LEXINGTON GNMA INCOME FUND, INC.
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
-----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-----------------
November 5, 1996
Notice is hereby given that a Special Meeting of the Shareholders of the
Lexington GNMA Income Fund, Inc. (the "Fund"), a Maryland corporation, will be
held on November 5, 1996 at 10 a.m. Eastern time at the offices of the Fund,
Park 80 West, Plaza Two, Saddle Brook, New Jersey for the following purposes:
I. To elect eleven directors to serve as members of the Board of Directors
of the Fund;
II. To ratify or reject the selection of KPMG Peat Marwick as independent
certified public accountants of the Fund; and
III. The transaction of such other business as may be properly brought
before the meeting.
Shareholders of record at the close of business on September 10, 1996 are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE FILL IN,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID
RETURN ENVELOPE ENCLOSED, SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER
OF SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO
SIGN YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO
ITS USE.
By Order of the Board of Directors,
Lisa A. Curcio, Secretary
October 10, 1996
<PAGE>
LEXINGTON GNMA INCOME FUND, INC.
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
---------------
PROXY STATEMENT
---------------
Dated October 10, 1996
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
November 5, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Lexington GNMA Income Fund, Inc. (the
"Fund"), a Maryland corporation, for use at a Special Meeting of Shareholders
(the "Meeting") to be held on November 5, 1996 at 10 a.m. Eastern time at the
offices of the Fund, Park 80 West, Plaza Two, Saddle Brook, New Jersey, and at
any adjournment thereof, and was first mailed to shareholders on or about
October 10, 1996. Even if you sign and return the accompanying proxy, you may
revoke it by giving written notice of such revocation to the Secretary of the
Fund prior to the Meeting or by delivering a subsequently dated proxy or by
attending and voting at the Meeting in person. Management expects to solicit
proxies principally by mail, but Management or agents appointed by Management
may also solicit proxies by telephone, telegraph or personal interview. The
costs of solicitation will be borne by the Fund.
The following are the Proposals for the Meeting:
I. Shareholders will be asked to elect eleven directors to serve as
members of the Board of Directors of the Fund;
II. Shareholders will be asked to ratify or reject the selection of KPMG
Peat Marwick as independent certified public accountants of the Fund;
and
III. Shareholders will be asked to transact such other business as may be
properly brought before the meeting.
The Board of Directors has fixed the close of business on September 10, 1996
as the record date for the determination of the shareholders entitled to notice
of and to vote at the Meeting or any adjournment thereof. As of that date, there
were approximately 15,670,195 outstanding shares of the Lexington GNMA Income
Fund, Inc., each share being entitled to one vote on each matter to come before
the Meeting. As of September 10, 1996, no shareholders beneficially owned 5% or
more of the Fund's shares.
The Fund's Annual Report for the year ended December 31, 1995, including
financial statements, has been sent to all shareholders of record on February
23, 1996. The Annual Report does not, however, form any part of the proxy
1
<PAGE>
soliciting material. A copy of the Fund's Annual Report and the most recent
Semi-Annual Report succeeding the Annual Report may be received, free of charge,
by calling the Fund, toll free, at 1-800-526-0056.
The favorable vote of the holders of a simple majority of the shares
represented at the Meeting, assuming a quorum of 50% of the outstanding shares
is present, is required for the election of Directors (Proposal I, below) and
for the ratification of the selection of KPMG Peat Marwick as independent
certified public accountants (Proposal II, below).
In addition to the solicitation of proxies by mail, the Fund may utilize the
services of officers and employees of the Fund, Lexington Management
Corporation, the Fund's investment adviser (the "Adviser" or the "Investment
Adviser"), and Lexington Funds Distributor, Inc., the Fund's distributor (the
"Distributor"), none of whom receive any compensation therefor, to solicit
proxies by telephone, telegraph and personal interview, and may also provide
shareholders with a procedure for recording their votes by telegraph, facsimile,
telephone or other electronic means. The estimated costs of solicitation of
proxies are expected to be approximately $20,000 in the aggregate for the Fund
and will be borne by the Fund. The Fund may request brokers, custodians,
nominees and fiduciaries to forward proxy material to the beneficial owners of
shares of record. Persons holding shares as nominees will, upon request, be
reimbursed for their reasonable expenses incurred in sending soliciting material
to their principals.
In the event that a quorum of shareholders is not represented at the Meeting
or at any adjournment thereof, or, even if 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
60 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 if such
proxies 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 if such
proxies instruct them to vote against or to abstain from voting on all of the
proposals to be considered at the adjournment meeting.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF SHARES
REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR, IN THE ABSENCE OF SUCH
DIRECTION, FOR APPROVAL OF EACH OF THE ABOVE PROPOSALS.
Proposal I
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 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 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.
2
<PAGE>
<TABLE>
<CAPTION>
Year First Shares Owned
Nominee's Name Became A Beneficially
and Age Principal Occupation for Past 5 Years Director Sept. 10, 1996**
- ------- ------------------------------------- ------- ----------------
<S> <C> <C> <C>
S.M.S. Chadha Director. Secretary, Ministry of External Affairs, New 1996 0
(59) 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. DeMichele President and Chairman; Chairman and Chief Executive 1982 0
(51) Officer, Lexington Management Corporation; Chairman
and Chief Executive Officer, Lexington Funds Distributor,
Inc.; President and Director, Lexington Global Asset
Managers, Inc.; Director, Chartwell Re Corporation;
Director, Continental National Corporation; Director,
The Navigator's Group, Inc.; Chairman, Lexington Capital
Management, Inc.; Director, Vanguard Cellular Systems,
Inc.; Chairman of the Board, Market Systems Research Advisors,
Inc. (registered investment advisors). Trustees, Smith
Richardson Foundation
Beverley C. Duer Director. Private Investor; formerly, Manager of Operations 1987 0
(67) Research Department, CPC International, Inc.
*Barbara R. Evans Director. Private Investor; formerly, Assistant Vice 1990 0
(36) President and Securities Analyst, Lexington Management
Corporation.
*Lawrence Kantor Vice President and Director. Executive Vice President, 1984 0
(49) Managing Director 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, Federal Business Centers; 1996 0
(50) Counsel, Ribis, Graham & Curtin; Trustee, Lexington
Convertible Fund since 1986.
Andrew M. McCosh Director. Professor of the Organisation of Industry and 1996 0
(56) Commerce, Department of Business Studies, The University
of Edinburgh, Scotland.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Year First Shares Owned
Nominee's Name Became A Beneficially
and Age Principal Occupation for Past 5 Years Director Sept. 10, 1996**
- ------- ------------------------------------- ------- ----------------
<S> <C> <C> <C>
Donald B. Miller Director. Chairman, Horizon Media, Inc.; Trustee, Galaxy 1981 15,967
(73) Funds (registered investment companies); Director, Maguire
Group of Connecticut.
John G. Preston Director. Associate Professor of Finance, Boston College. 1987 0
(64)
Margaret W. Russell Director. Private Investor. 1981 0
(76)
Philip C. Smith Director. Private Investor; Director, Southwest Investors 1979 0
(84) Income Fund, Inc., Government Income Fund, Inc., U.S.
Trend Fund, Inc., Investors Cash Reserve and Plimony Fund,
Inc. (registered investment companies).
</TABLE>
__________
*An "interested person" as defined in Section 2(a)(19) of 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.
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 ("LMC") and Lexington Funds Distributor, Inc.
("LFD"). LMC, P.O. Box 1515, Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663, is the investment adviser to the Fund. LFD, P.O. Box 1575, Park 80 West,
Plaza Two, Saddle Brook, New Jersey 07663, is the distributor to the Fund.
The Board of Directors met 5 times during the twelve months ended December
31, 1995, and each of the Directors attended at least 75% of those meetings.
Officers of the Fund
Officers of the Fund
<TABLE>
<CAPTION>
Year First Shares Owned
Nominee's Name Became An Beneficially
and Age Principal Occupation; Other Associations Officer Sept. 10, 1996**
- ------- ---------------------------------------- ------- ----------------
<S> <C> <C> <C>
Robert M. DeMichele* Chairman of the Board (see page 4). 1982 0
(51)
Richard M. Hisey* Vice President and Treasurer. Managing Director, Chief 1987
(51) Financial Officer and Director, Lexington Management
Corporation; Vice President, Chief Financial Officer and
Director, Lexington Funds Distributor, Inc.; Executive
Vice President and Chief Financial Officer, Lexington
Global Asset Managers, Inc.
Lawrence Kantor* Vice President and Director (see page 5). 1984 0
(49)
Denis Jamison* Vice President and Portfolio Manager. Senior Vice 1981 0
(49) President, Lexington Management Corporation. Mr. Jamison
is a Chartered Financial Analyst and a member of the New
York Society of Security Analysts.
</TABLE>
4
<PAGE>
Officers of the Fund
<TABLE>
<CAPTION>
Year First Shares Owned
Nominee's Name Became An Beneficially
and Age Principal Occupation; Other Associations Officer Sept. 10, 1996**
- ------- ---------------------------------------- ------- ----------------
<S> <C> <C> <C>
Lisa Curcio* Vice President and Secretary. Senior Vice President and
(36) Secretary, Lexington Management Corporation; Vice President
and Secretary, Lexington Funds Distributor, Inc.; Secretary,
Lexington Global Asset Managers, Inc. 1985 0
</TABLE>
__________
*Messrs. DeMichele, Hisey, Jamison and Kantor 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
**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.
As of September 10, 1996, the Directors and executive officers of the Fund
as a group beneficially owned a total of 15,967 Fund shares, constituting less
than 1% of all issued and outstanding shares of the Fund.
Remuneration of Directors and Certain Executive Officers
Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof. 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 LMC. Each
Director receives a fee, allocated among all investment companies for which the
Director serves. Effective September 12, 1995 each Director receives annual
compensation of $24,000. Prior to September 12, 1995, the Directors who were not
employed by the Fund or its affiliates received annual compensation of $16,000.
Set forth below is information regarding compensation paid or accrued during
the period January 1, 1995 to December 31, 1995 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>
Robert M. DeMichele 0 0 15
- ----------------------------------------------------------------------------------------------------------
Beverley C. Duer $1,456 $22,616 15
- ----------------------------------------------------------------------------------------------------------
Barbara R. Evans 0 0 14
- ----------------------------------------------------------------------------------------------------------
Lawrence Kantor 0 0 14
- ----------------------------------------------------------------------------------------------------------
Donald B. Miller $1,456 $22,616 14
- ----------------------------------------------------------------------------------------------------------
John G. Preston $1,456 $22,616 14
- ----------------------------------------------------------------------------------------------------------
Margaret Russell $1,456 $22,616 13
- ----------------------------------------------------------------------------------------------------------
Philip C. Smith $1,456 $22,616 14
- ----------------------------------------------------------------------------------------------------------
Francis A. Sunderland* $1,456 $22,616 13
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*Retired
5
<PAGE>
Retirement Plan for Eligible Directors
Effective September 12, 1995, the Directors instituted a Retirement Plan for
Eligible Directors (the "Plan") pursuant to which each Director (who is not an
employee of any of the funds managed by the Adviser, the Adviser, administrator
or Distributor or any of their affiliates) may be entitled to certain benefits
upon retirement from the Board. Pursuant to the 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 LMC (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 Plan
establishes age 72 as a mandatory retirement age for Directors; however,
Directors serving the Covered Funds as of September 12, 1995 are not subject to
such mandatory retirement. Directors serving the Covered Funds as of September
12, 1995 who elect retirement under the Plan prior to September 12, 1996 will
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 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.
Set forth in the table below are the estimated annual benefits payable to an
eligible Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, the estimated credited years
of service for Directors Duer, Miller, Preston, Russell, Smith and Sunderland
are 18, 22, 18, 15, 26 and 36, respectively. The following table refers to
retirement compensation for the trustees and directors of the entire Lexington
fund complex (the investment companies managed by LMC):
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
6
<PAGE>
Proposal II
RATIFICATION OR REJECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, including a majority of the directors who are not
interested persons of the Fund, unanimously appointed KPMG Peat Marwick, as
independent certified public accountants to examine and to report on the
financial statements of the Fund for the fiscal year ending December 31, 1996.
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. Such firm has no direct or indirect
interest in the Fund.
Representatives of KPMG Peat Marwick are not expected to be present at the
Meeting.
The Board of Directors recommends that you vote FOR the ratification of the
selection of KPMG Peat Marwick as independent certified public accountants to
examine and report on the financial statements of the Fund for the fiscal year
ending December 31, 1996.
Proposal III
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.
ADDITIONAL INFORMATION
A. The Investment Adviser
LMC, P.O. Box 1515, Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663,
is the investment adviser to the Fund. The Investment Adviser identifies and
analyzes possible investments for the Fund, determines the amount and timing of
such investments, and the form of investment. The Investment Adviser has the
responsibility of monitoring and reviewing the Fund's portfolio, and, on a
regular basis, to recommend the ultimate disposition of such investments. It is
the Investment Adviser's responsibility to cause the purchase and sale of
securities in the Fund's portfolio, subject at all times to the policies set
forth by the Fund's Board of Directors. The Investment Adviser also provides
certain administrative and managerial services to the Fund.
B. The Principal Underwriter
LFD, P.O. Box 1515, Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663,
is the principal underwriter of the Fund. The Principal Underwriter promotes the
sale and arranges for the sale of shares through its representatives and to
investment dealers. LMC and LFD are wholly owned subsidiaries of Lexington
Global Asset Managers, Inc., a Delaware corporation with offices at Park 80
West, Plaza Two, Saddle Brook, NJ 07663.
C. The Administrator
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulating compliance preparation of
7
<PAGE>
financial information for semi-annual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervisor of custodian, transfer agent and provides facilities for such
services.
SUBMISSION OF PROPOSALS FOR THE
NEXT MEETING OF SHAREHOLDERS
Under the Lexington GNMA Income Fund's Articles of Incorporation and
By-Laws, annual meetings of shareholders are not required to be held unless
necessary under the Investment Company Act of 1940, as amended (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. A
shareholder proposal intended to be presented at any meeting hereafter called
should be sent to the Lexington GNMA Income Fund at P.O. Box 1515, Park 80 West,
Plaza Two, Saddle Brook, New Jersey 07663, and must be received by the Fund
within a reasonable time before the solicitation relating thereto is made in
order to be included in the notice or proxy statement related to such meeting.
The submission by a shareholder of a proposal for inclusion in a proxy statement
does not guarantee that it will be included. Shareholder proposals are subject
to certain regulations under federal securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. 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.
October 10, 1996
By Order of the Board of Directors,
Lisa A. Curcio, Secretary
8
<PAGE>
LEXINGTON GNMA INCOME FUND, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of the Lexington GNMA Income
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 November 8, 1996 at 10 a.m. Eastern time.
The undersigned hereby appoints Peter Corniotes and Richard J. 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 common stock of the Fund that are held of record by the undersigned on
the record date for the Special Meeting, upon the following matters:
<PAGE>
(Left Column)
---
| X | PLEASE MARK BOX IN
--- BLUE OR BLACK INK
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. Date
- --------------------------------------------------------------------
- ------------Sign here exactly as name(s) appears hereon-------------
IMPORTANT: Joint owners must EACH sign. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your full
title as such.
(Right Column)
ITEM I
For With- For All
hold Except
---- ---- ----
| | | | | |
---- ---- ----
Votes on Proposal to elect trustees to serve as members of the Board of Trustees
of the Fund, the nominees are:
S.M.S. Chadha, Robert M. DeMichele, Beverley C. Duer,
Barbara R. Evans, Lawrence Kantor, Jerard F. Maher,
Andrew M. McCosh, Donald B. Miller, John G. Preston,
Margaret W. Russell and Philip C. Smith.
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 II For Against Abstain
---- ---- ----
| | | | | |
---- ---- ----
Vote on Proposal to ratify the selection of KPMG Peat Marwick as independent
certified public accountants to the Fund.
ITEM III For Against Abstain
---- ---- ----
| | | | | |
---- ---- ----
The transaction of such other business as may be properly brought before the
meeting.
