As filed with the Securities and Exchange Commission on April 28, 1995
Registration No. 2-14767
811-0865
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 62 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 X
(Check appropriate box or boxes.)
LEXINGTON GROWTH AND INCOME FUND, INC.
----------------------------------------------------
(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
-----------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Growth and Income Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
-----------------------------------------
(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, New York 10022
------------------------------------------
It is proposed that this filing will become effective May 1,
1995 pursuant to Paragraph (b) of Rule 485.
------------------------------------------
The Registrant has registered an indefinite number of shares
under the Securities Act of 1933, pursuant to Section 24(f) of
the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ended December 31, 1994 was filed on
February 24, 1995.
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
- --------------- ------------------ -----------
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information 2
4. General Description of Registrant 3
5. Management of the Fund 5
6. Capital Stock and Other Securities 12
7. Purchase of Securities Being Offered 5
8. Redemption or Repurchase 6
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ADDITIONAL STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION INFORMATION PAGE NUMBER
- ------ ----------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History 12 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 16
15. Control Persons and Principal Holders 3
of Securities
16. Investment Advisory and Other Services 3
17. Brokerage Allocation and Other Practices 5
18. Capital Stock and Other Securities 12 (Part A)
19. Purchase, Redemption and Pricing of 5,6 (Part A)
securities being offered
20. Tax Status 9
21. Underwriters 3
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements Exhibit
PART C
- ------
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in
Part C to this Registration Statement.
* Not Applicable
<PAGE>
PROSPECTUS
May 1, 1995
Lexington Growth and Income
Fund, Inc.
P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Service--1-800-526-0056
24 Hour Account Information--1-800-526-0052
A NO-LOAD MUTUAL FUND THAT IS FULLY MANAGED. ITS PRINCIPAL INVESTMENT OBJECTIVE
IS LONG TERM APPRECIATION OF CAPITAL. INCOME RETURN IS A SECONDARY OBJECTIVE.
- --------------------------------------------------------------------------------
Lexington Growth and Income Fund, Inc. (the "Fund") is a
no load open-end diversified management investment company.
The Fund's principal investment objective is long term
appreciation of capital. Income is a secondary objective.
Shareholders may invest, reinvest or redeem shares at
any time without charge or penalty.
Lexington Management Corporation ("LMC") is the
Investment Adviser of the Fund. Lexington Funds Distributor,
Inc. ("LFD") is the Distributor of shares of the Fund.
This Prospectus concisely sets forth information about
the Fund that you should know before investing. It should be
read and retained for future reference.
A Statement of Additional Information dated May 1, 1995,
which provides a further discussion of certain areas in this
Prospectus and other matters that may be of interest to some
investors, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a
free copy, call the appropriate telephone number above or
write to the address listed above.
Mutual fund shares are not deposits or obligations of
(or endorsed or guaranteed by) any bank, nor are they
federally insured or otherwise protected by the Federal
Deposit Insurance Corporation ("FDIC"), the Federal Reserve
Board or any other agency. Investing in mutual funds
involves investment risks, including the possible loss of
principal, and their value and return will fluctuate.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Investors Should Read and Retain this Prospectus for Future Reference
<PAGE>
FEE TABLE
<TABLE>
Annual Fund Operating Expenses:
(as a percentage of average net assets)
<S> <C>
Management fees .......................................................................................... 0.71%
12b-1 fees ............................................................................................... 0.25%
Other fees ............................................................................................... 0.19%
----
Total Fund Operating Expenses ............................................................................ 1.15%
====
</TABLE>
<TABLE>
<CAPTION>
Example: 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period ........... $11.72 $36.54 $63.03 $139.75
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear
indirectly. (For more complete descriptions of the various costs and expenses,
see "How to Purchase Shares" and "Investment Adviser and Distributor" below.)
The Expenses and Example (except the 12b-1 fees) appearing in the table above
are based on the Fund's expenses for the period from January 1, 1994 to December
31, 1994. The 12b-1 fees shown in the table reflect the maximum amount which may
be paid under the Distribution Plan. See "Distribution Plan." The Example shown
in the table above should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following Financial Highlights information for each of the years in the
five year period ended December 31, 1994 has been audited by KPMG Peat Marwick
LLP, Independent Auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes thereto included in the Statement of
Additional Information. The Fund's annual report, which contains additional
information, is available upon request and without charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Per Share Data for a share outstanding throughout the period
Year Ended December 31,
--------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period. $16.16 $16.25 $16.39 $14.24 $16.19 $14.39 $13.58 $19.16 $18.62 $15.37
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income ........... 0.17 0.21 0.23 0.35 0.60 0.50 0.46 0.43 0.47 0.60
Net realized and
unrealized gain
(loss) on
investments ...... (0.68) 1.94 1.79 3.17 (2.25) 3.44 0.80 0.02 3.06 3.36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from
investment
operations ......... (0.51) 2.15 2.02 3.52 (1.65) 3.94 1.26 0.45 3.53 3.96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income. (0.16) (0.21) (0.32) (0.35) (0.30) (0.60) (0.45) (0.51) (0.66) (0.60)
Distributions from
net realized
capital gains (0.91) (2.03) (1.84) (1.02) - (1.54) - (5.52) (2.33) (0.11)
Distributions in
excess of net
realized gains
(Temporary book-
tax difference) . (0.22) - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions .. (1.29) (2.24) (2.16) (1.37) (0.30) (2.14) (0.45) (6.03) (2.99) (0.71)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period .......... $14.36 $16.16 $16.25 $16.39 $14.24 $16.19 $14.39 $13.58 $19.16 $18.62
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return ......... (3.11%) 13.22% 12.36% 24.87% (10.27%) 27.56% 9.38% 0.15% 20.52% 26.36%
Ratio to average net assets:
Expenses ........... 1.15% 1.29% 1.20% 1.13% 1.04% 1.02% 1.10% 0.96% 0.95% 1.00%
Net investment
income. 1.06% 1.20% 2.57% 2.19% 3.91% 2.82% 3.20% 2.37% 2.52% 3.52%
Portfolio turnover ... 63.04% 93.90% 88.13% 80.33% 67.39% 64.00% 81.10% 95.28% 81.95% 86.04%
Net assets, end of
period (000's
omitted) ........... $124,289 $134,508 $126,241 $121,263 $104,664 $128,329 $111,117 $112,780 $124,678 $114,228
</TABLE>
2
<PAGE>
DESCRIPTION OF THE FUND
The Fund is an open-end diversified management investment company. It is
called a no-load Fund because its shares are sold without a sales charge.
INVESTMENT OBJECTIVE
The Fund's principal investment objective is long term appreciation of
capital. Income is a secondary objective. The Fund normally will invest its
assets in publicly traded common stocks and senior securities convertible into
common stocks of domestic and foreign companies. It intends however, when it
deems it appropriate for defensive purposes, to make investments in varying
amounts of senior securities such as bonds, debentures, and preferred stocks.
The Fund attempts to achieve its objective by investing principally in publicly
traded common stocks, bonds, debentures and preferred stock (which may be
convertible into or which carries the right to be converted into common stock),
and secondarily in securities as described above which offer attractive current
yields and the potential for capital appreciation.
INVESTMENT POLICY AND RESTRICTIONS
The Fund's principal investment objective is long term appreciation of
capital. Income return is a secondary objective. The Fund will not: (i) issue
senior securities; (ii) underwrite securities of other issuers; (iii) purchase
or sell real estate, 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); (iv)
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 10% of the Fund's
assets may be invested in repurchase agreements which mature in more than seven
days; (v) purchase the securities of another investment company or investment
trust except in the open market where no profit results to a sponsor or dealer,
other than the customary broker's commission; (vi) purchase any security on
margin or effect a short sale of a security; (vii) buy securities from or sell
securities to any of its officers and directors or its investment adviser or
principal distributor as principal; (viii) contract to sell any security or
evidence of interest therein except to the extent that the same shall be owned
by the Fund; (ix) retain securities of an issuer when one or more of the
officers and directors of the Fund or the investment adviser or a person owning
more than 10% of the stock of either, own benefically more than 0.5% of the
securities of such issuer and the persons owning more than 0.5% of such
securities together own beneficially more than 5% of the securities of such
issuer; (x) invest more than 5% of the value of its total assets in the
securities of any one issuer nor acquire more than 10% of the outstanding voting
securities of any one issuer; (xi) invest in companies for the purpose of
exercising management or control; or (xii) concentrate its investments in a
particular industry; thus the Fund will not purchase a security if the immediate
effect of such purchase would be to increase the Fund's holdings in such
industry above 25% of the Fund's assets. The 5% diversification limitation set
forth in subparagraph (x) above does not apply to obligations issued or
guaranteed as to principal and interest by the United States government, nor
does it apply to bank certificates of deposit, which are not classified by the
Fund as securities for the purposes of this limitation.
The Fund shareholder vote required for modification of its investment
policies or restrictions is the lesser of: (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% are present or
represented by proxy; or (b) more than 50% of the voting securities.
In addition to the above fundamental investment restrictions, the Fund has
undertaken not to: a) invest an aggregate of more than 5% of its total assets in
the securities of unseasoned issuers and equity securities of issuers which are
not readily marketable; b) purchase any class of securities of an issuer if such
purchase would cause the Fund to own at the time of the purchase more than 10%
of any such class of securities of an issuer; c) invest in puts, calls,
straddles, spreads, and any combination thereof; d) invest in
3
<PAGE>
interests in oil, gas or other mineral exploration or development programs; e)
pledge, mortgage or hypothecate the assets of the greater than 15% of the gross
assets of the Fund taken at cost; or f) invest more than 20% of its assets in
foreign companies.
The Fund has authority to borrow money from a bank not in excess of the
lesser of: (a) 5% of the gross assets of the Fund at the current market value at
the time of such borrowing; or (b) 10% of the gross assets of the Fund taken at
cost. Any such borrowing may be undertaken only as a temporary measure for
extraordinary or emergency purposes. This borrowing power has not been exercised
by the Fund's management.
Although the Fund has the right to pledge, mortgage or hypothecate its
assets, in order to comply with a state statute, the Fund will not, as a matter
of operating policy while offering shares in such state, pledge, mortgage or
hypothecate its portfolio securities to the extent that at any time the
percentage of pledged securities will exceed 10% of the offering price of the
Fund's shares.
The Fund's investment portfolio may include repurchase agreements ("repos")
with banks and dealers in U.S. Government securities. A repurchase agreement
involves the purchase by the Fund of an investment contract from a bank or a
dealer in U.S. Government securities which contract is secured by debt
securities whose value is equal to or greater than the value of the repurchase
agreement including the agreed upon interest. The agreement provides that the
institution will repurchase the underlying securities at an agreed upon time and
price. The total amount received on repurchase would exceed the price paid by
the Fund, reflecting an agreed upon rate of interest for the period from the
date of the repurchase agreement to the settlement date, and would not be
related to the interest rate on the underlying securities. The difference
between the total amount to be received upon the repurchase of the securities
and the price paid by the Fund upon their acquisition is accrued daily as
interest. If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in the market value of the collateral securities. The Fund intends to
limit repurchase agreements to transactions with institutions believed by the
adviser to present minimal credit risk.
Risk Considerations
Investments in foreign securities may involve risks and considerations not
present in domestic investments. Since foreign securities generally are
denominated and pay interest or dividends in foreign currencies, the value of
the assets of the Fund as measured in United States dollars will be affected
favorably or unfavorably by changes in the relationship of the United States
dollar and other currency rates. The Fund may incur costs in connection with the
conversion or transfer of foreign currencies. In addition, there may be less
publicly available information about foreign companies than United States
companies. Foreign companies may not be subject to accounting, auditing, and
financial reporting standards, practices and requirements comparable to those
applicable to United States companies. Foreign securities markets, while growing
in volume, have for the most part substantially less volume than United States
securities markets and securities of foreign companies are generally less liquid
and at times their prices may be more volatile than securities of comparable
United States companies. Foreign stock exchanges, brokers and listed companies
are generally subject to less government supervision and regulation than in the
United States. The customary settlement time for foreign securities may be
longer than the 5 day customary settlement time for United States securities.
Although the Fund will try to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization or foreign government
restrictions or other adverse political, social or diplomatic developments that
could affect investment in these nations.
Income from foreign securities held by the Fund may, and in some cases will
be reduced by a withholding tax at the source or other foreign taxes. A
shareholder of the Fund will, subject to certain restrictions, be entitled to
claim a creditor deduction for United States Federal income tax purposes for the
shareholder's pro rata share of such foreign taxes paid by the Fund. (See
Dividends, Capital Gains, Distributions and Tax Matters).
4
<PAGE>
PORTFOLIO TURNOVER
In the selection of various securities, long-term potential will take
precedence over short term market fluctuations. While management maintains the
flexibility to sell portfolio securities regardless of how long they have been
held by the Fund, it is anticipated that the Fund's annual portfolio turnover
rate will not exceed 100%. A rate of 100% could occur for example, if all of the
securities held by the Fund were replaced within a period of one year. High
portfolio turnover rates can result in corresponding increases in brokerage
costs. For the fiscal year ending December 31, 1994 the portfolio turnover rate
was 63.04%.
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the direction of its
Board of Directors. There are currently ten Directors (of whom seven are
non-affiliated persons) who meet four times each year. The Statement of
Additional Information contains additional information regarding the directors
and officers of the Fund.
PORTFOLIO MANAGER
The Fund is managed by an investment management team. Alan H. Wapnick, Vice
President is the lead manager.
Mr. Wapnick is a Senior Vice President of LMC and Director of Domestic
Investment Equity Strategy and is responsible for portfolio management. He has
25 years investment experience. Prior to joining LMC in 1986, Mr. Wapnick was an
equity analyst with Merrill Lynch, J. & W. Seligman, Dean Witter and most
recently Union Carbide Corporation. Mr. Wapnick is a graduate of Dartmouth
College and received a Master's Degree in Business Administration from Columbia
University.
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation, ("LMC") P.O. Box 1515/Park 80 West Plaza
Two, Saddle Brook, New Jersey 07663, is the investment adviser of the Fund.
Lexington Funds Distributor, Inc. ("LFD") is the distributor of shares of the
Fund.
LMC, established in 1938, currently manages over $3.8 billion in assets. LMC
serves as investment adviser to other investment companies and private and
institutional investment accounts. Included among these clients are persons and
organizations which own significant amounts of capital stock of LMC's parent.
The clients pay fees which LMC considers comparable to the fees paid by
similarly served clients.
LMC is paid an investment advisory fee at the annual rate of 0.75% of the
average daily net assets of the Fund up to $100 million and 0.60% of such assets
in excess of $100 million up to $150 million. For the fiscal year ended December
31, 1994, the Fund paid advisory fees to LMC of $947,752.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
LMC and LFD are wholly-owned subsidiaries of Piedmont Management Company
Inc., a Delaware corporation with offices at 80 Maiden Lane, New York, New York
10038. Descendants of Lunsford Richardson, Sr., their spouses, trusts and other
related entities have a majority voting control of outstanding shares of
Piedmont Management Company Inc. See "Investment Adviser and Distributor" in the
Statement of Additional Information.
HOW TO PURCHASE SHARES
Initial Investment-Minimum $1,000. By Mail: Send a check payable to Lexington
Growth and Income Fund, Inc., along with a completed New Account Application to
State Street Bank and Trust Company (the "Agent"). See the back cover of this
Prospectus for the Agent's address.
5
<PAGE>
Subsequent Investments-Minimum $50. By Mail: Send a check payable to Lexington
Growth and Income Fund, Inc., to the Agent, accompanied by either the detachable
form which is part of the confirmation of a prior transaction or a letter
indicating the dollar amount of the investment and identifying the Fund, account
number and registration.
Broker-Dealers: You may invest in shares of the Fund through broker-dealers who
are members of the National Association of Securities Dealers, Inc., and other
financial institutions and who have selling agreements with LFD. Broker-dealers
and financial institutions who process such purchase and sale transactions for
their customers may charge a transaction fee for these services. The fee may be
avoided by purchasing shares directly from the Fund.
The Open Account: By investing in the Fund, a shareholder appoints the Agent, as
his agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares (see "Dividend, Distribution and Reinvestment
Policy"). Stock certificates will be issued for full shares only when requested
in writing. Unless payment for shares is made by certified or cashier's check or
federal funds wire, certificates will not be issued for 30 days. In order to
facilitate redemptions and transfers, most shareholders elect not to receive
certificates.
After an Open Account is established, payments can be provided for by
"Lex-O-Matic" or other authorized automatic bank check program accounts (checks
drawn on the investor's bank periodically for investment in the Fund). Automatic
Investing Plan with "Lex-O-Matic". A shareholder may arrange to make additional
purchases of shares automatically on a monthly or quarterly basis. The
investments of $50 or more are automatically deducted from a checking account on
or about the 15th day of each month. The institution must be an Automated
Clearing House (ACH) member. Should an order to purchase shares of a fund be
cancelled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.
On payroll deduction accounts administered by a employer and on payments
into qualified pension or profit sharing plans and other continuing purchase
programs, there are no minimum purchase requirements.
Determination of Net Asset Value: The net asset value of Fund shares is
determined at the official closing time of the New York Stock Exchange each day
that such Exchange is open for trading. In determining net asset value,
portfolio securities listed on a national securities exchange are taken at their
sales price on such exchange as of such time; if no sales price is reported, the
mean of the last bid and asked price is used. For over-the-counter securities
the mean of the latest bid and asked prices is used. Securities for which there
are no current bid and asked prices, and any other assets of the Fund for which
there is no readily available market, shall be valued by Fund officers in good
faith using methods adopted by the Fund's Board of Directors. Repurchase
agreements and certificates of deposit are stated at cost. In order to determine
net asset value per share, the aggregate value of portfolio securities is added
to the value of the Fund's other assets, such as cash and receivables; the total
of the assets thus obtained, less liabilities, is then divided by the number of
shares outstanding.
Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss the Fund reserves the right to
redeem shares owned by the purchaser, seek reimbursement directly from the
purchaser and may prohibit or restrict the purchaser in placing future orders in
any of the Lexington Funds.
The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.
Account Statements: The Agent will send shareholders either purchasing or
redeeming shares of the Fund, a confirmation of the transaction indicating the
date the purchase or redemption was accepted, the number of shares purchased or
redeemed, the
6
<PAGE>
HOW TO REDEEM SHARES
purchase or redemption price per share, and the amount purchased or redemption
proceeds. A statement is also sent to shareholders whenever a distribution is
paid, or when a change in the registration, address, or dividend option occurs.
Shareholders are urged to retain their account statements for tax purposes.
By Mail: Send to the Agent (see the back cover of this Prospectus for the
address): (1) a written request for redemption, signed by each registered owner
exactly as the shares are registered including the name of the Fund, account
number and exact registration; (2) stock certificates for any shares to be
redeemed which are held by the shareholder; (3) signature guarantees, when
required, and (4) the additional documents required for redemptions by
corporations, executors, administrators, trustees, and guardians. Redemptions by
mail will not become effective until all documents in proper form have been
received by the Agent. If a shareholder has any questions regarding the
requirements for redeeming shares, he should call the Fund at the toll free
number on the back cover prior to submitting a redemption request. If a
redemption request is sent to the Fund in New Jersey, it will be forwarded to
the Agent and the effective date of redemption will be the date received by the
Agent.
Checks for redemption proceeds will normally be mailed within seven days,
but will not be mailed until all checks in payment for the shares to be redeemed
have been cleared.
Signature Guarantee: Signature guarantees are required in connection with (a)
redemptions by mail involving $10,000 or more; (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owners; (c) changes in instructions as to where the
proceeds of redemptions are to be sent, and (d) share transfer requests.
The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.
With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") specifying the total number
of shares to be redeemed, or (c) on all stock certificates tendered for
redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power.
Redemption Price: The redemption price will be the net asset value per share of
the Fund next determined after receipt by the Agent of a redemption request in
proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information).
The right of redemption may be suspended (a) for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
("SEC") determines that trading on the Exchange is restricted, (b) when there is
an emergency as determined by the SEC as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (c) for such other periods as the SEC may
by order permit for the protection of shareholders of the Fund. Due to the
proportionately high cost of maintaining smaller accounts, the Fund reserves the
right to redeem all shares in an account with a value of less than $500 (except
retirement plan accounts) and mail the proceeds to the shareholder. Shareholders
will be notified before these redemptions are to be made and will have 30 days
to make an additional investment to bring their accounts up to the required
minimum.
SHAREHOLDER SERVICES
Transfer: Shares of the Fund may be transferred to another owner. A signature
guarantee of the registered owner is required on the letter of instruction or
accompanying stock power.
7
<PAGE>
Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.
Group Sub-Accounting: To minimize recordkeeping by fiduciaries, corporations,
and certain other investors, the minimum initial investment may be waived.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share next determined at the
time of the exchange. In the event shares of one or more of these funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the fifth business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.
The Lexington Funds currently available for exchange are:
LEXINGTON GLOBAL FUND, INC. (NASDAQ Symbol: LXGLX)/Seeks long-term growth of
capital primarily through investment in common stocks of companies
domiciled in foreign countries and the United States.
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)/Seeks
long-term growth of capital primarily through investment in equity
securities of companies domiciled in, or doing business in, emerging
countries.
LEXINGTON INTERNATIONAL FUND, INC. (NASDAQ Symbol: LEXIX)/Seeks long-term growth
of capital through investment in common stocks of companies domiciled
in foreign countries. Shares of the Fund are not presently available
for sale in Vermont.
LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)/Seeks long-term
capital growth and income through investment in an equal number of
shares of the common stocks of a fixed list of American blue chip
corporations.
LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)/Seeks long-term
capital appreciation through investments in stocks of large, ably
managed and well financed companies. Income is a secondary objective.
LEXINGTON GOLDFUND, INC. (NASDAQ Symbol: LEXMX)/Seeks capital appreciation and
such hedge against loss of buying power as may be obtained through
investment in gold bullion and equity securities of companies engaged
in mining or processing gold throughout the world. Shares are not
presently available for sale in Wisconsin.
LEXINGTON CONVERTIBLE SECURITIES FUND. (NASDAQ Symbol: CNCVX)/Seeks total return
by providing capital appreciation, current income and conservation of
capital through investments in a diversified portfolio of securities
convertible into shares of common stock. Shares of the Fund are not
presently available for sale in Vermont.
LEXINGTON GNMA INCOME FUND, INC. (NASDAQ Symbol: LEXNX)/Seeks a high level of
current income, consistent with liquidity and safety of principal,
through investment primarily in mortgage-backed GNMA Certificates.
LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)/Seeks high current
income by investing in a combination of foreign and domestic
high-yield, lower rated debt securities. Capital appreciation is a
secondary objective.
LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX)/Seeks a high level of
current income consistent with preservation of capital and liquidity
through investments in interest bearing short term money market
instruments.
8
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC. (NASDAQ Symbol: LTFXX)/Seeks current income
exempt from Federal income taxes while maintaining liquidity and
stability of principal through investment in short-term municipal
securities.
LEXINGTON SHORT-INTERMEDIATE GOVERNMENT SECURITIES FUND, INC. (NASDAQ Symbol:
LSGXX)/Seeks current income as is consistent with preservation of
capital by investing in a portfolio of U.S. Government securities.
Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired.
If an exchange involves investing in a Lexington Fund not already owned and
a new account has to be established, the dollar amount exchanged must meet the
initial investment of the Fund being purchased. If, however, an account already
exists in the Fund being bought, there is a $500 minimum exchange required.
Shareholders must provide the account number of the existing account.
Any exchange between mutual funds is, in effect, a redemption of shares in
one Fund and a purchase in the other Fund. Shareholders should consider the
possible tax effects of an exchange.
TELEPHONE EXCHANGE PROVISIONS-Exchange instructions may be given in writing or
by telephone. Telephone exchanges may only be made if a Telephone Authorization
form has been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of 7 days have elapsed from the date of a
previous exchange. Exchanges may not be made until all checks in payment for the
shares to be exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at the Agent;
shares held in certificate form by the shareholder cannot be included. However,
outstanding certificates can be returned to the Agent and qualify for these
services. Any new account established with the same registration will also have
the privilege of exchange by telephone in the Lexington Funds.
All accounts involved in a telephonic exchange must have the same
registration and dividend option as the account from which the shares were
transferred and will also have the privilege of exchange by telephone in the
Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds as the true and lawful attorney to surrender
for redemption or exchange any and all non-certificated shares held by the Agent
in account(s) designated, or in any other account with the Lexington Funds,
present or future, which has the identical registration with full power of
substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, nor the Fund(s) will be liable for any loss,
expense or cost arising out of any requests effected in accordance with this
authorization which would include requests effected by imposters or persons
otherwise unauthorized to act on behalf of the account. LFD, the Agent and the
Fund, will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The following identification procedures may include, but are not
limited to, the following: account number, registration and address, taxpayer
identification number and other information particular to the account. In
addition, all exchange transactions will take place on recorded telephone lines
and each transaction will be confirmed in writing by the Fund. LFD reserves the
right to cease to act as agent subject to the above appointment upon thirty (30)
days' written notice to the address of record. If other than an individual, it
is certified that certain persons have been duly elected and are now legally
holding the titles given and that the said corporation, trust, unincorporated
association, etc. is duly organized and existing and has power to take action
called for by this continuing Authorization.
9
<PAGE>
Exchange Authorization forms, Telephone Authorization forms and prospectuses
of the other funds may be obtained from LFD.
The Distributor has made arrangements with certain dealers to accept
instructions by telephone to exchange shares of the Fund for shares of one of
the other Lexington funds at net asset value as described above. Under this
procedure, the dealer must agree to indemnify the Distributor and the Lexington
funds from any loss or liability that any of them might incur as a result of the
acceptance of such telephone exchange orders. A properly signed Exchange
Authorization must be received by the Distributor within five days of the
exchange request. In each such exchange, the registration of the shares of the
fund being acquired must be identical to the registration of the shares of the
fund exchanged. Shares in certificate form are not eligible for this type of
exchange. LFD reserves the right to reject any telephone exchange request. Any
telephone exchange orders so rejected may be processed by mail.
This exchange offer is available only in states where shares of the fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers a Prototype Pension and Profit Sharing Plan, including a
Keogh Plan, IRA's, SEP-IRA's and IRA Rollover Accounts, 401(k) Salary Reduction
Plans, Section 457 Deferred Compensation Plans and 403(b)(7) Plans. Plan support
services are available through the Shareholder Services Department of LMC at
1-800-526-0056. (See "Tax-Sheltered Retirement Plans" in the Statement of
Additional Information.)
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to pay quarterly dividends from investment income after the
close of each quarter, if earned and as declared by its Board of Directors. The
Board of Directors may, at its discretion, elect to retain or declare and pay
distributions from any realized security profits.
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies the Agent in writing that he
wants to receive his payments in cash. This request must be received by the
Agent at least seven days before the dividend record date. Upon receipt by the
Agent of such written notice, all further payments will be made in cash until
written notice to the contrary is received. An account of such shares owned by
each shareholder will be maintained by the Agent. Shareholders whose accounts
are maintained by the Agent will have the same rights as other shareholders with
respect to shares so registered (see "How to Purchase Shares-The Open Account").
DISTRIBUTION PLAN
The Board of Directors of the Fund has adopted a Distribution Plan (the
"Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940,
after having concluded that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan provides that the Fund may pay
distribution fees, including payments to the Distributor, at an annual rate not
to exceed 0.25% of its average daily net assets for distribution services.
Distribution payments will be made as follows: 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
10
<PAGE>
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. 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. LMC, at no additional cost to the Fund, may
pay to Shareholder Service Agents, additional amounts from past profits for
administrative services.
TAX MATTERS
The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification of
assets, distribution of income and sources of income. It is the Fund's policy to
distribute to shareholders all of its investment income (net of expenses) and
any capital gains (net of capital losses) so that, in addition to satisfying the
distribution requirement of Subchapter M, the Fund will not be subject to
federal income tax or the 4% excise tax.
Distributions by the Fund of its net investment income and the excess, if
any, of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. These distributions are treated as
dividends for federal income tax purposes, but in any year only a portion
thereof (which cannot exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund during the year) may qualify for the
70% dividends-received deduction for corporate shareholders. Because the Fund's
investment income may include interest and dividends from foreign corporations
and the Fund may have short-term capital gains, less than 100% of the ordinary
income dividends paid by the Fund may qualify for the dividends-received
deduction. Distributions by the Fund of the excess, if any, of its net long-term
capital gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder held his shares.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by the
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made or deemed made
during the year will be sent to shareholders promptly after the end of each
year. Shareholders purchasing shares of the Fund just prior to the ex-dividend
date will be taxed on the entire amount of the dividend received, even though
the net asset value per share on the date of such purchase reflected the amount
of such dividend.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the back-up withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. In order to avoid this back-up withholding, a
shareholder must provide the Fund with a correct taxpayer identification number
(which for most individuals is their Social Security number) or certify that it
is a corporation or otherwise exempt from or not subject to back-up withholding.
The new account application included with this Prospectus provides for
shareholder compliance with these certification requirements.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information
11
<PAGE>
only, a prospective shareholder should also review the more detailed discussion
of federal income tax considerations relevant to the Fund that is contained in
the Statement of Additional Information. In addition, each prospective
shareholder should consult with his own tax adviser as to the tax consequences
of investments in the Fund, including the application of state and local taxes
which may differ from the federal income tax consequences described above.
PERFORMANCE CALCULATION
The Fund will calculate performance on a total return basis for various
periods. The total return basis combines principal and dividend income changes
for the periods shown. Principal changes are based on the difference between the
beginning and closing net asset values for the period and assume reinvestment of
dividends paid by the Fund. Dividends are comprised of net realized capital
gains and net investment income.
Performance will vary from time to time and past results are not necessarily
representative of future results. It should be remembered that performance is a
function of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index and Standard & Poor's 500 Composite Stock Price Index.
Such comparative performance information will be stated in the same terms in
which the comparative data and indices are stated.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the Custodian for the Funds' portfolio
securities including those to be held by foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the SEC and for the Fund's domestic securities and other assets.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, is the transfer agent and dividend disbursing agent for the Fund. Neither
Chase Manhattan Bank, N.A. nor State Street Bank and Trust Company have any part
in determining the investment policies of the Fund or in determining which
portfolio securities are to be purchased or sold by the Fund or in the
declaration of dividends and distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been
selected as independent auditors for the Fund for the fiscal year ending
December 31, 1995.
OTHER INFORMATION
The Fund is an open end, diversified management investment company. The Fund
was originally organized as a New Jersey corporation on February 11, 1959 with
10,000,000 shares of capital stock, $1.00 par value. The Fund reorganized as a
corporation under the laws of the State of Maryland on May 11, 1988. The Fund,
formerly known as Lexington Research Fund, Inc. adopted its present name on
April 22, 1991. The Fund has authorized capital of 500,000,000 shares of common
stock, $0.001 par value. Each share of common stock has one vote and shares
equally in dividends and distributions when and if declared by the Fund and in
the
12
<PAGE>
Fund's net assets upon liquidation. All shares, when issued, are fully paid and
non-assessable. There are no preemptive, conversion or exchange rights. Fund
shares do not have cumulative voting rights and, as such, holders of at least
50% of the shares voting for Directors can elect all Directors and the remaining
shareholders would not be able to elect any Directors.
The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
A Registration Statement (herein called the "Registration Statement"), of
which this Prospectus is a part, has been filed with the Securities and Exchange
Commission, Washington, D.C. under the Securities Act of 1933, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Fund's
official sales literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund. This Prospectus does not
constitute an offer in any State in which, or to any person to whom, such
offering may not lawfully be made. A "Statement of Additional Information," to
which reference is made in this Prospectus, provides a further discussion of
certain areas in the Prospectus and other matters which may be of interest to
some investors and is available by request without cost as indicated herein. The
Prospectus and the Statement of Additional Information omit certain information
contained in the Registration Statement, to which reference is made, filed with
the SEC. Items which are thus omitted, including contracts and other documents
referred to or summarized herein and therein, may be obtained from the SEC upon
payment of the prescribed fees.
13
<PAGE>
-----------------
L E X I N G T O N
-----------------
-----------------
LEXINGTON
GROWTH
AND
INCOME
FUND, INC.
No sales charge
No redemption fee
Free telephone
exchange privilege
-----------------
The Lexington Group
of
No-Load
Investment Companies
-----------------
P R O S P E C T U S
MAY 1, 1995
-----------------
Investment Adviser
- ------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Distributor
- ------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
All shareholder requests for services of any kind should be
sent to:
Transfer Agent
- ------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
or call toll free:
Service: 1-800-526-0056
24 Hour Account Information:1-800-526-0052
Table of Contents Page
- ------------------------------------------------------------
Fee Table................................................ 2
Financial Highlights..................................... 2
Description of the Fund.................................. 3
Investment Objective..................................... 3
Investment Policy and Restrictions....................... 3
Portfolio Turnover....................................... 5
Management of the Fund................................... 5
Portfolio Manager........................................ 5
Investment Adviser, Distributor and Administrator........ 5
How to Purchase Shares................................... 5
How to Redeem Shares..................................... 6
Shareholder Services..................................... 7
Exchange Privilege....................................... 7
Tax-Sheltered Retirement Plans........................... 10
Dividend, Distribution and Reinvestment Policy........... 10
Distribution Plan........................................ 10
Tax Matters.............................................. 10
Performance Calculation.................................. 11
Custodian, Transfer Agent and
Dividend Disbursing Agent.............................. 12
Counsel and Independent Auditors......................... 12
Other Information........................................ 12
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1995
This statement of additional information which is not a prospectus,
should be read in conjunction with the current prospectus of Lexington
Growth and Income Fund, Inc. (the "Fund") dated May 1, 1995, as it may be
revised from time to time. To obtain a copy of the Fund's prospectus at no
charge, please write to the Fund at P.O. Box 1515/Park 80 West - Plaza Two,
Saddle Brook, New Jersey 07663 or call the following toll-free numbers:
Shareholder Services: 1-800-526-0056
24 Hour Account Information: 1-800-526-0052
Lexington Management Corporation ("LMC") serves as the Fund's
investment adviser. Lexington Funds Distributor, Inc. ("LFD") is the Fund's
distributor.
TABLE OF CONTENTS
Investment Policy and Restrictions . . . . . . . . . . . . . . . . . . 2
Investment Adviser, Distributor and Administrator. . . . . . . . . . . 3
Portfolio Turnover and Brokerage Allocations . . . . . . . . . . . . . 5
Tax Sheltered Retirement Plans . . . . . . . . . . . . . . . . . . . . 5
Dividend, Distribution and Reinvestment Policy . . . . . . . . . . . . 6
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Performance Calculation. . . . . . . . . . . . . . . . . . . . . . . .13
Custodian, Transfer Agent and Dividend Disbursing Agent. . . . . . . .14
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . .14
1
<PAGE>
INVESTMENT POLICY AND RESTRICTIONS
The Fund's principal investment objective is long term appreciation
of capital. Income return is a secondary objective. The Fund shall not:
(i) issue senior securities; (ii) underwrite securities of other issuers;
(iii) purchase or sell real estate, 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); (iv) 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 ivestment 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 10% of the Fund's assets may be invested
in repurchase agreements which mature in more than seven days; (v) purchase
the securities of another investment company or investment trust except in
the open market where no profit results to a sponsor or dealer, other than
the customary broker's commission; (vi) purchase any security on margin or
effect a short sale of a security; (vii) buy securities from or sell
securities to any of its officers and directors of the investment adviser
or principal distributor as principal; (viii) contract to sell any security
or evidence of interest therein except to the extent that the same shall be
owned by the Fund; (ix) retain securities of an issuer when one or more of
the officers and directors of the Fund or the investment adviser or a person
owning more than 10% of the stock of either, own beneficially more than 0.5%
of the securities of such issuer and the persons owning more than 0.5% of
such securities together own beneficially more than 5% of the securities of
such issuer; (x) invest more than 5% of the value of its total assets in the
securities of any one issuer nor acquire more than 10% of the outstanding
voting securities of any one issuer; (xi) invest in companies for the
purpose of exercising management or control; or (xii) concentrate its
investments in a particular industry; thus the Fund will not purchase a
security if the immediate effect of such purchase would be to increase the
Fund's holdings in such industry above 25% of the Fund's assets.
The Fund shareholder vote required for modification of its investment
policies or restrictions is the lesser of: (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% are present
or represented by proxy; or (b) more than 50% of the voting securities.
In addition to the above fundamental investment restrictions, the Fund
has undertaken not to: a) invest an aggregate of more than 5% of its total
assets in the securities of unseasoned issuers and equity securities of
issuers which are not readily marketable; b) purchase any class of
securities of an issuer if such purchase would cause the Fund to own at the
time of the purchase more than 10% of any such class of securities of an
issuer; c) invest in puts, calls, straddles, spreads, and any combination
thereof; d) invest in interests in oil, gas or other mineral exploration or
development programs; or e) pledge, mortgage or hypothecate the assets of
the Fund to an extent greater than 15% of the gross assets of the Fund taken
at cost.
The Fund has authority to borrow money from a bank not in excess of
the lesser of: (a) 5% of the gross assets of the Fund at the current market
value at the time of such borrowing; or (b) 10% of the gross assets of the
Fund taken at cost. Any such borrowing may be undertaken only as a
temporary measure for extraordinary or emergency purposes. This borrowing
power has not been exercised by the Fund's management.
Although the Fund has the right to pledge, mortgage or hypothecate its
assets, in order to comply with a state statute, the Fund will not, as a
matter of operating policy while offering shares in such state, pledge,
mortgage or hypothecate its portfolio securities to the extent that at any
time the percentage of pledged securities will exceed 10% of the offering
price of the Fund's shares.
2
<PAGE>
The Fund's investment portfolio may include repurchase agreements
("repos") with banks and dealers in U.S. Government securities. A
repurchase agreement involves the purchase by the Fund of an investment
contract from a bank or a dealer in U.S. Government securities which
contract is secured by debt securities whose value is equal to or greater
than the value of the repurchase agreement including the agreed upon
interest. The agreement provides that the institution will repurchase the
underlying securities at an agreed upon time and price. The total amount
received on repurchase would exceed the price paid by the Fund, reflecting
an agreed upon rate of interest for the period from the date of the
repurchase agreement to the settlement date, and would not be related to the
interest rate on the underlying securities. The difference between the
total amount to be received upon the repurchase of the securities and the
price paid by the Fund upon their acquisition is accrued daily as interest.
If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated
with changes in the market value of the collateral securities. The Fund
intends to limit repurchase agreements to transactions with institutions
believed by LMC to present minimal credit risk. The 5% diversification
limitation set forth in subparagraph (x) above does not apply to obligations
issued or guaranteed as to principal and interest by the United States
Government, nor does it apply to bank certificates of deposit, which are not
classified by the Fund as securities for the purposes of this limitation.
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
LMC, P.O. Box 1515/Park 80 West Plaza Two, Saddle Brook, N.J. 07663,
is the investment adviser to the Fund, and, as such, advises and makes
recommendations to the Fund with respect to its investments and investments
policies.
LMC is paid an investment advisory fee at the annual rate of 0.75% of
the net assets of the Fund up to $100 million; 0.60% of such value in excess
of $100 million up to $150 million; 0.50% of such value in excess of $150
million up to $250 million; and 0.40% of such value in excess of $250
million. This fee is computed on the basis of the Fund's daily net assets
and is payable on the last business day of each month.
Under the terms of the advisory agreement LMC also pays the Fund's
expenses for office rent, utilities, telephone, furniture and supplies
utilized for the Fund's principal office and the salaries and payroll
expense of officers and directors of the Fund who are employees of LMC or
its affiliates in carrying out its duties under the investment advisory
agreement. The Fund pays all its other expenses, including custodian and
transfer agent fees, legal and registration fees, audit fees, printing of
prospectuses, shareholder reports and communications required for regulatory
purposes or for distribution to existing shareholders, computation of net
asset value, mailing of shareholder reports and communications, portfolio
brokerage, taxes and independent directors' fees, and furnishes LFD, at
printers overrun cost paid by LFD, such copies of its prospectus, annual,
semi-annual and other reports and shareholder communication as may be
reasonably required for sales purposes.
LMC must also reimburse the Fund to the extent that all of the Fund's
other expenses (including the investment advisory fee) exclusive of interest
and taxes exceeding 2.5% of the first $30 million of the Fund's average
daily net assets, plus 2.0% of the next $70 million, plus 1.5% of the Fund's
average daily net assets of $100 million. In the event that the Fund's
expenses exceed such limitation at any month end, the investment advisory
fee paid by the Fund for such month is reduced accordingly. For the fiscal
year ended December 31, 1994 no expense reimbursement was required.
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<PAGE>
LMC's services are provided and its investment advisory fee is paid
pursuant to an agreement which will automatically terminate if assigned and
which may be terminated by either party upon 60 days' notice. The terms of
the agreement and any renewal thereof must be approved annually by a
majority of the Fund's Board of Directors, including a majority of directors
who are not parties to the Agreement or "interested persons" of such
parties, as such term is defined under the Investment Company Act of 1940,
as amended.
LMC serves as investment adviser to other investment companies and
private and institutional investment accounts. Included among these clients
are persons and organizations which own significant amounts of capital stock
of LMC's parent (see below). These clients pay fees which LMC considers
comparable to the fee levels for similarly served clients.
LMC's accounts are managed independently with reference to the
applicable investment objectives and current security holdings, but on
occasion more than one fund or counsel account may seek to engage in
transactions in the same security at the same time. To the extent
practicable, such transactions will be effected on a pro-rata basis in
proportion to the respective amounts of securities to be bought and sold for
each portfolio, and the allocated transactions will be averaged as to price.
While this procedure may adversely affect the price or volume of a given
Fund transaction, LMC believes that the ability of the Fund to participate
in combined transactions may generally produce better executions overall.
Fund Advisory Fee Paid to LMC:
Fiscal Year Investment Advisory
Ended Fees Paid to LMC
----------- -------------------
1992 $874,940
1993 950,002
1994 947,752
Of the directors, executive officers or employees ("affiliated
persons") of the Fund, Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor,
Lavery, Luehs, Petruski and Wapnick and Mmes. Carnicelli, Carr, Curcio,
Gilfillan and Mosca (see "Management of the Fund") may also be deemed
affiliates of LMC by virtue of being officers, directors or employees
thereof. As of April 3, 1995, all officers and directors of the Fund as a
group owned of record and beneficially less than 1% of the capital stock of
the Fund.
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited
to, maintaining general ledger accounts, regulatory compliance, preparation
of financial information for semiannual and annual reports, preparing
registration statements, calculating net asset values, shareholder
communications and supervision of the custodian of, transfer agent and
provides facilities for such services. The Fund shall reimburse LMC for its
actual cost in providing such services, facilities and expenses.
LMC and LFD are wholly-owned subsidiaries of Piedmont Management
Company Inc., a Delaware corporation with offices at 80 Maiden Lane, New
York, NY 10038. Descendants of Lunsford Richardson, Sr., their spouses,
trusts and other related entities have a majority voting control of
outstanding shares of Piedmont Management Company Inc.
LFD also serves as distributor for Fund shares under a Distribution
Agreement which is subject to annual approval by a majority of the Fund's
Board of Directors, including a majority of directors who are not
"interested persons".
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<PAGE>
PORTFOLIO TURNOVER AND BROKERAGE ALLOCATIONS
In the selection of various securities, long-term potential will take
precedence over short term market fluctuations. While management maintains
the flexibility to sell portfolio securities regardless of how long they
have been held by the Fund, it is anticipated that the Fund's annual
portfolio turnover rate will not exceed 100%. A rate of 100% could occur
for example if all of the securities held by the Fund were replaced within
a period of one year. High portfolio turnover rates can result in
corresponding increases in brokerage costs.
Portfolio turnover is calculated by dividing the dollar value of the
portfolio purchases or sales during the year, whichever is less, by the
securities or short term notes. The turnover rate for each of the last
three fiscal years was: 1992, 88.13%; 1993, 93.90% and 1994, 63.04%.
The Fund's foremost consideration in selecting a broker is to obtain
the best price and execution of orders. From time to time, the Fund may
seek executions of stock exchange listed stocks on markets other than the
stock exchanges on a net or commission basis. In over-the-counter
transactions, orders are placed with the principal market maker for the
security being purchased or sold, unless a better price could be obtained
by placing the order with another broker.
Persons responsible for brokerage allocation are not obligated to
obtain the least expensive execution. The commission paid to a broker is
only part of the overall cost of an execution and accordingly, the Fund does
not intend to apply a rigid commission formula in determining execution
costs. The Fund shall not pay an exchange member, broker or dealer a
commission for effecting a securities transaction in excess of the amount
of commission another member, broker or dealer would have charged in
effecting that transaction unless LMC, in connection with such transaction,
shall make a good faith determination that the amount of commission charged
was reasonable in relation to the value of the brokerage and research
services provided by such member, broker or dealer, viewed in terms of
either that particular transaction or the Fund's overall transactions.
Brokerage transactions for the Fund have not been allocated to brokers
affiliated with Fund officers or directors or its investment adviser.
Brokerage commissions paid for each of the last three fiscal years were:
1992 $348,298; 1993, $406,084 and 1994, $209,559.
TAX SHELTERED RETIREMENT PLANS
The Fund makes available a variety of Prototype Pension and Profit
Sharing Plans including a 401(k) Salary Reduction Plan and a 403(b)(7) Plan.
Plan services are available by contacting the Shareholder Services
Department of the Distributor at 1-800-526-0056.
INDIVIDUAL RETIREMENT ACCOUNT (IRA): Individuals may make tax
deductible contributions to their own Individual Retirement Accounts
established under Section 408 of the Internal Revenue Code (the "Code").
Married investors filing a joint return neither of whom is an active
participant in an employer sponsored retirement plan, or who have an
adjusted gross income of $40,000 or less ($25,000 or less for single
taxpayers) may continue to make a $2,000 ($2,250 for spousal IRA's) annual
deductible IRA contribution. For adjusted gross incomes over $40,000
($25,000 for single taxpayers), the IRA deduction limit is generally phased
out ratably over the next $10,000 of adjusted gross income, subject to a
minimum $200 deductible contribution. Investors who are not able to deduct
a full $2,000 ($2,250 spousal) IRA contribution because of the limitations
may make a non-deductible contribution to their IRA to the extent a
deductible contribution is not allowed. Federal income tax on accumulations
earned on non-deductible contributions is deferred until such time as these
amounts are deemed distributed to an investor. Rollovers are also permitted
under the Plan. The Disclosure statement required by the Internal Revenue
Service ("IRS") is provided by the Fund.
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<PAGE>
The minimum initial investment to establish a tax-sheltered plan
through the Fund is $250 for both Keogh Plans and IRA Plans. Subsequent
investments are subject to a minimum of $50 for each account.
SELF-EMPLOYED RETIREMENT PLAN (HR-10): Self-employed individuals may
make tax deductible contributions to a prototype defined contribution
pension plan or profit sharing plan. There are, however, a number of
special rules which apply when self-employed individuals participate in such
plans. Currently purchase payments under a self-employed plan are
deductible only to the extent of the lesser of (i) $30,000 or (ii) 25% of
the individuals earned annual income (as defined in the Code) and in
applying these limitations not more than $200,000 of "earned income" may be
taken into account.
CORPORATE PENSION AND PROFIT SHARING PLANS: The Fund makes available
a Prototype Defined Contribution Pension Plan and a Prototype Profit Sharing
Plan.
All purchases and redemptions of Fund shares pursuant to any one of
the Fund's tax sheltered plans must be carried out in accordance with the
provisions of the Plan. Accordingly, all plan documents should be reviewed
carefully before adopting or enrolling in the plan. Investors should
especially note that a penalty tax of 10% may be imposed by the IRS on early
withdrawals under corporate, Keogh or IRA Plans. It is recommended by the
IRS that an investor consult a tax adviser before investing in the Fund
through any of these plans. An investor participating in any of the Fund's
special plans has no obligation to continue to invest in the Fund and may
terminate the Plan with the Fund at any time. Except for expenses of sales
and promotion, executive and administrative personnel, and certain services
which are furnished by LMC, the cost of the plans generally is borne by the
Fund; however, each IRA Plan is subject to an annual maintenance fee of
$10.00 charged by the Agent.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to pay quarterly dividends from investment income
after the close of each quarter, if earned and as declared by its Board of
Directors. The Board of Directors may, at its discretion, elect to retain
or declare and pay distributions from any realized security profits.
Any dividends and distribution payments will be reinvested at net
asset value, without sales charge, in additional full and fractional shares
of the Fund unless and until the shareholder notifies State Street Bank and
Trust Company (the "Agent") in writing that he wants to receive his payments
in cash. This request must be received by the Agent at least seven days
before the dividend record date. Upon receipt by the Agent of such written
notice, all further payments will be made in cash until written notice to
the contrary is received. An account of such shares owned by each
shareholder will be maintained by the Agent.
Shareholders whose accounts are maintained by the Agent will have the
same rights as other shareholders with respect to shares so registered (see
"How to Purchase Shares - The Open Account" in the Prospectus).
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<PAGE>
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which provides
that the Fund may pay distribution fees including payments to the
Distributor, at an annual rate not to exceed 0.25% of its average daily net
assets for distribution services.
Distribution payments will be made as follows: 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. 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.
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.
The Plan shall become effective upon approval of the Plan, the form
of 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 below), 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 1940 Act.
The 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 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. 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.
The 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 1940 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 1940 Act.
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 Qualified Directors then in office.
7
<PAGE>
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to
federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains
over capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code that are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within twelve months after the close of the
taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive
of certain gains on designated hedging transactions that are offset by
realized or unrealized losses on offsetting positions) from the sale or
other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, the Fund
may have to limit the sale of appreciated securities that it has held for
less than three months. However, the Short-Short Gain Test will not prevent
the Fund from disposing of investments at a loss, since the recognition of
a loss before the expiration of the three-month holding period is
disregarded for this purpose. Interest (including original issue discount)
received by the Fund at maturity or upon the disposition of a security held
for less than three months will not be treated as gross income derived from
the sale or other disposition of such security within the meaning of the
Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
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<PAGE>
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on
the disposition of a debt obligation denominated in a foreign currency or
an option with respect thereto (but only to the extent attributable to
changes in foreign currency exchange rates), and gain or loss recognized on
the disposition of a foreign currency forward contract, futures contract,
option or similar financial instrument, or of foreign currency itself,
except for regulated futures contracts or non-equity options subject to Code
Section 1256 (unless the Fund elects otherwise), will generally be treated
as ordinary income or loss.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain
(i.e., the excess of net long-term capital gain over net short-term capital
loss) for any taxable year, to elect (unless it has made a taxable year
election for excise tax purposes as discussed below) to treat all or any
part of any net capital loss, any net long-term capital loss or any net
foreign currency loss incurred after October 31 as if it had been incurred
in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a
regulated investment company. Under this test, at the close of each quarter
of the Fund's taxable year, at least 50% of the value of the Fund's assets
must consist of cash and cash items, U.S. Government securities, securities
of other regulated investment companies, and securities of other issuers (as
to which the Fund has not invested more than 5% of the value of the Fund's
total assets in securities of such issuer and as to which the Fund does not
hold more than 10% of the outstanding voting securities of such issuer), and
no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions
generally will be eligible for the dividends-received deduction in the case
of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to
98% of ordinary taxable income for the calendar year and 98% of capital gain
net income for the one-year period ended on October 31 of such calendar year
(or, at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company
is treated as having distributed any amount on which it is subject to income
tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain)
by the amount of any net ordinary loss for the calendar year; and (2)
exclude foreign currency gains and losses incurred after October 31 of any
year (or after the end of its taxable year if it has made a taxable year
election) in determining the amount of ordinary taxable income for the
current calendar year (and, instead, include such gains and losses in
determining ordinary taxable income for the succeeding calendar year).
9
<PAGE>
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise
tax. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments to make
sufficient distributions to avoid excise tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will qualify for the 70% dividends-
received deduction for corporate shareholders only to the extent discussed
below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to
distribute any such amounts. If net capital gain is distributed and
designated as a capital gain dividend, it will be taxable to shareholders
as long-term capital gain, regardless of the length of time the shareholder
has held his shares or whether such gain was recognized by the Fund prior
to the date on which the shareholder acquired his shares.
Conversely, if the Fund elects to retain its net capital gain, the
Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, it is expected that the Fund also will elect
to have shareholders of record on the last day of its taxable year treated
as if each received a distribution of his pro rata share of such gain, with
the result that each shareholder will be required to report his pro rata
share of such gain on his tax return as long-term capital gain, will receive
a refundable tax credit for his pro rata share of tax paid by the Fund on
the gain, and will increase the tax basis for his shares by an amount equal
to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally
available to corporations (other than corporations, such as S corporations,
which are not eligible for the deduction) to the extent of the amount of
qualifying dividends received by the Fund from domestic corporations for the
taxable year. A dividend received by the Fund will not be treated as a
qualifying dividend (1) if it has been received with respect to any share
of stock that the Fund has held for less than 46 days (91 days in the case
of certain preferred stock), excluding for this purpose under the rules of
Code Section 246(c)(3) and (4): (i) any day more than 45 days (or 90 days
in the case of certain preferred stock) after the date on which the stock
becomes ex-dividend and (ii) any period during which the Fund has an option
to sell, is under a contractual obligation to sell, has made and not closed
a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (2) to the extent that the Fund is under an obligation (pursuant to
a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property; or (3) to the extent
the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction
for a corporate shareholder may be disallowed or reduced (1) if the
corporate shareholder fails to satisfy the foregoing requirements with
respect to its shares of the Fund or (2) by application of Code Section
246(b) which in general limits the dividends-received deduction to 70% of
the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items).
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<PAGE>
Alternative minimum tax ("AMT") is imposed in addition to, but only
to the extent it exceeds, the regular tax and is computed at a maximum
marginal rate of 28% for noncorporate taxpayers and 20% for corporate
taxpayers on the excess of the taxpayer's alternative minimum taxable income
("AMTI") over an exemption amount. In addition, under the Superfund
Amendments and Reauthorization Act of 1986, a tax is imposed for taxable
years beginning after 1986 and before 1996 at the rate of 0.12% on the
excess of a corporate taxpayer's AMTI (determined without regard to the
deduction for this tax and the AMT net operating loss deduction) over $2
million. For purposes of the corporate AMT and the environmental superfund
tax (which are discussed above), the corporate dividends-received deduction
is not itself an item of tax preference that must be added back to taxable
income or is otherwise disallowed in determining a corporation's AMTI.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e.,
75% of the excess of a corporate taxpayer's adjusted current earnings over
its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on
such income. It is impossible to determine the effective rate of foreign
tax in advance since the amount of the Fund's assets to be invested in
various countries is not known.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital
to the extent of (and in reduction of) the shareholder's tax basis in his
shares; any excess will be treated as gain from the sale of his shares, as
discussed below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or
reinvested in additional shares of the Fund (or of another fund).
Shareholders receiving a distribution in the form of additional shares will
be treated as receiving a distribution in an amount equal to the fair market
value of the shares received, determined as of the reinvestment date. In
addition, if the net asset value at the time a shareholder purchases shares
of the Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the
assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable
to shareholders of record on a specified date in such a month will be deemed
to have been received by the shareholders (and made by the Fund) on December
31 of such calendar year if such dividends are actually paid in January of
the following year. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or deemed made)
during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of distributions and the proceeds of redemption of
shares, paid to any shareholder (1) who has provided either an incorrect tax
identification number or no number at all, (2) who is subject to backup
withholding by the IRS for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that
it is not subject to backup withholding or that it is a corporation or other
"exempt recipient."
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<PAGE>
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption
of shares of the Fund in an amount equal to the difference between the
proceeds of the sale or redemption and the shareholder's adjusted tax basis
in the shares. All or a portion of any loss so recognized may be disallowed
if the shareholder purchases other shares of the Fund within 30 days before
or after the sale or redemption. In general, any gain or loss arising from
(or treated as arising from) the sale or redemption of shares of the Fund
will be considered capital gain or loss and will be long-term capital gain
or loss if the shares were held for longer than one year. However, any
capital loss arising from the sale or redemption of shares held for six
months or less will be treated as a long-term capital loss to the extent of
the amount of capital gain dividends received on such shares. For this
purpose, the special holding period rules of Code Section 246(c)(3) and (4)
(discussed above in connection with the dividends-received deduction for
corporations) generally will apply in determining the holding period of
shares. Long-term capital gains of noncorporate taxpayers are currently
taxed at a maximum rate 11.6% lower than the maximum rate applicable to
ordinary income. Capital losses in any year are deductible only to the
extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000
of ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder"), depends on whether the
income from the Fund is "effectively connected" with a U.S. trade or
business carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding
tax at the rate of 30% (or lower treaty rate) upon the gross amount of the
dividend. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of the Fund,
capital gain dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends, and any gains realized upon the sale of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at
a reduced treaty rate) unless the shareholder furnishes the Fund with proper
notification of its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described herein.
Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued
thereunder as in effect on the date of this Statement of Additional
Information. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
12
<PAGE>
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from
the rules for U.S. federal income taxation described above. Shareholders
are urged to consult their tax advisers as to the consequences of these and
other state and local tax rules affecting investment in the Fund.
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of the Fund to
that of other mutual fund and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in
terms of total return. Under the rules of the Securities and Exchange
Commission ("SEC rules"), funds advertising performance must include total
return quotes calculated according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods at the end of
the 1, 5 and 10 year periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and
will cover one, five, and ten year periods or a shorter period dating from
the effectiveness of the Fund's Registration Statement. In calculating the
ending redeemable value, all dividends and distributions by the Fund are
assumed to have been reinvested at the net asset value as described in the
Prospectus on the reinvestment dates during the period. The total return,
or "T" in the formula above, is computed by finding the average annual
compounded rates of return over the 1, 5 and 10 year periods (or fractional
portion thereof) that would equate the initial amount invested to the ending
redeemable value. Any recurring account charges that might in the future
be imposed by the Fund would be included at that time. Lexington Growth and
Income Fund, Inc.'s total return for the 1,5 and 10 years ended December 31,
1994 is a follows:
Average Annual
Period Annual Return
------ -------------
1 year ended December 31, 1994 -3.11%
5 years ended December 31, 1994 +6.67%
10 years ended December 31, 1994 +11.38%
The Fund may also from time to time include in such advertising a
total return figure that is not calculated according to the formula set
forth above in order to compare more accurately the performance of the Fund
with other measures of investment return. For example, in comparing the
Fund's total return with data published by Lipper Analytical Services, Inc.,
or with the performance of the Standard & Poor's 500 Composite Stock Price
Index or the Dow Jones Industrial Average, the Fund calculates its aggregate
total return for the specified periods of time by assuming the reinvestment
of each dividend or other distribution at net asset value on the
reinvestment date. Percentage increases are determined by subtracting the
initial value of the investment from the ending value and by dividing the
remainder by the beginning value.
13
<PAGE>
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New
York 10036 has been retained to act as the Custodian for the Fund's
portfolio securities including those to be held by foreign banks and foreign
securities depositories which qualify as eligible foreign custodians under
the rules adopted by the S.E.C. and for the Fund's domestic securities and
other assets. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02181, has been retained to act as the transfer agent
and dividend disbursing agent. Neither Chase Manhattan Bank, N.A. nor State
Street Bank and Trust Company have any part in determining the investment
policies of the Fund or in determining which portfolio securities are to be
purchased or sold by the Fund or in the declaration of dividends and
distributions.
MANAGEMENT OF THE FUND
The Fund's directors and executive officers and their principal
occupations are:
*+ ROBERT M. DEMICHELE, President and Chairman. P.O. Box 1515 Saddle
Brook, N.J. 07663. Chairman and Chief Executive Officer, Lexington
Management Corporation; Chairman and Chief Executive Officer, Lexington
Funds Distributor, Inc.; President and Director, Piedmont Management
Company Inc. Director, Reinsurance Corporation of New York; Director,
Unione Italiana Reinsurance; Vice Chairman of Board of Trustees, Union
College; Director, Continental National Corporation; Director, The
Navigator's Group, Inc.; Chairman, Lexington Capital Management, Inc.;
Chairman, LCM Financial Services, Inc.; Director, Vanguard Cellular
Systems, Inc.; Chairman of the Board, Market Systems Research, Inc. and
Market Systems Research Advisors, Inc. (registered investment advisors).
Trustee, Smith Richardson Foundation.
+ BEVERLEY C. DUER, P.E., Director. 340 East 72nd Street, New York, N.Y.
Investments/Engineering Economics Consultant; formerly Manager of
Operations Research Department, CPC International, Inc.
*+ BARBARA M. EVANS, Director. 5 Fernwood Drive, Summit, N.J. 07901.
Private Investor. Prior to May 1989, Assistant Vice President and
Securities Analyst, Lexington Management Corporation; prior to March
1987, Vice President - Institutional Equity Sales, L.F. Rothschild,
Unterberg, Towbin.
*+ LAWRENCE KANTOR, Director and Vice President. P.O. Box 1515, Saddle
Brook, N.J. 07663. Executive Vice President, Managing Director and
Director, Lexington Management Corporation; Executive Vice President and
Director, Lexington Funds Distributor, Inc.
+ DONALD B. MILLER, Director. 3689 Quail Ridge Drive, Boyton Beach,
Florida 33436. Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds;
Director, Maguire Group of Connecticut; prior to January 1989,
President, C.E.O. and Director, Media General Broadcast Services
(advertising firm).
+ FRANCIS OLMSTED, Director, 50 Van Hooten Court, San Anselmo, California
94960. Private Investor; formerly Manager Commercial Development (West
Coast), Essex Chemical Corporation, Clifton, New Jersey (chemical
manufacturers).
14
<PAGE>
+ JOHN G. PRESTON, Director, 3 Woodfield Road, Wellesley, Massachusetts.
Associate Professor of Finance, Boston College, Boston Massachusetts.
+ MARGARET W. RUSSELL, Director, 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor, formerly Community Affairs Director, Union
Camp Corporation.
+ PHILIP C. SMITH, Director, 87 Lord's Highway, Weston, Connecticut
06883. Private Investor; Director, Southwest Investors Income Fund,
Inc., Fund of the Southwest, Inc., and Plimony Fund, Inc. (registered
investment companies) formerly, Chairman of the Board of Directors of
Yardley of London, Inc. (cosmetic manufacturer).
+ FRANCIS A. SUNDERLAND, Director, 309 Quito Place, Castle Rock, Co.
80104. Private Investor.
*+ ALAN H. WAPNICK, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President, Director of Domestic Equity Investment
Strategy, Lexington Management Corporation.
*+ LISA CURCIO,Vice President and Secretary. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President and Secretary, Lexington
Management Corporation; Vice President and Secretary, Lexington Funds
Distributor, Inc.
*+ RICHARD M. HISEY, Vice President and Treasurer. P.O. Box 1515, Saddle
Brook, N.J. 07663. Chief Financial Officer, Managing Director and
Director, Lexington Management Corporation; Chief Financial Officer,
Vice President and Director, Lexington Funds Distributor, Inc.; Chief
Financial Officer, Market Systems Research Advisors, Inc.
*+ RICHARD J. LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle
Brook, N.J. 07663. Senior Vice President, Lexington Management
Corporation; Vice President, Lexington Funds Distributor, Inc.
*+ JANICE A. CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+ CHRISTIE CARR, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to October 1992, Senior Accountant, KPMG Peat Marwick.
*+ SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook,
N.J. 07663.
*+ THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to November, 1993, Supervisor Investment Accounting,
Alliance Capital Management, Inc.
*+ SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to September 1990, Fund Accounting Manager, Lexington Group
of Investment Companies.
*+ ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to May 1994, Supervising Senior Accountant, NY Life
Securities. Prior to December 1990, Senior Accountant, Dreyfus
Corporation.
*+ PETER CORNIOTES, Assistant Secretary, P.O. Box 1515, Saddle Brook, N.J.
07663. Assistant Secretary, Lexington Management Corporation.
Assistant Secretary, Lexington Funds Distributor.
*+ ENRIQUE J. FAUST, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator, Lexington
Group of Investment Companies.
15
<PAGE>
* "Interested person" and/or "Affiliated person" of LMC as defined in
the Investment Company Act of 1940, as amended.
+ Messrs. Corniotes, DeMichele, Duer, Faust, Hisey, Kantor, Lavery,
Luehs, Miller, Olmsted, Petruski, Preston, Smith, Sunderland and Wapnick and
Mmes. Carnicelli, Carr, Curcio, Evans, Gilfillan, Mosca, and Russell hold
similar offices with some or all of the other registered investment
companies advised and/or distributed by Lexington Management Corporation and
Lexington Funds Distributor, Inc.
Directors of the Fund not employed by the Fund or its affiliates
receive an annual fee of $600 and a fee of $150 for each meeting attended
plus reimbursement of expenses for attendance at regular meetings. During
the fiscal year ended December 31, 1994, the aggregate remuneration paid by
the Fund to eight such Directors not employed by the Fund's affiliates was
$11,290.
Aggregate Total Compensation Number of
Compensation From Fund and Directorships in
Name of Director From Fund Fund Complex Fund Complex
- ---------------- ----------- ------------------ ----------------
Robert M. DeMichele 0 0 15
Beverley C. Duer $1350 $20,250 15
Barbara R. Evans 0 0 14
Lawrence Kantor 0 0 15
Donald B. Miller $1350 $20,250 14
Francis Olmsted $1350 $18,900 13
John G. Preston $1350 $20,250 14
Margaret Russell $1350 $18,900 13
Philip C. Smith $1350 $20,250 14
Francis A. Sunderland $1200 $16,800 13
16
<PAGE>
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
Page in the Financial
(a) Financial statements: Statements Exhibit
---------------------
Report of Independent Auditors 1
dated February 6, 1995
Statement of Net Assets (Including 2
the Portfolio of Investments) at
December 31, 1994 (1)
Statement of Assets and Liabilities 7
at December 31, 1994
Statement of Operations for the year 8
ended December 31, 1994 (2)
Statements of Changes in Net Assets for 9
the years ended December 31, 1994
and December 31, 1993
Notes to financial statements 10
Schedules II-VII and other Financial Statements, for which provisions
are made in the applicable accounting regulations of the Securities
and Exchange Commission, are omitted because they are not required
under the related instructions, they are inapplicable, or the required
information is presented in the financial statements or notes thereto.
(1) Includes the information required by Schedule I.
(2) Includes the information required by the Statement of
Realized Gain or Loss on Investments
<PAGE>
ITEM 24. Financial Statements and Exhibits - List
----------------------------------------
(b) Exhibits:
1. Articles of Incorporation - Filed 4/13/88 -
Incorporated by reference
2. By-Laws - Filed 4/13/88 - Incorporated by reference
3. Not Applicable
4. Stock Certificate Specimen - Filed 4/13/88 -
Incorporated by reference
5. Investment Advisory Agreement between Registrant
and Lexington Management Corporation -
Filed 3/13/92 - Incorporated by reference
6. Distribution Agreement between Registrant
and Lexington Funds Distributor, Inc. -
Filed 4/30/91 - Incorporated by reference
7. Not Applicable
8a. Form of Custodian Agreement between Filed electronically
Registrant and Chase Manhattan Bank, N.A.
8b. Transfer Agency Agreements between Registrant
and State Street Bank and Trust Company -
Filed 4/30/90 - Incorporated by reference
9. Form of Administrative Services Agreement Filed electronically
between Registrant and Lexington Management
Corporation
10. Opinion of Counsel as to Legality of Securities
being registered - Filed 5/26/72 -
Incorporated by reference
11. Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Form of Distribution Plan under Rule 12b-1
and Related Agreements - Filed 3/13/92 -
Incorporated by reference
16. Performance Calculation - Filed 4/25/89 -
Incorporated by reference
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or
indirectly controlled by or under common control with the
Registrant and as to each such person indicate (1) if a company,
the state or other sovereign power under the laws of which it is
organized, (2) the percentage of voting securities owned or other
basis of control by the person, if any, immediately controlling
it.
None.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the
number of record holders of each class of securities of the
Registrant.
The following information is given as of April 3, 1995:
Title of Class Number of Record Holders
-------------- ------------------------
Capital Stock 7,258
($0.001 par value)
Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified in
any manner against any liability which may be incurred in such
capacity, other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law
and the Company's By-Laws, the Company may indemnify any person
who was or is a director, officer or employee of the Company to
the maximum extent permitted by the Maryland General Corporation
Law; provided, however, that Company only as authorized in the
specific case upon a determination that indemnification of such
persons is proper in the circumstances. Such determination shall
be made (i) by the Board of Directors, by a majority vote of a
quorum which consists of directors who are neither "interested
persons" of Company as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or if a quorum of such directors so
directs by independent legal counsel in a written opinion. No
indemnification will be provided by the Company to any director
or officer of the Company for any liability by the Company or
Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or
employment of a substantial nature in which the investment
adviser of the Registrant, and each director, officer or partner
of any such investment adviser, is or has been, at any time
during the past two fiscal years, engaged for his own account or
in the capacity of director, officer, employee, partner or
trustee.
See Prospectus Part A and Statement of Additional
Information Part B ("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Short-Intermediate Government Securities Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Natural Resources Trust
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington Convertible Securities Fund
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
Lexington Corporate Leaders Trust Fund
<PAGE>
29 (b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ----------------- -------------------- ------------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa A. Curcio* Vice President and Secretary
Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer, Vice President and
Vice President & Director Treasurer
Lawrence Kantor* Executive Vice President, Director & Vice
General Manager & Director President
Richard Lavery* Vice President Vice President
Janice Violette* Assistant Treasurer None
(c)
Not Applicable.
- --------------
*P.O. Box 1515
Saddle Brook, New Jersey 07663
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document
required to be maintained by Section 31(a) of the 1940 Act and
the Rules (17 CFR 270, 31a-1 to 31a-3) promulgated thereunder,
furnish the name and address of each person maintaining physical
possession of each such account, book or other document.
The Registrant, Lexington Growth and Income Fund, Inc.,
Park 80 West - Plaza Two, Saddle Brook, New Jersey 07663 will
maintain physical possession of such of each such account, book
or other document of the Company, except for those maintained by
the Registrant's Custodian, Chase Manhattan Bank, N.A., 1211
Avenue of the Americas, New York, New York 10036, or Transfer
Agent, State Street Bank and Trust Company, c/o National
Financial Data Services, City Center Square, 1100 Main, Kansas
City, Missouri 64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B
of this Form (because the contract was not believed to be
material to a purchaser of securities of the Registrant) under
which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom for
the last three fiscal years.
None.
Item 32. Undertakings -
------------
The Registrant, Lexington Growth and Income Fund, Inc.,
undertakes to furnish a copy of the Fund's latest
annual report, upon request and without charge, to
every person to whom a prospectus is delivered.
<PAGE>
Registration No. 2-14767
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON GROWTH AND INCOME FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as
exhibits to this filing:
Financial Statements for the period ending December 31, 1994
Form of Custodian Agreement
Form of Administrative Services Agreement
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of independent auditors for the inclusion of their report herein
Article 6 Financial Data Schedule
Cover
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 the Registrant certifies
that it meets all of the requirements for effectiveness of this
amendment to the Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this
amendment to be signed on its behalf by the Undersigned,
thereunto duly authorized, in the City of Saddle Brook and State
of New Jersey, on the 25th day of April, 1995.
LEXINGTON GROWTH AND INCOME FUND, INC.
Robert M. DeMichele
________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
Robert M. DeMichele
__________________________ Chairman of the Board April 25, 1995
Robert M. DeMichele Principal Executive
Officer
Richard M. Hisey
__________________________ Principal Financial April 25, 1995
Richard M. Hisey and Accounting Officer
Lisa Curcio
__________________________ Principal Compliance April 25, 1995
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director April 25, 1995
- --------------------------
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 25, 1995
- --------------------------
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 25, 1995
- --------------------------
Lawrence Kantor
*Donald B. Miller Director April 25, 1995
- -------------------------
Donald B. Miller
*Francis Olmsted Director April 25, 1995
- -------------------------
Francis Olmsted
*John G. Preston Director April 25, 1995
- -------------------------
John G. Preston
*Margaret W. Russell Director April 25, 1995
- -------------------------
Margaret W. Russell
*Philip C. Smith Director April 25, 1995
- -------------------------
Philip C. Smith
*Francis A. Sunderland Director April 25, 1995
- -------------------------
Francis A. Sunderland
Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
Independent Auditors' Report
The Board of Directors and Shareholders
Lexington Growth and Income Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Growth and
Income Fund, Inc. as of December 31, 1994, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Growth and Income Fund, Inc. as of December 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 6, 1995
1
<PAGE>
Lexington Growth and Income Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Shares or
Principal Value
Amount Security Description (Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS: 91.2%
Aerospace/Engineering: 1.1%
27,500 Daimler Benz A.G. (ADR).......................... $ 1,354,375
------------
Auto & Truck: 0.8%
24,100 Toyota Motor Corporation (ADR)................... 1,012,200
------------
Banking: 3.0%
57,600 Bankamerica Corporation.......................... 2,275,200
49,300 Signet Banking Corporation....................... 1,411,212
------------
3,686,412
------------
Beverage: 2.5%
84,600 Pepsico, Inc..................................... 3,066,750
------------
Building Materials: 1.8%
51,600 Fluor Corporation................................ 2,225,250
------------
Chemical (Basic): 3.5%
54,200 Dexter Coporation................................ 1,178,850
20,700 Dow Chemical Company............................. 1,392,075
66,200 Geon Company..................................... 1,812,225
------------
4,383,150
------------
Chemical (Diversified): 4.1%
39,600 Air Products & Chemicals, Inc.................... 1,767,150
13,800 Asahi Chemical Industries, Ltd. (ADR)............ 1,060,875
43,000 Minnesota Mining & Manufacturing Company......... 2,295,125
------------
5,123,150
------------
Computer Software & Services: 1.0%
73,800 *Novell, Inc...................................... 1,259,213
------------
Consumer-Non Durable Goods: 2.0%
47,000 CPC International, Inc........................... 2,502,750
------------
Drug: 1.8%
29,200 Pfizer, Inc...................................... 2,255,700
------------
Electrical Equipment: 4.5%
56,800 Avnet, Inc....................................... 2,101,600
39,600 W.W. Grainger, Inc............................... 2,286,900
23,900 General Electric Company......................... 1,218,900
------------
5,607,400
------------
Electronics/Entertainment: .7%
5,200 Matsushita Electronic Industries, Ltd. (ADR)..... 847,600
------------
Environmental Technology: 1.1%
53,300 WMX Technologies, Inc............................ 1,399,125
------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Value
Amount Security Description (Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Energy Sources: 4.4%
52,300 Atlantic Richfield Company....................... $ 1,366,337
42,900 Burlington Resources, Inc........................ 1,501,500
58,600 Chevron Corporation.............................. 2,615,025
------------
5,482,862
------------
Food Processing: 1.5%
30,900 Kellogg Company.................................. 1,796,063
------------
Heating & Air Conditioning: 2.3%
23,300 Whirlpool Corporation............................ 1,170,825
47,300 York International Corporation................... 1,744,187
------------
2,915,012
------------
Hotels: 1.4%
61,100 Marriott International, Inc...................... 1,718,438
------------
Household Products: 2.2%
26,300 Colgate Palmolive Company........................ 1,666,762
18,000 Procter & Gamble Company......................... 1,116,000
------------
2,782,762
------------
Industrial Gases: 1.3%
79,000 Praxair, Inc..................................... 1,619,500
------------
Insurance: 2.7%
11,200 General Re Corporation........................... 1,386,000
58,900 Travelers, Inc................................... 1,914,250
------------
3,300,250
------------
Machinery: 6.5%
22,400 Amada, Ltd. (ADR)................................ 1,131,200
71,900 Cincinnati Milacron, Inc......................... 1,698,638
54,200 Goulds Pumps, Inc................................ 1,168,687
78,300 Ingersoll-Rand Company........................... 2,466,450
34,800 Parker Hannifin Corporation ..................... 1,583,400
------------
8,048,375
------------
Metal Fabricating: 3.8%
31,000 Illinois Tool Works, Inc......................... 1,356,250
68,850 Trinity Industries, Inc.......................... 2,168,775
24,100 Reynolds Metals Company.......................... 1,180,900
------------
4,705,925
------------
Metals/Mining: 3.6%
11,000 Aluminum Company of America...................... 952,875
37,900 *Inco, Ltd........................................ 1,084,888
24,900 *Kawasaki Steel Corporation (ADR)................. 1,045,800
22,400 Phelps Dodge Corporation......................... 1,386,000
------------
4,469,563
------------
</TABLE>
3
<PAGE>
Lexington Growth and Income Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1994 (continued)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Value
Amount Security Description (Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Office Equipment & Supplies: 1.8%
68,800 Pitney Bowes, lnc................................ $ 2,184,400
------------
Oilfield Services/Equipment: 2.2%
49,900 Halliburton Company.............................. 1,652,937
21,500 Schlumberger, Ltd................................ 1,083,063
------------
2,736,000
------------
Paper & Forest Products: 2.8%
41,600 Union Camp Corporation........................... 1,960,400
20,000 International Paper Company...................... 1,507,500
------------
3,467,900
------------
Personal Care: 2.3%
38,700 Gillette Company................................. 2,892,825
------------
Petroleum (Integrated): 5.2%
36,600 Andarko Petroleum Corporation.................... 1,409,100
68,000 BJ Services Company.............................. 1,147,500
53,300 Unocal Corporation............................... 1,452,425
40,500 Texaco, Inc...................................... 2,424,937
------------
6,433,962
------------
Plastic Products: 0.8%
66,200 Nifco, Inc. (ADR)................................ 1,017,825
------------
Precious Metals: 1.2%
108,000 *Samancor, Ltd. (ADR)............................. 1,510,650
------------
Publishing: 1.0%
18,100 McGraw-Hill, Inc................................. 1,210,438
------------
Railroads: 0.9%
63,700 *Southern Pacific Rail Corporation................ 1,154,562
------------
Real Estate: 1.8%
39,600 Chelsea G.C.A. Realty Group, Inc................. 1,079,100
43,900 Horizon Outlet Centers, lnc...................... 1,146,888
------------
2,225,988
------------
Recreation: 1.8%
49,000 Walt Disney Company ............................. 2,260,125
------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Value
Amount Security Description (Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Retail Stores: 6.3%
54,200 Barnes & Noble, Inc.............................. $ 1,693,750
82,600 *Carson Pirie Scott & Company..................... 1,569,400
49,900 Dillard Department Stores, Inc................... 1,334,825
36,100 May Department Stores Company.................... 1,218,375
65,400 Toys "R" Us, Inc................................. 1,994,700
------------
7,811,050
------------
Steel: 1.8%
26,500 *Inland Steel Industries, Inc..................... 930,812
37,000 USX Corporation-U.S. Steel Group................. 1,313,500
------------
2,244,312
------------
Telecommuncations: 3.7%
32,700 American Telephone & Telegraph Company........... 1,643,175
74,800 MCI Communications Corporation................... 1,379,125
38,700 *Telefonos de Mexico S.A., (ADR).................. 1,586,700
------------
4,609,000
------------
TOTAL COMMON STOCKS
(cost $111,244,819)............................ 113,320,862
------------
SHORT-TERM INVESTMENTS: 9.6%
$5,000,000 Federal Home Loan Bank
5.75% due 01/03/95............................. 4,996,806
4,000,000 Federal National Mortgage Association
5.88% due 01/04/95............................. 3,998,693
3,000,000 U.S. Treasury Bill
4.88% due 01/19/95............................. 2,993,624
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $11,989,123)............................. 11,989,123
------------
TOTAL INVESTMENTS: 100.8%
(cost $123,233,942**) (Note 1)................. $125,309,985
Liabilites in excess of other assets: (0.8%)..... (1,021,317)
------------
TOTAL NET ASSETS: 100.0%
(equivalent to $14.36 per share
on 8,653,955 shares outstanding)............... $124,288,668
============
<FN>
*Non-income producing securities.
**Aggregate cost for Federal Income tax purposes is identical.
ADR-American Depository Receipts.
</FN>
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
Lexington Growth and Income Fund, Inc.
Portfolio Changes
Six months ended December 31, 1994 (unaudited)
Additions
Andarko Petroleum Corporation
Atlantic Richfield Company
Burlington Resources, Inc.
Chevron Corporation
Colgate Palmolive Company
CPC Intemational, Inc.
General Electric Company
Kellogg Company
Novell, Inc.
Procter & Gamble Company
Signet Banking Corporation
Texaco, Inc.
Toys "R" Us, Inc.
Travelers, Inc.
Whirlpool Corporation
Increases in Holdings
Pepsico, Inc.
Deletions
American Airlines, Inc.
AMP, Inc.
Briggs & Stratton Corporation
Burlington Northern, Inc.
CSX Corporation
Dana Corporation
General Motors Corporation
Intel Corporation
ITT Corporation
Knight-Ridder, Inc.
Morrison Knudsen Corporation
Morton International, Inc.
Paccar, Inc.
Tolmex S.A. (ADR)
Varity Corporation
Decreases In Holdings
Air Products & Chemicals, Inc.
Aluminum Company of America
Amada, Ltd. (ADR)
American Telephone & Telegraph Company
Asahi Chemical Industries, Ltd. (ADR)
Avnet, Inc.
Bankamerica Corporation
Barnes & Noble, Inc.
BJ Services Company
Carson Pirie Scott & Company
Chelsea G.C.A. Realty Group, Inc.
Cincinnati Milacron, Inc.
Daimler Benz A.G. (ADR)
Dexter Corporation
Dillard Department Stores, Inc.
Dow Chemical Company
Fluor Corporation
General Re Corporation
Geon Company
Gillette Company
Goulds Pumps, Inc.
Halliburton Company
Horizon Outlet Centers, Inc.
Illinois Tool Works, Inc.
Inco, Ltd.
Ingersoll-Rand Company
Inland Steel Industries, Inc.
International Paper Company
Kawasaki Steel Corporation (ADR)
Marriott International, Inc.
Matsushita Electronic Industries, Ltd. (ADR)
May Department Stores Company
McGraw-Hill, Inc.
MCI Communications Corporation
Minnesota Mining & Manufacturing Company
Nifco, Inc. (ADR)
Parker Hannifin Corporation
Pfizer, Inc.
Phelps Dodge Corporation
Pitney Bowes, Inc.
Praxair, Inc.
Reynolds Metals Company
Samancor, Ltd. (ADR)
Schlumberger, Ltd.
Southem Pacific Rail Corporation
Telefonos de Mexico, S.A. (ADR)
Toyota Motor Corporation (ADR)
Trinity Industries, Inc.
Union Camp Corporation
Unocal Corporation
USX Corporation - U.S. Steel Group
Walt Disney Company
WMX Technologies, Inc.
W.W. Grainger, Inc.
York International Corporation
6
<PAGE>
Lexington Growth and Income Fund, Inc.
Statement of Assets and Liabilities
December 31, 1994
Assets
<TABLE>
<S> <C>
Investment in securities, at value (cost $123,233,942) (Note 1).. $125,309,985
Cash............................................................. 54,201
Receivable for shares sold....................................... 18,715
Dividends receivable............................................. 218,199
------------
Total Assets............................................... 125,601,100
------------
Liabilities
Due to Lexington Management Corporation (Note 2)................. 74,182
Payable for shares redeemed...................................... 20,477
Distributions payable............................................ 1,116,391
Accrued expenses................................................. 101,382
------------
Total Liabilities.......................................... 1,312,432
------------
Net Assets (equivalent to $14.36 per share on
8,653,955 shares outstanding) (Note 4)......................... $124,288,668
============
Net Assets consist of:
Capital stock-authorized 500,000,000 shares,
$.001 par value per share...................................... $ 8,654
Additional paid-in capital (Note 1).............................. 124,078,907
Undistributed net investment income (Note 1)..................... 62,496
Distributions in excess of net realized gains
on investments (Note 1)........................................ (1,937,432)
Net unrealized appreciation of investments....................... 2,076,043
------------
$124,288,668
============
</TABLE>
7
<PAGE>
Lexington Growth and Income Fund, Inc.
Statement of Operations
Year ended December 31, 1994
Investment Income
<TABLE>
<S> <C> <C>
Income
Dividends..................................... $ 2,625,397
Interest...................................... 331,819
-----------
2,957,216
-----------
Less: foreign tax expense..................... 18,695
-----------
Total investment income................... $ 2,938,521
-----------
Expenses
Investment advisory fee (Note 2).............. 947,752
Accounting and shareholder
services expense (Note 2)................... 190,764
Custodian and transfer agent expenses......... 79,659
Printing and mailing.......................... 53,860
Directors' fees and expenses.................. 11,290
Audit and legal............................... 30,129
Registration fees............................. 19,045
Distribution expenses (Note 3)................ 118,070
Computer processing fees...................... 21,010
Other expenses................................ 56,311
-----------
Total expenses............................ 1,527,890
-----------
Net investment income..................... 1,410,631
-----------
Realized and Unrealized Gain (Loss)
on Investments (Note 5)
Realized gain from security transactions
(excluding short-term securities):
Proceeds from sales....................... 95,317,835
Cost of securities sold................... 88,138,994
-------------
Net realized gain......................... 7,178,841
Unrealized appreciation of investments:
End of period............................. 2,076,043
Beginning of period....................... 14,824,380
-----------
Change during period.......................... (12,748,337)
-----------
Net realized and unrealized loss
on investments................................ (5,569,496)
-----------
Decrease in Net Assets Resulting
from Operations............................... $(4,158,865)
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
8
<PAGE>
Lexington Growth and Income Fund, Inc.
Statements of Changes in Net Assets
Years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
Net investment income.......................... $ 1,410,631 $ 1,594,315
Net realized gain from security transactions... 7,178,841 14,584,108
Increase (decrease) in unrealized
appreciation of investments.................. (12,748,337) 161,596
------------ ------------
Net increase (decrease) in net assets
resulting from operations.................... (4,158,865) 16,340,019
Distributions to shareholders from net
investment income............................ (1,348,135) (1,586,083)
Distributions to shareholders from net
realized gains from security transactions
(Note 1)..................................... (7,199,281) (15,219,810)
Distributions to shareholders in excess of
net realized gains from security
transactions (Note 1)........................ (1,937,432) -
Increase in net assets from capital share
transactions (Note 4)........................ 4,424,144 8,732,632
------------ ------------
Net increase (decrease) in net assets.......... (10,219,569) 8,266,758
Net Assets
Beginning of period............................ 134,508,237 126,241,479
End of period (including undistributed
net investment income of $62,496
and $0, respectively) (Note 1................ $124,288,668 $134,508,237
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
9
<PAGE>
Lexington Growth and Income Fund, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
1. Significant Accounting Policies
Lexington Growth & Income Fund, Inc. (the "Fund") is an open end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The following is a summary of the significant accounting
policies followed by the Fund in the preparation of its financial statements:
Securities Security transactions are accounted for on a trade date basis.
Realized gains and losses from security transactions are reported on the
identified cost basis. Investments are stated at market value based on closing
prices reported by the exchanges on which the securities are traded on the last
business day of the period or, for over-the- counter securities, at the average
between bid and asked prices. Short-term securities are stated at amortized cost
which approximates market value. Securities for which market quotations are not
readily available and other assets are valued at fair value as determined by
management and approved in good faith by the Board of Directors. Dividend income
and distributions to shareholders are recorded on the ex-dividend date. Interest
income is accrued as earned.
Distributions Effective January 1, 1993, the Fund adopted Statement of
Position 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies. As of December 31, 1994, book and tax basis differences amounting to
$29,385 have been reclassified from undistributed net investment income and
distributions in excess of net realized gain to additional paid-in capital.
Distributions in excess of net realized gains reflect temporary book-tax
differences arising from Internal Revenue Code ("IRC") Excise Tax distribution
requirements and associated post-October loss deferral provisions, which
effectively allow the deferral of some net realized capital losses to the next
tax year.
Federal Income Taxes It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
2. Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 0.75% of the Fund's average daily net assets up to
$100 million and in decreasing stages to 0.4% of average daily net assets in
excess of $250 million. The investment advisory contract provides that the total
annual expenses of the Fund (including management fees, but excluding interest,
taxes, brokerage commissions and extraordinary expenses) will not exceed the
level of expenses which the Fund is permitted to bear under the most restrictive
expense limitation imposed by any state in which shares of the Fund are offered
for sale. No reimbursement was required for the year ended December 31, 1994.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund but paid by LMC.
Lexington Growth and Income Fund, Inc. Notes to Financial Statements December
31, 1994 and 1993 (continued)
3. Distribution Plan
The Fund has a Distribution Plan (the "Plan") which allows payments to finance
activities associated with the distribution of the Fund's shares. The plan
provides that the Fund may pay distribution fees on a reimbursement basis,
including payments to Lexington Fund Distributors, Inc. ("LFD"), the Fund's
distributor, in amounts not exceeding .25% per annum of the Fund's average daily
net assets. Total distribution expenses for the year ended December 31, 1994
were $118,070 which are set forth in the statement of operations.
10
<PAGE>
4. Capital Stock
Transactions in capital stock were as follows:
Year Ended Year Ended
December 31, 1994 December 31, 1993
----------------------- ----------------------
Shares Amount Shares Amount
---------- ----------- --------- -----------
Shares sold.................. 890,121 $14,369,520 598,098 $10,356,276
Shares issued to share-
holders on reinvestment
of dividends............... 640,376 9,254,980 877,067 14,276,622
---------- ----------- --------- -----------
1,530,497 23,624,500 1,475,165 24,632,898
Shares redeemed.............. (1,199,120) (19,200,356) (919,619) (15,900,266)
---------- ----------- --------- -----------
Net increase................. 331,377 $ 4,424,144 555,546 $ 8,732,632
========== =========== ========= ===========
5. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1994, excluding short term securities, were $79,611,852 and
$95,317,835, respectively.
At December 31, 1994 aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$9,025,919 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $6,949,876.
6. Investment Risks
The Fund's ability to invest in foreign securities may involve risks not present
in domestic investments. Since foreign securities may be denominated in a
foreign currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
11
<PAGE>
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------
1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $16.16 $16.25 $16.39 $14.24 $16.19
------ ------ ------ ------ ------
Income from investment operations:
Net investment income.................................. .17 .21 .23 .35 .60
Net realized and unrealized gain (loss) on investments. (.68) 1.94 1.79 3.17 (2.25)
------ ------ ------ ------ ------
Total income (loss) from investment operations........... (.51) 2.15 2.02 3.52 (1.65)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income................... (.16) (.21) (.32) (.35) (.30)
Distributions from net realized capital gains.......... (.91) (2.03) (1.84) (1.02) -
Distributions in excess of net realized gains
(Temporary book-tax difference)...................... (.22) - - - -
------ ------ ------ ------ ------
Total distributions...................................... (1.29) (2.24) (2.16) (1.37) (.30)
------ ------ ------ ------ ------
Net asset value, end of period........................... $14.36 $16.16 $16.25 $16.39 $14.24
====== ====== ====== ====== ======
Total return............................................. (3.11%) 13.22% 12.36% 24.87% (10.27%)
Ratios to average net assets:
Expenses............................................... 1.15% 1.29% 1.20% 1.13% 1.04%
Net investment income.................................. 1.06% 1.20% 2.57% 2.19% 3.91%
Portfolio turnover....................................... 63.04% 93.90% 88.13% 80.33% 67.39%
Net assets at end of period (000's omitted)............. $124,289 $134,508 $126,241 $121,263 $104,664
</TABLE>
CUSTODY AGREEMENT
This AGREEMENT is effective __________, 19__, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and LEXINGTON GROWTH AND INCOME FUND, INC.
(the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated
or uncertificated as may be received by the Bank or its Subcustodian (as
defined in Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank or its Subcustodian
for the account of the Customer, which cash shall not be subject to
withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular
currency. To the extent Instructions are issued and the Bank can comply with
such Instructions, the Bank is authorized to maintain cash balances on
deposit for the Customer with itself or one of its affiliates at such
reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct, if
acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and Subcustodians
are authorized to hold any of the Securities in their account with any
securities depository in which they participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of
any amendment to Schedule A. Upon request by the Customer, the Bank will
identify the name, address and principal place of business of any
Subcustodian of the Customer's Assets and the name and address of the
governmental agency or other regulatory authority that supervises or
regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit of
customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for
holding its customer's assets shall provide that such assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of such Subcustodian except for safe custody or administration, and
that the beneficial ownership of such assets will be freely transferable
without the payment of money or value other than for safe custody or
administration. The foregoing shall not apply to the extent of any special
agreement or arrangement made by the Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the
Bank or its Subcustodian upon receipt by the Bank of Instructions which
include all information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the Custody
Account may be made in accordance with the customary or established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of Securities to a purchaser, dealer or their agents
against a receipt with the expectation of receiving later payment and free
delivery. Delivery of Securities out of the Custody Account may also be made
in any manner specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on
a contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions will
be credited or debited to the Accounts on the date cash or Securities are
actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts
in its discretion if the related transaction fails to settle
within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the related
transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer sends the Bank a written exception or objection
to any Bank statement within sixty (60) days of receipt, the Customer shall
be deemed to have approved such statement. In such event, or where the
Customer has otherwise approved any such statement, the Bank shall, to the
extent permitted by law, be released, relieved and discharged with respect to
all matters set forth in such statement or reasonably implied therefrom as
though it had been settled by the decree of a court of competent jurisdiction
in an action where the Customer and all persons having or claiming an
interest in the Customer or the Customer's Accounts were parties.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay
in the actual receipt of notice by the Bank or by its Subcustodians of any
payment, redemption or other transaction regarding Securities in the Custody
Account in respect of which the Bank has agreed to take any action under this
Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities
(other than a proxy), such as subscription rights, bonus issues, stock
repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to the extent
that the Bank's central corporate actions department has actual knowledge of
a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual notice
of such Corporate Action was received too late to seek Instructions, the Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it
deems, in good faith, to be appropriate in which case it shall be held
harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and
where bearer Securities are involved, proxies will be delivered in accordance
with Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank believes in good faith to have
been given by Authorized Persons or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the Bank may
specify. Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized Person
to send such confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. The Customer
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which the Bank shall make available to the Customer or
its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets.
The Bank shall be liable to the Customer for any loss which shall
occur as the result of the failure of a Subcustodian to exercise
reasonable care with respect to the safekeeping of such Assets to
the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or
its Subcustodian to utilize reasonable care, the Bank shall be
liable to the Customer only to the extent of the Customer's
direct damages, to be determined based on the market value of the
property which is the subject of the loss at the date of
discovery of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether
pursuant to Instructions or otherwise within the scope of this
Agreement if such act or omission was in good faith, without
negligence. In performing its obligations under this Agreement,
the Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and any
related expenses with respect to income from or Assets in the
Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of
the Customer.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or
affect the value of Assets.
(viii) Neither party shall be liable to the other for any
loss due to forces beyond their control including, but not
limited to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation,
or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the
Customer or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made
pursuant to this Agreement;
(v) review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in
Section 10) issuing Instructions shall bear any responsibility to
review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have
a material interest in a transaction, or circumstances are such that the Bank
may have a potential conflict of duty or interest including the fact that the
Bank or any of its affiliates may provide brokerage services to other
customers, act as financial advisor to the issuer of Securities, act as a
lender to the issuer of Securities, act in the same transaction as agent for
more than one customer, have a material interest in the issue of Securities,
or earn profits from any of the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to, legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration
of the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the Bank's
obligations under this Agreement. The Customer will indemnify the Bank
against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination of
books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking
to permit the Customer's independent public accountants reasonable access to
the records of any Subcustodian which has physical possession of any Assets
as may be required in connection with the examination of the Customer's books
and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
MUTUAL FUND
SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise, or the
exercise of any other power or right. No waiver by a party of any provision
of this Agreement, or waiver of any breach or default, is effective unless in
writing and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective
when actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the following
addresses or such other addresses as may subsequently be given to the other
party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
Customer: Richard Hisey
Lexington Management Corp.
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
or telex:
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank.
LEXINGTON GROWTH AND INCOME FUND, INC.
By:____________________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By:____________________________________________
Title
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally came
, to me known, who being by me duly sworn, did
depose and say that he/she resides in at
;
that he/she is of
, the entity described in and which executed the
foregoing instrument; that he/she knows the seal of said entity, that the
seal affixed to said instrument is such seal, that it was so affixed by order
of said entity, and that he/she signed his/her name thereto by like order.
Sworn to before me this
day of , 19 .
Notary
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,19 ,
before me personally came , to me known, who being by
me duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that he/she signed his/her name
thereto by like order.
Sworn to before me this
day of , 19 .
Notary
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made by and between LEXINGTON GROWTH AND INCOME
FUND, INC., a Maryland corporation (the Fund ), and LEXINGTON MANAGEMENT
CORPORATION, a Delaware corporation (the Administrator ), with respect to
the following recital of facts:
RECITAL
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
1940 Act ), and the rules and regulations promulgated thereunder;
WHEREAS, the Administrator is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the Advisers Act ),
and engages in the business of acting as an investment adviser and an
administrator of investment companies;
WHEREAS, the Fund, and the Administrator desire to enter into an
agreement to provide for administrative services for the Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADMINISTRATOR
The Administrator is hereby appointed to serve as the Administrator
to the Fund, to provide the administrative services described herein and
assume the obligations set forth in Section II, subject to the terms of this
Agreement and the control of the Fund s Board of [Directors/Trustees] (the
Board ). The administrator shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided
or authorized, no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADMINISTRATOR
In carrying out the terms of this Agreement, the Administrator shall:
A. provide office space, equipment and facilities (which may be
the Administrator s or its affiliates ) for maintaining the
Fund s organization, for meetings of the Board and the
shareholders, and for performing administrative services
hereunder;
B. supervise and manage all aspects of the Fund s operations
(other than investment advisory activities), and supervise
relations with, and monitor the performance of, custodians,
depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and
other persons in any capacity deemed to be necessary and
desirable by the Board;
C. determine and arrange for the publication of the net asset
value of the Fund;
D. provide non-investment related statistical and research data
and such other reports, evaluations and information as the Fund
may request from time to time;
E. provide internal clerical, accounting and legal services, and
stationery and office supplies;
F. prepare, to the extent requested by the Fund, the Fund s
prospectus, statement of additional information, proxy
statements and annual and semi-annual reports to shareholders;
G. arrange for the printing and mailing (at the Fund s expense) of
proxy statements and other reports or other materials provided
to the Fund s shareholders;
H. prepare for execution and file all the Fund s federal and state
tax returns and required tax filings other than those required
to be made by the Fund s custodian and transfer agent;
I. prepare periodic reports to and filings with the Securities and
Exchange Commission (the SEC ) and state Blue Sky authorities
with the advice of the Fund s counsel;
J. maintain the Fund s existence, and during such times as the
shares of the Fund are publicly offered, maintain the
registration and qualification of the Fund s shares under the
federal and state law;
K. keep and maintain the financial accounts and records of the
Fund;
L. develop and implement, if appropriate, management and
shareholder services designed to enhance the value or
convenience of the Fund as an investment vehicle;
M. provide the Board on a regular basis with reports and analyses
of the Fund s operations and the operations of comparable
investment companies;
N. respond to inquiries from shareholders or participants of
employee benefit plans (for which the administrator or any
affiliate provides recordkeeping) relating to the Fund,
concerning, among other things, exchanges among Funds, or refer
any such inquiries to the Fund s officers or the Fund s
transfer agent;
O. provide participant recordkeeping services for participants in
employee benefit plans for which the Administrator or any
affiliate provides recordkeeping services; and
P. provide such information as may be reasonably requested by a
shareholder representative of or a participant in an employee
benefit plan to comply with applicable federal or state laws.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator hereby represents and warrants to the Fund as
follows:
1. Due Incorporation and Organization. The Administrator is
duly organized and is in good standing under the laws of the
State of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations hereunder.
2. Best Efforts. The Administrator at all times shall provide
its best judgment and effort to the Fund in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF THE FUND AND THE FUND
The Fund hereby represents and warrants to the Administrator as
follows:
1. Organization. The Fund has been duly organized as a
corporation under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
terms.
2. Registration. The Fund is registered as an investment
company with the SEC under the 1940 Act and shares of the Fund
are registered or qualified for offer and sale to the public
under the Securities Act of 1933, as amended (the 1933 Act ),
and all applicable state securities laws. Such registrations
or qualifications will be kept in effect during the term of
this Agreement.
IV. CONTROL BY THE BOARD
Any activities undertaken by the administrator pursuant to this
Agreement on behalf of the Fund shall at all times be subject to any
directives of the Board.
V. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the
Administrator shall at all times conform to:
A. all applicable provisions of the 1940 Act;
B. the provisions of the registration statement of the Fund under
the 1933 Act and the 1940 Act;
C. the provisions of the Fund s chartering documents, as amended;
D. the provisions of the By-Laws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VI. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement
may be furnished by any directors, officers or employees of the
Administrator or by any affiliates of the Administrator under the
Administrator s supervision.
VII. COMPENSATION
For the services to be rendered, the facilities furnished and the
expenses assumed by the administrator, the Fund shall pay to the
Administrator an annual fee, payable monthly, equal to the pro-rata portion
of the Administrator s actual cost in providing such services, facilities
and expenses.
VIII. NON-EXCLUSIVITY
The services of the Administrator to the Fund are not to be deemed to
be exclusive, and the Administrator shall be free to render administrative
or other services to others (including other investment companies) and to
engage in other activities, so long as its services under this agreement are
not impaired thereby. It is understood and agreed that officers and
directors of the Administrator may serve as officers or [directors/trustees]
of the Fund, and that officers of [directors/trustees] of the Fund may serve
as officers or directors of the Administrator to the extent permitted by
law; and that the officers and directors of the Administrator are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers,
directors or trustees of any other firm or trust, including other investment
companies.
IX. TERM
This Agreement shall become effective at the close of business on the
date hereof and shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund s [directors/trustees] who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, or by
the vote of the holders of a majority (as so defined) of the outstanding
voting securities of the Fund and by such vote of the [directors/trustees].
X. TERMINATION
This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Fund s [directors/trustees] or by vote of a
majority of the Fund s outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Administrator, on sixty (60) days
written notice to the other party.
XI. LIABILITY OF ADMINISTRATOR AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator or its officers, directors
or employees, or reckless disregard by the Administrator of its duties
under this Agreement, the Administrator shall not be liable to the
Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
looses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder
on the part of the Administrator or any officer, director or employee
of the Administrator, to the extent permitted by applicable law, the
Fund hereby agrees to indemnify and hold the Administrator harmless
from and against all claims, actions, suits and proceedings at law or
in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating
to the sale, purchase, pledge of, advertisement of, or solicitation
of sales or purchases of any security (whether of the Fund or
otherwise) by the Fund, its officers, directors, employees or agents
in alleged violation of applicable federal, state or foreign laws,
rules or regulations.
XII. MATERIALS FOR DISTRIBUTION TO SHAREHOLDERS
During the term of this Agreement, the Fund shall furnish to the
Administrator at its principal office copies of all prospectuses, proxy
statements, reports to shareholders, sales literature and other material
referring to the Administrator that were prepared for distribution to
shareholders of the Fund and to participants in employee benefit plans
owning interests in the Fund (prior to the public distribution of such
materials). The Fund shall not use any such materials that refer to the
Administrator if the Administrator reasonably objects in writing within five
business days (or such other time as the parties may agree) after receipt
thereof, unless prior to such use the material is modified in a manner that
is satisfactory to the Administrator. Subsequent to the termination of this
Agreement, the Fund will continue to furnish to the Administrator copies of
such materials. The Fund shall also furnish or otherwise make available to
the Administrator other information relating to the business affairs of the
Fund as the Administrator reasonably requests from time to time.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the
Administrator and that of the Fund for this purpose shall be Park 80 West,
Plaza Two, Saddle Brook, New Jersey, 07663.
XIV. QUESTIONS OF INTERPRETATIONS
This Agreement shall be governed by the laws of the State of New
Jersey. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to
said Act. In addition, where the effect of a requirement of the 1940 Act
reflected in the provisions of this Agreement is revised by rule, regulation
or order of the SEC, such provisions shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the ____ day of
_________________, 199__.
LEXINGTON GROWTH AND INCOME FUND, INC.
Attest: By: _______________________________
Name Title
________________________
LEXINGTON MANAGEMENT CORPORATION
Attest: By: ______________________________
Name Title
________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 21, 1995
Lexington Growth and Income Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Re: Lexington Growth and Income Fund, Inc.
Registration No. 2-14767
Post-Effective Amendment to Registration
Statement on Form N-1A
Gentlemen:
We hereby consent to the reference of our firm as Counsel in the
Post-Effective Amendment No. 62 to the Registration Statement on Form N-1A of
Lexington Growth and Income Fund, Inc.
Very truly yours,
Independent Auditors' Consent
The Board of Directors
Lexington Growth and Income Fund, Inc.:
We consent to the use of our report dated February 6, 1995, included in the
Registration Statement on form N-1A and to the reference to our firm under the
heading "Financial Highlights" in the Prospectus.
KPMG PEAT MARWICK LLP
New York, New York
April 26, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-
end audited financial statements dated December 31, 1994 and is qualified
in its entirety by references to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 123,233,942
<INVESTMENTS-AT-VALUE> 125,309,985
<RECEIVABLES> 236,914
<ASSETS-OTHER> 54,201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125,601,100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,312,432
<TOTAL-LIABILITIES> 1,312,432
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,087,561
<SHARES-COMMON-STOCK> 8,653,955
<SHARES-COMMON-PRIOR> 8,322,578
<ACCUMULATED-NII-CURRENT> 62,496
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,937,432
<ACCUM-APPREC-OR-DEPREC> 2,076,043
<NET-ASSETS> 124,288,668
<DIVIDEND-INCOME> 2,625,397
<INTEREST-INCOME> 331,819
<OTHER-INCOME> (18,695)
<EXPENSES-NET> 1,527,890
<NET-INVESTMENT-INCOME> 1,410,631
<REALIZED-GAINS-CURRENT> 7,178,841
<APPREC-INCREASE-CURRENT> (12,748,337)
<NET-CHANGE-FROM-OPS> (4,158,865)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,348,135
<DISTRIBUTIONS-OF-GAINS> 7,199,281
<DISTRIBUTIONS-OTHER> 1,937,432
<NUMBER-OF-SHARES-SOLD> 890,121
<NUMBER-OF-SHARES-REDEEMED> 1,199,120
<SHARES-REINVESTED> 640,376
<NET-CHANGE-IN-ASSETS> (10,219,569)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 41,593
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 947,752
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,527,890
<AVERAGE-NET-ASSETS> 132,958,552
<PER-SHARE-NAV-BEGIN> 16.16
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> (0.68)
<PER-SHARE-DIVIDEND> 0.16
<PER-SHARE-DISTRIBUTIONS> 1.13
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.36
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
