-advisory function or retaining another subadviser.
Based on these considerations and the recommendation of the
Adviser, the Board, including a majority of the Disinterested Directors,
unanimously approved the proposed Sub-Advisory Agreement at the meeting
held on June 15, 1998.
Required Vote
Approval of the proposed Sub-Advisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of
the Fund. If the shareholders of the Fund do not approve the proposed
Sub-Advisory Agreement, the Board of Directors will take such further
action as it may deem to be in the best interests of the Fund's
shareholders.
Directors' Recommendation
The Board of Directors recommends that you vote FOR approval of
the proposed Sub-Advisory Agreement between the Adviser and Stratos.
PROPOSAL 3
APPROVAL OR DISAPPROVAL OF DISTRIBUTION PLAN
At a meeting held on June 15, 1998, the Board of Directors,
including a majority of the Disinterested Directors, approved the
proposed Plan of Distribution (the "Plan") in accordance with
requirements of Rule 12b-1 of the Investment Company Act of 1940 Act.
The Board of Directors determined that it was reasonably likely that the
Plan would contribute to an increase in sales of the shares of the Fund,
with resulting benefits the Fund and its shareholders for the reasons
described below. Shareholders are being asked to consider and approve
the proposed Plan for the Fund.
The Board of Directors determined that an enhanced marketing
effort by Lexington Funds Distributor, Inc. (the "Distributor") on
behalf of the Fund would benefit the Fund in maintaining and improving
its market share, and that such an effort would be enhanced by the
adoption of the Plan, under which the Fund's assets will be available to
compensate the Distributor for the costs of marketing and distributing
the Fund's shares. The proposed Plan will also cover the same expenses
currently being paid through the Shareholder Servicing Plan. However,
under the proposed Plan, payment of fees to no-transaction fee programs
may reduce other expenses such as Transfer Agent expenses.
The Adviser believes, and the Board of Directors concurs, that the
adoption of the Plan is reasonably likely to improve the sales of Fund
shares by providing third party intermediaries with an incentive to
provide ongoing services to the Fund shareholders and sell shares of the
Fund and assist the Fund to remain competitive in the marketplace, and
by providing Funds with advertising or other promotional efforts.
Benefits to Shareholders
The Adviser believes, and the Board of Directors concurs, that the
proposed Plan is reasonably likely to benefit both the Fund and existing
shareholders. For example, enhanced marketing efforts, if successful,
should result in an increase in net assets through the sale of
additional shares and afford greater resources with which to pursue the
investment objective of the Fund. In addition, the sale of additional
shares reduces the likelihood that redemptions of shares will require
the liquidation of the Fund's securities in amounts and at times that
are disadvantageous for investment purposes and, therefore,
disadvantageous to the remaining shareholders. Finally, increased Fund
assets may result in reducing each investor's share of certain expenses
through economies of scale (e.g., allocating fixed expenses over a
larger asset base), thereby partially offsetting the costs of the Plan.
The Board of Directors recognize that there is no assurance that
the expenditures of assets of the Fund to finance distribution of shares
of the Fund will result in additional sales of shares or in an increase
in the net assets of the Fund. The Board of Directors determined,
however, that there is a reasonable likelihood that one or more of such
benefits will result and that the Board of Directors will be in a
position to monitor the distribution expenses of the Fund and to
evaluate the benefit of such expenditures in deciding whether to
continue the Plan.
Description of the Proposed Plan of Distribution
Under the proposed Plan, the Fund will pay for distribution and
service expenses. A copy of the proposed Plan is attached as Exhibit B.
The Fund is authorized under the proposed Plan to use its assets to
finance certain activities relating to the distribution of its shares
including, among other things, advertising, the preparation, printing
and distribution of sales literature, printing and distributing
prospectuses, statement of additional information, annual reports and
other periodic reports to prospective investors.
The proposed Plan provides that distribution payments are limited
to an amount not to exceed an annual rate of 0.25% of the Fund's average
daily net assets. The proposed Plan of Distribution does not permit
carrying over distribution expenses in excess of the annual rate of 0.25%
to subsequent periods. The Board of Directors will receive quarterly
reports concerning the marketing expenses that have been compensated under
the Plan. The Board of Directors will be able to terminate the Plan of
Distribution at any time, which would terminate subsequent payments. In
addition, the Board of Directors, including a majority of the of the
Disinterested Directors, must approve the continuation of the Plan
annually, or the Plan will terminate automatically along with the
payments made under it by the Fund.
Board Considerations
In considering whether to recommend that the proposed Plan be
approved by shareholders, the Board of Directors identified and
considered, among other things, the potential benefits from the proposed
Plan to the Fund and its shareholders. In addition, the Disinterested
Directors requested, evaluated and discussed other information and
materials furnished [by Fund management] which the Disinterested
Directors deemed to be relevant. In connection with their consideration
of the proposed Plan, the Directors were furnished with a draft of the
Plan of Distribution and related materials which outlined the uses and
benefits of distribution plans under Rule 12b-1 of the 1940 Act
currently being used in the mutual fund industry, and certain data
concerning such plans.
The Directors considered various factors relevant to the Fund's
situation, including the investment and sales history of the Fund, the
Fund's marketing experience using Lexington Funds Distributor, Inc. as
distributor, possible ways in which sales of shares could be increased,
and the effect of the proposed Plan on the Fund and its shareholders.
The Board also took into account the following factors: the nature and
causes of the problems or circumstances which made implementation of the
Plan advisable and appropriate; the way in which the Plan would address
these problems or circumstances, including the nature and potential
amount of the expenditures; the relationship of such expenditures to the
overall cost structure of the Fund; the nature of the anticipated
benefits; the time it might take for those benefits to be achieved; the
merits of possible alternative plans; and the effect of the Plan on
existing shareholders.
In approving the Plan, the Directors determined, in the exercise
of their business judgment and in light of their fiduciary duties, based
upon the materials requested and evaluated by them, that there was a
reasonable likelihood that the Fund and its shareholders would benefit
from the adoption of the proposed Plan.
Based on these considerations, the Board, including all of the
Disinterested Directors, unanimously approved the proposed Plan at the
meeting held on June 15, 1998.
Required Vote
Approval of the proposed Plan will require the affirmative vote of
a "majority of the outstanding voting securities" of the Fund. If the
shareholders of the Fund do not approve the proposed Plan, the Board of
Directors will take such further action as it may deem to be in the best
interests of the Fund's shareholders.
Directors' Recommendation
The Board of Directors recommends that you vote FOR approval of
the proposed Plan of Distribution for the Fund.
PROPOSAL 4
RATIFICATION OR REJECTION OF
INDEPENDENT AUDITORS
The Board of Directors, including a majority of the Disinterested
Directors, unanimously appointed KPMG Peat Marwick LLP, as independent
auditors to examine and to report on the financial statements of the
Fund for the fiscal year ending December 31, 1998. Such appointment was
expressly conditioned upon the right of the Fund by a vote of the
majority of the outstanding voting securities at any meeting called for
the purpose to terminate such employment. The Board's selection of KPMG
Peat Marwick LLP is hereby submitted to shareholders for ratification.
KPMG Peat Marwick LLP has served as the independent auditors for
the Fund during its most recent fiscal period ended December 31, 1997.
As the independent auditors, KPMG Peat Marwick LLP audits and certifies
the Fund's financial statements. KPMG Peat Marwick LLP also reviews the
Fund's Annual Reports to shareholders and its filings with the U.S.
Securities and Exchange Commission. Neither KPMG Peat Marwick LLP nor
any of its partners has any direct or material indirect financial
interest in the Fund. Representatives of KPMG Peat Marwick LLP are not
expected to attend the Meeting but have been given the opportunity to
make a statement if they so desire, and will be available should any
matter arise requiring their participation.
Directors' Recommendation
The Board of Directors recommends that you vote FOR the
ratification of the selection of KPMG Peat Marwick LLP as independent
certified public accountants to examine and to report on the financial
statements of the Fund for the fiscal year ending December 31, 1998.
PROPOSAL 5
OTHER MATTERS
The Directors do not know of any matters to be presented at the
Meeting other than those set forth in this proxy statement. If any other
business should come before the meeting, the persons named in the
accompanying proxy will vote thereon in accordance with their best
judgment.
OTHER INFORMATION
Voting Information and Discretion of the Persons Named as Proxies.
At the date of the proxy, we know of no other business to be brought before
the Meeting. However, if any other matters do come up, we will use our
best judgment to vote on your behalf.
If at the time any session of the Meeting is called to order a quorum
is not present, in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a
later date. In the event that a quorum is present but sufficient votes in
favor of one or more of the proposals have not been received, the persons
named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies with respect to any such proposal.
All adjournments will require the affirmative vote of a majority of the
shares present in person or by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote those proxies which they
are entitled to vote in favor of the proposal, in favor of such an
adjournment, and will vote those proxies required to be voted against the
proposal, against any adjournment. We may take a vote on one or more of
the proposals in this proxy statement prior to any adjournment if we
receive sufficient votes for its approval and the approval is otherwise
appropriate. Any adjourned session or sessions may be held within 90 days
after the date set for the original Meeting without the necessity of
further notice.
Annual/semiannual reports. The Fund's most recent annual and
semiannual reports to shareholders are available at no cost. To request a
report, please call us toll-free at 1-800-526-0056 or write us at Park 80
West, Plaza Two, Saddle Brook, New Jersey 07663.
Litigation. The Fund is not involved in any litigation.
Submission of Proposals for the Next Annual Meeting of the Fund.
Under the Fund's Articles of Incorporation and By-Laws, annual meetings of
shareholders are not required to be held unless necessary under the 1940
Act (for example, when fewer than a majority of the Directors have been
elected by shareholders). Therefore, the Fund does not hold shareholder
meetings on an annual basis. Any shareholder proposals to be included in
the proxy statement for the next meeting must be received by the Fund, at
Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663, within a
reasonable time period prior to that meeting. The submission of a
shareholder proposal does not guarantee that it will be included in the
proxy statement. Shareholder proposals are subject to certain regulations
under federal securities law.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD
PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY
EXPENSE AND DELAY. NO POSTAGE IS NECESSARY.
By Order of the Board of Directors,
Lisa A. Curcio
Secretary
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of Lexington
Worldwide Emerging Markets Fund, Inc. (the "Fund") for use at a Special
Meeting of Shareholders to be held at the offices of the Fund, Park 80
West, Plaza Two, Saddle Brook, New Jersey, on August 12, 1998 at 10:30 a.m.
Eastern time.
The undersigned hereby appoints Peter Corniotes and Richard Lavery,
and each of them, with full power of substitution, as proxies of the
undersigned to vote at the above-stated Special Meeting, and at all
adjournments thereof, all shares of beneficial interest of the Fund that
are held of record by the undersigned on the record date for the Special
Meeting, upon the following matters:
Please mark box in blue or black ink.
ITEM I. Votes on Proposal to elect directors to serve as members of the
Board of Directors of the Fund, the nominees are: S.M.S.
Chadha, Robert M. DeMichele, Beverley C. Duer, Barbara R.
Evans, Richard M. Hisey, Lawrence Kantor, Jerard F. Maher,
Andrew M. McCosh, Donald B. Miller, John G. Preston, and Allen
H. Stowe.
FOR ALL
FOR WITHHOLD EXCEPT
[ ] [ ] [ ] TO WITHHOLD
AUTHORITY TO VOTE
FOR ANY INDIVIDUAL
NOMINEE, MARK THE
"FOR ALL EXCEPT"
BOX, AND STRIKE A
LINE THROUGH THE
NOMINEE'S NAME IN
THE LIST ABOVE.
ITEM 2. Vote on Proposal to approve an investment sub-advisory
agreement between Lexington Management Corporation and Stratos
Advisors, Inc. with respect to the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 3. Vote on Proposal to approve a Plan of Distribution for the
Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 4. Vote on Proposal to ratify the selection of KPMG Peat Marwick
LLP as independent auditors of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 5. Vote on the transaction of any other business properly brought
before the meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items.
Receipt of Notice of Special Meeting is hereby acknowledged.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
______________________________________
Sign here exactly as name(s)
appears on this Proxy card
______________________________________
Dated:____________________________,1998
IMPORTANT: Joint owners must EACH
sign. When signing as attorney,
executor, administrator, trustee,
guardian or corporate officer,
please give your full title as
such.
EXHIBIT A
FORM OF
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made this day of __________, 1998 by and
between LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the
"Adviser"), and Stratos Advisors, Inc., a New York corporation (the
"Sub-Adviser"), with respect to the following recital of fact:
R E C I T A L
WHEREAS, Lexington Worldwide Emerging Markets Fund, Inc. (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 Adviser 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 Sub-Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Fund is authorized to issue shares of common stock $1.00
par value; and
WHEREAS, the Fund and the Adviser have entered into an agreement
dated December 5, 1994 to provide for management services for the Fund on
the terms and conditions set forth therein (the "Investment Advisory
Agreement"); and
WHEREAS, the Sub-Adviser proposes to render investment management
services to the Adviser in connection with the Adviser's responsibilities
to the Fund on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Duties. The Sub-Adviser shall furnish the Fund with investment
research and advice consistent with the investment policies set forth in
the Prospectus and Statement of Additional Information of the Fund, subject
at all times to the policies and control of the Fund's Board of Directors
and the supervision of the Adviser. The Sub-Adviser shall give the Fund
the benefit of its best judgment, efforts and facilities in rendering its
services as Sub-Adviser. In carrying out this obligation, the Sub-Adviser
shall:
(a) determine which issuers and securities shall be represented in
the Fund's portfolio and regularly report thereon to the Fund's Board of
Directors and the Adviser;
(b) formulate and implement continuing programs for the purchase
and sale of the securities of such issuers and regularly report thereon to
the Fund's Board of Directors and the Adviser;
(c) continuously review the Fund's security holdings and the
investment program and the investment policies of the Fund; and
(d) take, on behalf of the Fund, all actions which appear necessary
to carry into effect such purchase and sale programs, including the
placement of orders for the purchase and sale of securities for the Fund.
2. Broker-Dealer Relationships.
a. Portfolio Trades. The Adviser and Sub-Adviser at their own
expense, shall place all orders for the purchase and sale of portfolio
securities for the Fund with brokers or dealers selected by the Adviser,
and Sub-Adviser which may include brokers or dealers affiliated with the
Adviser or Sub-Adviser. The Adviser and Sub-Adviser shall use their best
efforts to seek to execute portfolio transactions at prices that are
advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received.
b. Selection of Broker-Dealers. In selecting broker-dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) to the Fund and/or the other accounts which the Adviser, Sub-Adviser
or its affiliates exercise investment discretion. The Adviser and
Sub-Adviser are authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer. This determination may be viewed in
terms of either that particular transaction or the overall responsibilities
that the Adviser and its affiliates have with respect to accounts over
which they exercise investment discretion. The Board shall periodically
review the commissions paid by the Fund to determine if the commissions
paid over representative periods of time were reasonable in relation to the
benefits received.
3. Control by Board of Directors. Any investment program
undertaken by the Sub-Adviser pursuant to this Agreement, as well as any
other activities undertaken by the Sub-Adviser on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the
Board of Directors of the Fund.
4. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Adviser shall at all times
conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Fund under
the Securities Act of 1933 and the 1940 Act; and
(c) the provisions of the Fund's Agreement and Articles of
Incorporation and
(d) the provisions of the By-Laws of the Fund; and
(e) any other applicable provisions of state and federal law.
5. Expenses. The expenses connected with the Fund shall be borne
by the Sub-Adviser as follows:
(a) The Sub-Adviser shall pay the salaries and payroll expenses of
persons serving as officers or Directors of the Fund who are also employees
of the Sub-Adviser or any of its affiliates.
6. Delegation of Responsibilities. Upon request of the Adviser
and with the approval of the Fund's Board of Directors the Sub-Adviser may
perform services on behalf of the Fund which are not required by this
Agreement. Such services will be performed on behalf of the Fund and the
Sub-Adviser's cost in rendering such services may be billed monthly to the
Adviser, subject to examination by the Adviser's independent accountants.
Payment or assumption by the Sub-Adviser of any Fund expense that the
Sub-Adviser is not required to pay or assume under this Agreement shall not
relieve the Adviser or the Sub-Adviser of any of their obligations to the
Fund or obligate the Sub-Adviser to pay or assume any similar Fund expense
on any subsequent occasions.
7. Compensation. For the services to be rendered and the
facilities furnished hereunder, the Adviser shall pay the Sub-Adviser
monthly compensation of the sum of the amount determined by applying the
following annual rate to the Fund's average daily net assets, net of
reimbursement and net of No Transaction Fee (NTF) program fees not borne
by the Fund: 0.35% of the Fund's annual average daily net assets.
Compensation under this Agreement shall be paid monthly. If this Agreement
becomes effective subsequent to the first day of the month or shall
terminate before the last day of the month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation for the preceding month and shall be made
as promptly as possible after the end of each month.
8. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Fund, including all investment advisory
fees but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority
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.
The amount of any such reduction to be borne by the Sub-Adviser shall be
deducted from the monthly investment advisory fee otherwise payable to the
Sub-Adviser during such fiscal year; and if such amount should exceed such
monthly fee, the Sub-Adviser agrees to repay to the Adviser such amount of
its investment advisory fee previously received with respect to such fiscal
year as may be required to make up the deficiency no later than the last
day of the first month of the next succeeding fiscal year. The Sub-Adviser
will not be required to reimburse the Fund for any ordinary business
expenses which exceed the amount of its Sub-Advisory fee for said fiscal
year. For purposes of this paragraph, the term "fiscal year" shall exclude
the portion of the current fiscal year which shall have elapsed prior to
the date hereof and shall include the portion of the then current fiscal
year which shall have elapsed at the date of termination of this Agreement.
9. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect, subject
to Section 11 hereof for two years from the date hereof.
10. Renewal. Following the expiration of its initial two year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually.
(a) (I) by the Fund's Board of Directors or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the Directors who are
not parties of this Agreement or interested persons of a party to the
Agreement (other than as a Director of the Fund), by votes cast in person
at a meeting specifically called for such purposes.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities or by the Sub-Adviser on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(42) of the Investment Company Act of 1940.
12. Liability of the Sub-Adviser. In the absence of willful
misfeasance, bad faith, gross negligence on the part of the Sub-Adviser or
its officers, directors or employees, or reckless disregard by the Sub-Adviser
of its duties under this Agreement, the Sub-Adviser shall not be
liable to the Adviser, the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security, provided the Sub-Adviser has acted in good faith.
13. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of
the Adviser shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663, and that of the Sub-Adviser for this purpose shall be 20 Exchange
Place, 52nd Floor, New York, NY 10005.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
LEXINGTON MANAGEMENT CORPORATION
Attest: By
Executive Vice President
STRATOS ADVISORS, INC.
Attest: By
President
EXHIBIT B
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
DISTRIBUTION PLAN
Distribution Plan (the "Plan") of Lexington Worldwide Emerging
Markets Fund, Inc. a Maryland Corporation (the "Fund"), an open-end,
management investment company registered under the Investment Company Act
of 1940, as amended (the "Act"), adopted pursuant to Section 12(b) of the
act and Rule 12b-1 promulgated thereunder ("Rule 12b-1").
1. Principal Underwriter and Investment Adviser. Lexington
Funds Distributor, Inc., a Delaware corporation ("the Distributor"), acts
as the principal underwriter of the Fund's shares pursuant to a
Distribution Agreement. Lexington Management Corporation, a Delaware
corporation (the "Adviser"), acts as the Fund's investment adviser pursuant
to an Investment Advisory Agreement.
2. Distribution Payments. (a) The Fund either directly or
through the Adviser, may make payments periodically (i) to the Distributor
or to any broker-dealer (a "Broker") who is registered under the Securities
Exchange Act of 1934 and a member in good standing of the National
Association of Securities Dealers, Inc. and who has entered into a selected
dealer agreement with the Distributor, (ii) to other persons or
organizations ("Servicing Agents") who have entered into shareholder
processing and service agreements with the Adviser or with the Distributor,
with respect to Fund shares owned by shareholders for which such Broker is
the dealer or holder of record or such servicing agent has a servicing
relationship, or (iii) for expenses associated with distribution of Fund
shares, including the compensation of the sales personnel of the
Distributor; payments of no more than an effective annual rate of 0.25%,
or such lesser amounts as the Distributor determines appropriate.
(b) The schedule of such fees and the basis upon
which such fees will be paid shall be determined from time to time by the
Distributor and the Adviser, subject to approval by the Directors of the
Fund.
(c) Payments may also be made for any advertising
and promotional expenses relating to selling efforts, including but not
limited to the incremental costs of printing, prospectuses, statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Fund; the costs of
preparing and distributing any other supplemental sales literature; costs
of radio, television, newspaper and other advertising: telecommunications
expenses, including the cost of telephones telephone lines and other
communications equipment, incurred by or for the Distributor in carrying
out its obligations under the Distribution Agreement.
3. Reports. Quarterly, in each year that this Plan remains in
effect, the Fund's Treasurer shall prepare and furnish to the Directors of
the Fund a written report, complying with the requirements of Rule 12b-1,
setting forth the amounts expended by the Fund under the Plan and
purposes for which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon
approval of the Plan, the form is Selected Dealer agreement and the form
of Shareholder Service Agreement, by the majority votes of both (a) the
Fund's Directors and the Qualified Directors (as defined in Section 6),
cast in person at a meeting called for the purpose of voting on the Plan
and (b) the outstanding voting securities of the Fund, as defined in
Section 2(a)(42) of the Act.
5. Term. This Plan shall remain in effect for one year from
its adoption date and may be continued thereafter if this Plan and all
related agreements are approved at least annually by a majority vote of the
Directors of the Fund, including a majority of the Qualified Directors cast
in person at a meeting called for the purpose of voting on such Plan and
agreements. This Plan may not be amended in order to increase materially
the amount to be spent for distribution assistance without shareholder
approval in accordance with Section 4 hereof. All material amendments to
this Plan must be approved by a vote of the Directors of the Fund, and of
the Qualified Directors (as hereinafter defined), cast in person at a
meeting called for the purpose of voting thereon.
6. Termination. This Plan may be terminated at any time by
a majority vote of the Directors who are not interested persons (as defined
in Section 2(a)(19) of the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan or in any agreements
related to the Plan (the "Qualified Directors") or by vote of a majority
of the outstanding voting securities of the Fund, as defined in Section
2(a)(42) of the Act.
7. Nomination of "Non-Interested Directors." While this Plan
shall be in effect, the selection and nomination of the "non-interested"
Directors of the Fund shall be committed to the discretion of the
non-interested Directors then in office.
8. Miscellaneous. (a) Any termination or non-continuance of
(i) a Selected Dealer Agreement between the Distributor and a particular
broker or (ii) a Shareholder Service agreement between the adviser or the
Fund and a particular person or organization, shall have no effect on any
similar agreements between brokers or other persons and the Fund, the
Adviser or the Distributor pursuant to this Plan.
(b) The Distributor, the Adviser, or the Fund
shall not be under any obligation because of this Plan to execute any
Selected Dealer Agreement with any broker or any Shareholder Service
Agreement with any person or organization.
(c) All Agreements with any person or organization
relating to the implementation of this Plan shall be in writing and any
agreement related to this Plan shall be subject to termination, without
penalty, pursuant to the provisions of Section 6 hereof.
Dated:_______________________________
