As filed with the Securities and Exchange Commission on March 3, 1997
Registration No. 33-5827
811-4675
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. 12 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13 X
(Check appropriate box or boxes.)
LEXINGTON RAMIREZ GLOBAL INCOME FUND
-------------------------------------
(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 Ramirez Global Income Fund
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, Kamin & Frankel
919 Third Avenue, New York, NY 10022
------------------------------------
It is proposed that this filing will become effective
60 days after filing pursuant to Paragraph (a) 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, 1996 was filed on February 26, 1997.
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
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. Financial Highlights 11
4. General Description of Registrant 3
5. Management of the Fund 42
6. Capital Stock and Other Securities 61
7. Purchase of Securities Being Offered 51
8. Redemption or Repurchase 54
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
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 61 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 22
15. Control Persons and Principal Holders 15
of Securities
16. Investment Advisory and Other Services 15
17. Brokerage Allocation and Other Practices 13
18. Capital Stock and Other Securities 61 (Part A)
19. Purchase, Redemption and Pricing of 51, 54 (Part A)
securities being offered
20. Tax Status 17
21. Underwriters 15 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 27
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>
THE LEXINGTON FUNDS
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
Shareholder Services--1-800-526-0056
1-201-845-7300
Institutional/Financial Adviser Services--1-800-367-9160
24 Hour Account Information--1-800-526-0052
PROSPECTUS
___________, 1997
The following twelve mutual funds (each a "Fund," and collectively the
"Funds") are offered in this Prospectus:
Fund Name Nasdaq Symbol
Lexington Convertible Securities Fund CNCVX
Lexington Crosby Small Cap Asia Growth Fund, Inc. LXCAX
Lexington Global Fund, Inc. LXGLX
Lexington GNMA Income Fund, Inc. LEXNX
Lexington Goldfund, Inc. LEXMX
Lexington Growth and Income Fund, Inc. LEXRX
Lexington International Fund, Inc. LEXIX
Lexington Money Market Trust LMMXX
Lexington Ramirez Global Income Fund LEBDX
Lexington SmallCap Value Fund, Inc. LESVX
Lexington Troika Dialog Russia Fund, Inc. LETRX
Lexington Worldwide Emerging Markets Fund, Inc. LEXGX
Each Fund's shares offered in this Prospectus are sold at net asset value
with no sales load, no commissions and (except for certain redemptions of the
Lexington Troika Dialog Russia Fund) no redemption or exchange fees. The minimum
initial investment in each Fund is $1000 ($5,000 for the Lexington Troika Dialog
Russia Fund), and subsequent investments must be at least $50. See "How to
Invest in the Funds."
Each Fund is an open-end management investment company and managed by
Lexington Management Corporation (the "Manager"), an affiliate of Lexington
Funds Distributor (the "Distributor"). Each Fund has its own investment
objective and policies designed to meet different investment goals. The
Lexington Convertible Securities and Lexington Ramirez Global Income Funds may
invest without limitation in lower rated debt securities commonly referred to as
"junk bonds." Investments of this type are subject to greater risk of loss of
principal and interest. As with all mutual funds, there is no guarantee a Fund
will achieve its objective.
<PAGE>
Please read this Prospectus before investing and retain it for future
reference. A Statement of Additional Information dated __________,1997, has been
filed with the Securities and Exchange Commission, is incorporated to this
Prospectus by reference and is available without charge by calling the
appropriate telephone number above or writing to the address listed above.
Information about the Lexington Funds is available on the internet at
http:\\www.sec.gov.
AN INVESTMENT IN THE FUNDS IN NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE LEXINGTON MONEY MARKET TRUST WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
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.
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.
TABLE OF CONTENTS
The Lexington Funds ............................................. 3
Fees and Expenses of the Funds .................................. 5
Financial Highlights ............................................ 8
The Funds' Investment Objectives
and Policies .................................................. 20
Other Investment Practices ...................................... 33
Risk Considerations ............................................. 36
Management of the Funds ......................................... 42
How to Contact the Funds ........................................ 51
How to Invest in the Funds ...................................... 51
How to Redeem an Investment
in the Funds .................................................. 54
Exchange Privileges and
Restrictions .................................................. 56
How Net Asset Value is Determined
Dividends and Distributions ..................................... 57
Taxation ........................................................ 59
General Information ............................................. 61
Backup Withholding .............................................. 63
Glossary ........................................................ 64
2
<PAGE>
THE LEXINGTON FUNDS
The Funds' investment objectives are summarized below. See "The Funds'
Investment Objectives and Policies" beginning on page __, "Portfolio Securities"
beginning on page __, "Other Investment Practices" beginning on page ___ and
"Risk Considerations" beginning on page __ for more detailed information.
International Funds
Lexington Crosby Small Cap Asia Growth Fund, Inc.
The Lexington Crosby Small Cap Asia Growth Fund's investment objective is
to seek long-term capital appreciation through investment in common stocks and
equivalents of companies domiciled in the Asia Region with a market
capitalization of less than $1 billion.
Lexington Global Fund, Inc.
The Lexington Global Fund's investment objective is to seek long-term
growth of capital primarily through investment in common stocks of companies
domiciled in foreign countries and the United States.
Lexington International Fund, Inc.
The Lexington International Fund's investment objective is to seek
long-term growth of capital through investment in common stocks and equivalents
of companies domiciled in foreign countries.
Lexington Ramirez Global Income Fund
The Lexington Ramirez Global Income Fund's investment objective is to seek
high current income. Capital appreciation is a secondary objective. The
Lexington Ramirez Global Income Fund invests in a combination of foreign and
domestic high-yield, lower rated debt securities, commonly known as "junk
bonds."
Lexington Troika Dialog Russia Fund, Inc.
The Lexington Troika Dialog Russian Fund's investment objective is to seek
long-term capital appreciation through investment primarily in the equity
securities of Russian companies.
Lexington Worldwide Emerging Markets Fund, Inc.
The Lexington Worldwide Emerging Markets Fund's investment objective is to
seek long-term growth of capital primarily through investment in equity
securities of companies domiciled in, or doing business in emerging countries
and emerging markets.
3
<PAGE>
Domestic Equity Funds
Lexington Convertible Securities Fund
The Lexington Convertible Securities Fund's investment objective is total
return which it seeks to achieve by providing capital appreciation, current
income and conservation of the shareholders capital.
Lexington Growth and Income Fund, Inc.
The Lexington Growth and Income Fund's principal investment objective is
long term appreciation of capital. Income is a secondary objective.
Lexington SmallCap Value Fund, Inc.
The Lexington SmallCap Value Fund's principal investment objective is long
term capital appreciation. The Lexington SmallCap Value Fund will seek to obtain
its objective through investment in common stocks and equivalents of companies
domiciled in the United States with a market capitalization of less than $1
billion.
Precious Metals Funds
Lexington Goldfund, Inc.
The Lexington Goldfund's investment objective is to attain capital
appreciation and such hedge against loss of buying power as may be obtained
through investment in gold securities of companies engaged in mining or
processing gold throughout the world.
Domestic Fixed-Income Funds
Lexington GNMA Income Fund, Inc.
The Lexington GNMA Income Fund's investment objective is to seek a high
level of current income, consistent with liquidity and safety of principal,
through investment primarily in mortgage-backed GNMA Certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
Money Market Funds
Lexington Money Market Trust
The Lexington Money Market Trust's investment objective is to seek as high
a level of current income from short-term investments as is consistent with the
preservation of capital and liquidity. The Lexington Money Market Trust seeks to
maintain a stable net asset value of $1 per share.
4
<PAGE>
Fees and Expenses of the Funds
Shareholder Transaction Expenses
An investor would pay the following charges when buying or redeeming shares
of a Fund:
- --------------------------------------------------------------------------------
Maximum
Maximum Sales
Sales Load Imposed Deferred Sales Redemption
Load Imposed on Reinvested Load Fees+ Exchange Fees
on Purchases Dividends
- --------------------------------------------------------------------------------
None None None None None
- --------------------------------------------------------------------------------
+ Shareholders effecting redemptions via wire transfer may be required to pay
fees, including the wire fee and other fees, that will be directly deducted
from redemption proceeds. LEXINGTON TROIKA DIALOG RUSSIA FUND ONLY: You
will pay a redemption fee of 2% for shares you redeem within 365 days after
you have purchased them. See "How to Redeem an Investment in the Funds."
5
<PAGE>
Annual Fund Operating Expenses (as a percentage of average net assets):
<TABLE>
<CAPTION>
Total Fund
Management Rule 12b-1 Other Operating
Fees Fees Fees Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Funds
Lexington Crosby SmallCap Asia Growth Fund 1.25 1.17 2.42*
Lexington Global Fund 1.00 0.90 1.90
Lexington International Fund 1.00 0.25 1.20 2.45
Lexington Ramirez Global Income Fund 1.00 0.25 0.25 1.50*
Lexington Troika Dialog Russia Fund 1.25 0.25 1.50 2.65*
Lexington Worldwide Emerging Markets Fund 1.00 0.76 1.76
- ---------------------------------------------------------------------------------------------------------------------------
Domestic Equity Funds
Lexington Convertible Securities Fund 1.00 0.25 1.14 2.39
Lexington Growth and Income Fund 0.68 0.25 0.20 1.13
Lexington SmallCap Value Fund 1.00 0.25 1.23 2.48*
- ---------------------------------------------------------------------------------------------------------------------------
Precious Metals Funds
Lexington Goldfund 0.84 0.25 0.51 1.60
- ---------------------------------------------------------------------------------------------------------------------------
Domestic Fixed-Income Funds
Lexington GNMA Income Fund 0.60 0.45 1.05
- ---------------------------------------------------------------------------------------------------------------------------
Money Market Funds
Lexington Money Market Trust 0.50 0.50 1.00*
</TABLE>
* Net of reimbursement
This table is intended to assist the investor in understanding the various
expenses of each Fund. Operating expenses are paid out of a Fund's assets and
are factored into the Fund's share price. Each Fund estimates that it will have
the expenses listed (expressed as a percentage of average net assets) for the
current fiscal year.
6
<PAGE>
Example of Expenses for the Funds
Assuming, hypothetically, that each fund's annual return is 5% and that its
operating expenses are as set forth above, an investor buying $1,000 of a fund's
shares would have paid the following total expenses upon redeeming such shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lexington Crosby SmallCap Asia Growth Fund 24.51 75.45 129.05 275.63
Lexington Global Fund 19.29 59.70 102.64 222.21
Lexington International Fund 24.81 76.35 130.55 278.62
Lexington Ramirez Global Income Fund 15.26 47.41 81.84 179.05
Lexington Troika Dialog Russia Fund 54.11 103.01 174.55 363.98
Lexington Worldwide Emerging Markets Fund 17.89 55.41 95.41 207.31
Lexington Convertible Securities Fund 24.21 74.55 127.55 272.63
Lexington Growth and Income Fund 11.52 35.91 62.23 137.46
Lexington SmallCap Value Fund 25.11 77.25 132.05 281.60
Lexington Goldfund 16.27 50.49 87.08 190.01
Lexington GNMA Income Fund 10.71 33.41 57.94 128.26
Lexington Money Market Trust 10.20 31.84 55.25 122.46
</TABLE>
This example is to show the effect of expenses. This example does not
represent past or future expenses or returns; actual expenses and returns may
vary.
7
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
The following financial information for the periods ended December 31,
1991, through December 31, 1996, was audited by KPMG Peat Marwick LLP, whose
report, dated December 31, 1996, appears in the 1996 Annual Reports of the
Funds.
<TABLE>
<CAPTION>
Lexington Crosby Small Cap Asia Growth Fund
1996 1995
---- ----
<S> <C> <C>
Net asset value, beginning of period $ 9.76 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (0.05) 0.02
Net realized and unrealized gain (loss) on investments 2.54 (0.24)
- ----------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 2.49 (0.22)
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net realized capital gains (0.01) (0.02)
Distributions in excess of net investment income (0.01) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.24 $ 9.76
- ----------------------------------------------------------------------------------------------------------------------
Total return 25.50% (4.39)%*
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
Expenses, before reimbursement or waiver 2.64% 3.51%
- ----------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 2.42% 1.75%
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss, before reimbursement or waiver (0.86)% (1.24)%
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss (0.64)% 0.52%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 176.49% 40.22%
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 23,796 $ 8,936
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
The average commission paid on equity security transactions for the period ended
December 31, 1996 is less than $0.005 per share of securities purchased and
sold. In accordance with recent SEC disclosure guidelines, average commissions
were calculated for the current period and not for prior periods.
8
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Global Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.32 $ 11.17 $ 13.51 $ 11.09 $ 11.57
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.01 0.09 0.02 0.06 0.06
Net realized and unrealized gain (loss)
on investments 1.84 1.10 0.23 3.47 (0.47)
- ----------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 1.85 1.19 0.25 3.53 (0.41)
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.16) (0.29) -- (0.06) (0.07)
Distributions in excess of net investments
income (temporary book-tax difference) -- -- (0.13) -- --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized capital gains (1.73) (0.62) (2.46) (1.05)
Distributions in excess of net realized capital
gains (temporary book-tax difference) -- -- (0.13) -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (1.89) (1.04) (2.59) (1.11) (0.07)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.28 $ 11.32 $ 11.17 $ 13.51 $ 11.09
- ----------------------------------------------------------------------------------------------------------------
Total return 16.43% 10.69% 1.84% 31.88% (3.55%)
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ----------------------------------------------------------------------------------------------------------------
Expenses 1.90% 1.67% 1.61% 1.49% 1.52%
- ----------------------------------------------------------------------------------------------------------------
Net investment income 0.11% 0.48% 0.14% 0.52% 0.55%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover 128.05% 166.35% 83.40% 84.61% 81.38%
- ----------------------------------------------------------------------------------------------------------------
Average commission paid on
equity security transactions** $ 0.03 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 37,223 $ 53,614 $ 67,392 $ 87,313 $ 50,298
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
Net asset value, beginning of period $ 10.26 $ 12.83 $ 10.89 $ 9.89 $ 9.50
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income (loss) from investment operations:
Net investment income 0.09 0.11 0.01 0.02 0.01
Net realized and unrealized gain (loss)
on investments 1.50 (2.25) 2.72 1.56 0.38
Total income (loss)
from investment operations 1.59 (2.14) 2.73 1.58 0.39
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.08) (0.11) (0.02) (0.02) --
Distributions in excess of net investments
income (temporary book-tax difference) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized capital gains (0.20) (0.32) (0.77) (0.56) --
Distributions in excess of net realized capital
gains (temporary book-tax difference) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (0.28) (0.43) (0.79) (0.58) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.57 $ 10.26 $ 12.83 $ 10.89 $ 9.89
- ----------------------------------------------------------------------------------------------------------------
Total return 15.55% (16.75%) 25.10% 15.99% 5.47%*
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ----------------------------------------------------------------------------------------------------------------
Expenses 1.57% 1.59% 1.64% 1.80% 1.20%*
- ----------------------------------------------------------------------------------------------------------------
Net investment income 0.79% 0.99% 0.13% 0.12% 0.19%*
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover 75.71% 81.88% 113.58% 96.90% 95.66%*
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 53,886 $ 50,501 $ 57,008 $ 38,150 $ 31,250
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** In accordance with recent SEC disclosure guidelines, average commissions
are calculated for the current period and not for prior periods.
9
<PAGE>
FINANCIAL HIGHLIGHTS Lexington International Fund
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.60 $ 10.37 $ 10.00
Income (loss) from investment operations:
Net investment loss (.02) (.01) (.08)
Net realized and unrealized gain on investments 1.45 .61 .67
- ------------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.43 .60 .59
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (.20) -- --
Dividends in excess of net investment income
(temporary book-tax difference) -- (.35) --
Distributions from net realized capital gains (.97) (.02) (.10)
Distributions in excess of net realized capital
gains (temporary book-tax difference) -- -- (.12)
----- ----- -----
Total distributions (1.17) (.37) (.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.86 $ 10.60 $ 10.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total return 13.57% 5.77% 5.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 2.45% 2.46% 2.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.39%) (.12%) (.94%)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 113.55% 137.72% 100.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission paid on
equity security transactions* $ 0.03 ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 18,891 $ 17,855 $ 17,843
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* In accordance with recent SEC disclosure guidelines, the average commissions
are calculated for the current period, but not for prior periods.
10
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Ramirez Global Income Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.75 $ 9.80 $ 10.95 $ 10.39 $ 10.35
Income (loss) from investment operations:
Net investment income 1.01 0.96 0.46 0.53 0.61
Net realized and unrealized gain (loss)
on investments 0.36 0.95 (1.16) (0.58) (0.04)
- -----------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 1.37 1.91 (0.70) 1.11 0.65
- -----------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.86) (0.96) (0.45) (0.55) (0.61)
Distributions from net realized gains (0.04) -- -- -- --
---- ---- ---- ---- ----
Total Distributions (0.90) (0.96) (0.45) (0.55) (0.61)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.22 $ 10.75 $ 9.80 $ 10.95 $ 10.39
- -----------------------------------------------------------------------------------------------------------
Total return 13.33% 20.10% (6.52%) 10.90% 6.51%
- -----------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- -----------------------------------------------------------------------------------------------------------
Expenses, before reimbursement or waiver 2.33% 3.07% 1.80% 1.44% 1.54%
- -----------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 1.50% 2.75% 1.50% 1.44% 1.50%
- -----------------------------------------------------------------------------------------------------------
Net investment income, before
reimbursement or waiver 9.49% 9.48% 4.18% 4.83% 5.88%
- -----------------------------------------------------------------------------------------------------------
Net investment income 10.32% 9.80% 4.48% 4.83% 5.92%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover 71.83% 164.72% 10.20% 31.06% 31.24%
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 29,110 $ 12,255 $ 10,351 $ 14,576 $ 13,085
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.05 $ 10.12 $ 10.03 $ 9.67 $ 10.55
Income (loss) from investment operations:
Net investment income 0.67 0.73 0.63 0.63 0.78
Net realized and unrealized gain (loss)
on investments 0.30 (0.09) 0.09 0.36 (0.86)
- ----------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 0.97 0.64 0.72 0.99 (0.08)
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.67) (0.71) (0.63) (0.63) (0.80)
Distributions from net realized gains -- -- -- -- --
---- ---- ---- ---- ----
(0.67) (0.71) (0.63) (0.63) (0.80)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.35 $ 10.05 $ 10.12 $ 10.03 $ 9.67
- ----------------------------------------------------------------------------------------------------------------
Total return 10.03% 6.62% 7.40% 10.54% (0.21%)
- ----------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ----------------------------------------------------------------------------------------------------------------
Expenses, before reimbursement or waiver 1.65% 1.61% 1.72% 1.50% 1.97%
- ----------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 1.12% 1.08% 1.20% 1.33% --
- ----------------------------------------------------------------------------------------------------------------
Net investment income, before
reimbursement or waiver 6.11% 6.67% 5.70% 6.16% 5.98%
- ----------------------------------------------------------------------------------------------------------------
Net investment income 6.64% 7.20% 6.22% 6.33% 7.95%
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover 29.45% 44.50% 46.60% 67.11% 66.77%
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 12,252 $ 10,707 $ 12,739 $ 13,139 $ 11,049
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
11
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Troika Dialog Russia Fund
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Net asset value, beginning of period $ 12.12
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.05)
Net realized and unrealized gain (loss) on investments (0.51)
------
Total income (loss) from investment operations (0.56)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income
Distributions from net realized capital gains (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (9.01)%*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, before reimbursement or waivers 5.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waivers 2.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income, before reimbursement or waivers (3.69)%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (1.26%)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 115.55%*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commissions paid
on equity security transactions --***
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 13,846
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** The Fund's commencement of operations was June 3, 1996 with the investment
of its initial capital. The Fund's registration statement with the
Securities and Exchange Commission became effective on July 3, 1996.
Financial results prior to the effective date of the Fund's registration
statement are not presented in this Financial Highlights Table.
*** The average commission paid on equity security transactions for the period
ended December 31, 1996 is less than $0.005 per share of securities
purchased and sold.
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Worldwide Emerging Markets Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.70 $ 11.47 $ 13.96 $ 8.66 $ 9.03
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income -- 0.08 (0.01) 0.05 0.07
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ------------------------------------------------------------------------------------------------------------------
on investments 0.79 (0.76) (1.92) 5.43 0.27
- ------------------------------------------------------------------------------------------------------------------
Total income (loss)
- ------------------------------------------------------------------------------------------------------------------
from investment operations 0.79 (0.68) (1.93) 5.48 0.34
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (0.08) -- (0.01) (0.11)
- ------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
- ------------------------------------------------------------------------------------------------------------------
income (temporary book-tax difference) -- (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Distributions from capital gains -- -- (0.47) (0.17) (0.60)
- ------------------------------------------------------------------------------------------------------------------
Distributions in excess of capital gains
- ------------------------------------------------------------------------------------------------------------------
(temporary book-tax difference) -- -- (0.09) -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions -- (0.09) (0.56) (0.18) (0.71)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.49 $ 10.70 $ 11.47 $ 13.96 $ 8.66
- ------------------------------------------------------------------------------------------------------------------
Total return 7.38% (5.93%) (13.81%) 63.37% 3.77%
- ------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Expenses 1.76% 1.88% 1.65% 1.64% 1.89%
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.01)% 0.70% (0.06)% 0.21% 0.75%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover 86.26% 92.85% 75.56% 38.35% 91.27%
- ------------------------------------------------------------------------------------------------------------------
Average commission paid
equity security transactions* -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 254,673 $ 265,544 $ 288,581 $ 230,473 $ 30,021
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987 1986
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.56 $ 10.79 $ 8.72 $ 8.01 $ 11.80 $ 9.96
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.09 0.25 0.13 0.12 0.14 0.16
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ---------------------------------------------------------------------------------------------------------------------------------
on investments 1.97 (1.891) 2.32 0.71 0.12 1.88
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss)
- ---------------------------------------------------------------------------------------------------------------------------------
from investment operations 2.06 (1.56) 2.45 0.83 0.26 2.04
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.11) (0.24) (0.21) (0.12) (0.38) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
- ---------------------------------------------------------------------------------------------------------------------------------
income (temporary book-tax difference) -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from capital gains (1.48) 0.43) (0.17) -- (3.67) --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of capital gains
- ---------------------------------------------------------------------------------------------------------------------------------
(temporary book-tax difference) -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.59) (0.67) (0.38) (0.12) (4.05) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.03 $ 8.56 $ 10.79 $ 8.72 $ 8.01 $ 11.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total return 24.19% (14.44%) 28.11% 10.36% 0.35% 20.73%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Expenses 1.97% 1.42% 1.36% 1.33% 1.34% 1.32%
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.79% 2.52% 1.18% 1.27% 1.26% 1.24%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 112.03% 52.48% 59.07% 47.63% 83.21% 54.20%
- ---------------------------------------------------------------------------------------------------------------------------------
Average commission paid
on equity security transactions* -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 25,060 $ 22,192 $ 29,126 $ 26,389 $ 25,579 $ 29,862
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The average commission paid on equity security transactions for the year ended
December 31, 1996 is less than $0.005 per share of securities purchased and
sold. In accordance with recent SEC disclosure guidelines, average commissions
are calculated for the current period and not for prior periods.
13
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Convertible Securities Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.66 $ 11.84 $ 14.10 $ 13.80
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.11 0.15 0.08 --
Net realized and unrealized gain (loss)
on investments 0.55 2.04 0.10 0.89
- ---------------------------------------------------------------------------------------------------
Total income (loss) from operations 0.66 2.19 0.18 0.89
- ---------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.11) (0.15) (0.07) --
Dividends from net realized capital gains (0.55) (0.22) (2.32) (0.59)
Distribution in excess of capital gains
(temporary book-tax difference) -- -- (0.05) --
- ---------------------------------------------------------------------------------------------------
Total distributions (0.66) (0.37) (2.44) (0.59)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.66 $ 13.66 $ 11.84 $ 14.10
- ---------------------------------------------------------------------------------------------------
Total return 4.89% 18.63% 1.30% 6.53%
- ---------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ---------------------------------------------------------------------------------------------------
Expenses, before reimbursement of waiver 2.39% 2.52% 2.81% 2.76%
- ---------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 2.39% 2.52% 2.75% 2.76%
- ---------------------------------------------------------------------------------------------------
Net investment income (loss), before
- ---------------------------------------------------------------------------------------------------
reimbursement or waiver 0.77% 1.24% 0.50% (0.04%)
- ---------------------------------------------------------------------------------------------------
Net investment income 0.77% 1.24% 0.56% (0.04%)
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 18.45% 11.23% 38.14% 6.53%
- ---------------------------------------------------------------------------------------------------
Average commission paid on
equity security transactions* 0.04 -- -- --
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 11,208 $ 11,641 $ 8,117 $ 8,319
- ---------------------------------------------------------------------------------------------------
<CAPTION>
1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.41 $ 8.74 $ 9.55 $ 9.51 $ 9.35
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.18 0.22 0.50 0.64 0.42
Net realized and unrealized gain (loss)
on investments 1.39 3.68 (0.81) 0.04 0.19
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from operations 1.57 3.90 (0.31) 0.68 0.61
- ---------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.18) (0.23) (0.50) (0.64) (0.42)
Dividends from net realized capital gains -- -- -- -- (0.03)
Distribution in excess of capital gains
(temporary book-tax difference) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.18) (0.23) (0.50) (0.64) (0.45)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.80 $ 12.41 $ 8.74 $ 9.55 $ 9.51
- ---------------------------------------------------------------------------------------------------------------
Total return 12.82% 45.06% (3.39%) 7.16% 6.96%
- ---------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ---------------------------------------------------------------------------------------------------------------
Expenses, before reimbursement of waiver 3.02% 3.42% 4.51% 2.64% 4.12%
- ---------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 2.32% 2.50% 2.68% 2.13% 2.00%
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss), before
- ---------------------------------------------------------------------------------------------------------------
reimbursement or waiver 0.70% 1.14% 3.09% 5.74% 3.43%
- ---------------------------------------------------------------------------------------------------------------
Net investment income 1.40% 2.06% 4.92% 6.25% 5.55%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover 12.58% 29.46% 25.58% 34.23% 39.70%
- ---------------------------------------------------------------------------------------------------------------
Average commission paid on
equity security transactions* -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 7,180 $ 6,599 $ 4,744 $ 5,986 $ 6,930
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* In accordance with recent SEC disclosure guidelines, the average commissions
are calculated for the current period, but not for prior periods.
14
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Growth and Income Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.71 $ 14.36 $ 16.16 $ 16.25 $ 16.39
Income from investment operations:
Net investment income 0.07 0.22 0.17 0.21 0.23
Net realized and unrealized gain (loss)
on investments 4.08 3.00 (0.68) 1.94 1.79
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 4.15 3.22 (0.51) 2.15 2.02
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.13) (0.22) (0.16) (0.21) (0.32)
Distributions from net realized capital gains (1.17) (1.65) (0.91) (2.03) (1.84)
Distributions in excess of net realized
gains (temporary book-tax difference) -- -- (0.22) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (1.30) (1.87) (1.29) (2.24) (2.16)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.56 $ 15.71 $ 14.36 $ 16.16 $ 16.25
- ---------------------------------------------------------------------------------------------------------------------
Total return 26.46% 22.57% (3.11%) 13.22% 12.36%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
- ---------------------------------------------------------------------------------------------------------------------
Expenses 1.13% 1.09% 1.15% 1.29% 1.20%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 0.43% 1.38% 1.06% 1.20% 2.57%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 101.12% 159.94% 63.04% 93.90% 88.13%
- ---------------------------------------------------------------------------------------------------------------------
Average commissions paid on
equity security transactions* $ 0.07 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 200,309 $ 138,901 $ 124,289 $ 134,508 $ 126,241
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.24 $ 16.19 $ 14.39 $ 13.58 $ 19.16
Income from investment operations:
Net investment income 0.35 0.60 0.50 0.46 0.43
Net realized and unrealized gain (loss)
on investments 3.17 (2.25) 3.44 0.80 0.02
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 3.52 (1.65) 3.94 1.26 0.45
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.35) (0.30) (0.60) (0.45) (0.51)
Distributions from net realized capital gains (1.02) -- (1.54) -- (5.52)
Distributions in excess of net realized
gains (temporary book-tax difference) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (1.37) (0.30) (2.14) (0.45) (6.03)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.39 $ 14.24 $ 16.19 $ 14.39 $ 13.58
- ---------------------------------------------------------------------------------------------------------------------
Total return 24.87% (10.27%) 27.56% 9.38% 0.15%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
- ---------------------------------------------------------------------------------------------------------------------
Expenses 1.13% 1.04% 1.02% 1.10% 0.96%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.19% 3.91% 2.82% 3.20% 2.37%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 80.33% 67.39% 64.00% 81.10% 95.28%
- ---------------------------------------------------------------------------------------------------------------------
Average commission paid on
equity security transactions -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 121,263 $ 104,664 $ 128,329 $ 111,117 $ 112,780
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* In accordance with recent SEC disclosure guidelines, the average commissions
are calculated for the current period, but not for prior periods.
15
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Small Cap
Value Fund
1996
---------
Net asset value, beginning of period $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (0.18)
Net realized and unrealized gain (loss) on investments 1.94
- --------------------------------------------------------------------------------
Total income (loss) from investment operations 1.76
- --------------------------------------------------------------------------------
Less distributions:
Distributions from net realized capital gains (0.03)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 11.73
- --------------------------------------------------------------------------------
Total return 17.50%
- --------------------------------------------------------------------------------
Ratios to average net asset of:
- --------------------------------------------------------------------------------
Expenses, before reimbursement or waiver 3.04%
- --------------------------------------------------------------------------------
Expenses, net of reimbursement or waiver 2.48%
- --------------------------------------------------------------------------------
Net investment loss, before reimbursement or waiver (2.34)%
- --------------------------------------------------------------------------------
Net investment loss (1.78)%
- --------------------------------------------------------------------------------
Portfolio turnover 60.92%
- --------------------------------------------------------------------------------
Average commissions paid on equity security transactions $ 0.03
- --------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 8,061
- --------------------------------------------------------------------------------
16
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Goldfund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 6.24 $ 6.37 $ 6.90 $ 3.70 $ 4.68
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.02 -- 0.03 0.01 0.02
Net realized and unrealized gain (loss)
on investments 0.50 (0.12) (0.53) 3.21 (0.98)
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 0.52 (0.12) (0.50) 3.22 (0.96)
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.79) (0.01) (0.03) (0.02) (0.02)
Distributions from net realized
capital gains -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (0.79) (0.01) (0.03) (0.02) (0.02)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.97 $ 6.24 $ 6.37 $ 6.90 $ 3.70
- ---------------------------------------------------------------------------------------------------------------------
Total return 7.84% (1.89%) (7.28%) 89.96% (20.51%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ---------------------------------------------------------------------------------------------------------------------
Expenses 1.60% 1.70% 1.54% 1.63% 1.69%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.32)% 0.07% 0.50% 0.25% 0.58%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 31.04% 40.41% 23.77% 28.41% 13.18%
- ---------------------------------------------------------------------------------------------------------------------
Average commissions paid on equity
security transactions* $ 0.02 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 109,287 $ 135,779 $ 159,435 $ 159,479 $ 71,856
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.03 $ 6.39 $ 5.21 $ 6.20 $ 4.49
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.04 0.04 0.05 0.04 0.01
Net realized and unrealized gain (loss)
on investments (0.35) (1.36) 1.18 (0.98) 2.07
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations (0.31) (1.32) 1.23 (0.94) 2.08
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.04) (0.04) (0.05) (0.05) (0.05)
Distributions from net realized
capital gains -- -- -- -- (0.32)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (0.04) (0.04) (0.05) (0.05) (0.37)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.68 $ 5.03 $ 6.39 $ 5.21 $ 6.20
- ---------------------------------------------------------------------------------------------------------------------
Total return (6.14%) (20.35%) 23.62% (15.18%) 46.56%
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ---------------------------------------------------------------------------------------------------------------------
Expenses 1.43% 1.36% 1.42% 1.61% 1.29%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 0.81% 0.69% 1.14% 0.78% 0.57%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover 22.14% 12.43% 15.98% 20.45% 13.78%
- ---------------------------------------------------------------------------------------------------------------------
Average commissions paid on equity
security transactions* -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 96,316 $ 106,074 $ 154,484 $ 92,782 $ 104,842
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* In accordance with recent SEC disclosure guidelines, the average commissions
are calculated for the current period, but not for prior periods.
17
<PAGE>
FINANCIAL HIGHLIGHTS Lexington GNMA Income Fund
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.19 $ 7.60 $ 8.32 $ 8.26 $ 8.45
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.53 0.58 0.55 0.59 0.61
Net realized and unrealized gain (loss)
on investments (0.08) 0.59 (0.72) 0.06 (0.19)
- ----------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 0.45 1.17 (0.17) 0.65 0.42
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.52) (0.58) (0.55) (0.59) (0.61)
Distributions from net realized
capital gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (0.52) (0.58) (0.55) (0.59) (0.61)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.12 $ 8.19 $ 7.60 $ 8.32 $ 8.26
- ----------------------------------------------------------------------------------------------------------------------
Total return 5.71% 15.91% (2.07%) 8.06% 5.19%
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
- ----------------------------------------------------------------------------------------------------------------------
Expenses 1.05% 1.01% 0.98% 1.02% 1.01%
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 6.56% 7.10% 6.90% 6.96% 7.31%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 128.76% 30.69% 37.15% 52.34% 180.11%
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 133,777 $ 130,681 $ 132,108 $ 149,961 $ 132,048
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.90 $ 7.88 $ 7.45 $ 7.58 $ 8.22
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.64 0.65 0.69 0.64 0.71
Net realized and unrealized gain (loss)
on investments 0.55 0.03 0.42 (0.13) (0.59)
- ----------------------------------------------------------------------------------------------------------------------
Total income (loss)
from investment operations 1.19 0.68 1.11 0.51 0.12
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.64) (0.66) (0.68) (0.64) (0.73)
Distributions from net realized
capital gains -- -- -- (0.03) --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (0.64) (0.66) (0.68) (0.64) (0.76)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.45 $ 7.90 $ 7.88 $ 7.45 $ 7.58
- ----------------------------------------------------------------------------------------------------------------------
Total return 15.75% 9.23% 15.60% 6.90% 1.62%
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net asset of:
- ----------------------------------------------------------------------------------------------------------------------
Expenses 1.02% 1.04% 1.03% 1.07% 0.98%
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 7.97% 8.43% 8.88% 8.31% 8.49%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover 138.71% 112.55% 102.66% 233.48% 89.40%
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 122,191 $ 98,011 $ 96,465 $ 97,185 $ 109,793
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
FINANCIAL HIGHLIGHTS Lexington Money Market Trust
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0441 0.0495 0.0330 0.0230 0.0299
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.0441) (0.0495) (0.0330) (0.0230) (0.0299)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total return 4.50% 5.06% 3.35% 2.32% 3.03%
- ---------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ---------------------------------------------------------------------------------------------------------------------
Expenses, before reimbursement 1.04% 1.08% 1.02% 1.00% 1.03%
- ---------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income, before
---------------------------------------------------------------------------------------------------------------------
reimbursement 4.37% 4.87% 3.30% 2.30% 2.99%
---------------------------------------------------------------------------------------------------------------------
Net investment income, net of
---------------------------------------------------------------------------------------------------------------------
reimbursement 4.41% 4.95% 3.32% 2.30% 3.02%
N---------------------------------------------------------------------------------------------------------------------
et assets, end of period (000's omitted) $ 97,526 $ 88,786 $ 111,805 $ 94,718 $ 111,453
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1991 1990 1989 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0532 0.0732 0.0828 0.0678 0.0610
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.0532) (0.0732) (0.0828) (0.0678) (0.0610)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total return 5.45% 7.56% 8.60% 7.00% 6.29%
- ---------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ---------------------------------------------------------------------------------------------------------------------
Expenses, before reimbursement 1.02% 0.97% 0.99% 0.97% 0.80%
- ---------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement 1.00% 0.97% 0.99% 0.97% 0.80%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income, before
- ---------------------------------------------------------------------------------------------------------------------
reimbursement 5.35% 7.32% 8.29% 6.74% 6.13%
- ---------------------------------------------------------------------------------------------------------------------
Net investment income, net of
- ---------------------------------------------------------------------------------------------------------------------
reimbursement 5.37% 7.32% 8.29% 6.74% 6.13%
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 143,137 $ 176,127 $ 182,703 $ 192,079 $ 212,487
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
The Funds' Investment Objectives and Policies
The investment objective and general investment policies of each Fund are
described below. Specific portfolio securities that may be purchased by the
Funds are described in "Portfolio Securities" beginning on page __. Specific
investment practices that may be employed by the Funds are described in "Other
Investment Practices" beginning on page __. Certain risks associated with
investments in the Funds are described in those sections as well as in "Risk
Considerations" beginning on page __. CERTAIN TERMS USED IN THE PROSPECTUS ARE
DEFINED IN THE GLOSSARY BEGINNING ON PAGE __.
Summary Comparison of Funds
Under normal market conditions, the Funds will invest their assets as follows:
<TABLE>
<CAPTION>
Typical Market
Anticipated Anticipated Capitalizatioin
Equity Debt of Portfolio
Fund Name Exposure Exposure Focus Campanies
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
International Lexington Crosby 100% 0% Asia Small-Cap Less than
Funds Small Cap Asia $1 billion
Growth Fund
----------------------------------------------------------------------------------------------------------------------
Lexington Global 100% 0% Foreign Growth Any size
Fund
----------------------------------------------------------------------------------------------------------------------
Lexington 100% 0% Foreign Growth Any size
International Fund
----------------------------------------------------------------------------------------------------------------------
Lexington Ramirez 0% 100% Global Income Any size
Global Income Fund
----------------------------------------------------------------------------------------------------------------------
Lexington Troika 85% 15% Russian Growth Any size
Dialog Russia Fund
----------------------------------------------------------------------------------------------------------------------
Lexington Worldwide 100% 0% Foreign Emerging Any size
Emer0ging Markets Growth
Fund
====================================================================================================================================
Domestic Lexington Convertible 0-35% 100% Convertible Any size
Equity Securities Fund Securities
Funds ----------------------------------------------------------------------------------------------------------------------
Lexington Growth 0-100% 0-100% Capital and Income Any size
and Income Fund
----------------------------------------------------------------------------------------------------------------------
Lexington SmallCap 100% 0% U.S. Small-Cap Between
Value Fund $20 million
and $1 billion
====================================================================================================================================
Precious Lexington Goldfund 100% 0% Gold and Gold Any size
Metals Companies
====================================================================================================================================
Domestic Lexington GNMA 0% 100% Income N/A
Fixed- Income Fund
Income
Funds
====================================================================================================================================
Money Lexington Money 0% 100% Income N/A
Market Market Trust
Funds
====================================================================================================================================
</TABLE>
20
<PAGE>
Lexington Crosby Small Cap Asia Growth Fund, Inc.
The investment objective of the Lexington Crosby Small Cap Asia Growth Fund
is long-term capital appreciation through investment in common stocks and
equivalents of companies domiciled in the Asia Region with a market
capitalization of less than $1 billion.
The Lexington Crosby Small Cap Asia Growth Fund will invest principally in
companies listed on stock exchanges in the Asia Region consisting of Bangladesh,
China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, The Philippines,
Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam ("the Asia Region"). The
Lexington Crosby Small Cap Asia Growth Fund will invest at least 65% of its
total assets in securities of companies (1) that are organized under the laws of
the above countries, (2) whose principal securities trading market is located in
those countries, and (3) that derive at least 50% of their revenues or profits
from those countries. The Lexington Crosby Small Cap Asia Growth Fund also
intends to invest in Australia and New Zealand. The Lexington Crosby Small Cap
Asia Growth Fund may also invest in unlisted securities. Under normal market
conditions, the Lexington Crosby Small Cap Asia Growth Fund will invest
substantially all of its assets in three or more countries in the Asia Region.
The Lexington Crosby Small Cap Asia Growth Fund will invest at least 65% of
its total assets in growth companies in the Asia Region which have market
capitalizations of less than $1 billion. Approximately 13,000 companies are
listed on recognized exchanges in the Asia Region. Approximately 300 companies
in the Asia Region are capitalized over $1 billion. These companies form the
principal components of their respective market indices and consequently attract
the majority of foreign investment in the region. Approximately 3,000 companies,
which are considered small capitalization companies, will be the primary focus
for the Lexington Crosby Small Cap Asia Growth Fund's investments. These
companies are frequently under-researched by international investors and
undervalued by their markets. The companies in which the Lexington Crosby Small
Cap Asia Growth Fund intends to invest will generally have the following
characteristics: a market capitalization of less than $1 billion; part of a
strong growth industry; proven management; under-researched; and undervalued.
The Lexington Crosby Small Cap Asia Growth Fund intends to select
securities which can have enhanced growth prospects and may provide investment
returns superior to the Asian market as a whole. The market value of small
capitalization companies in the Asia Region tends to be volatile, and in the
past has offered greater potential for gain as well as loss than securities of
companies traded in developed countries. It is possible that certain Lexington
Crosby Small Cap Asia Growth Fund investments
21
<PAGE>
could be subject to foreign expropriation or exchange control restrictions. See
"Risk Considerations."
The Lexington Crosby Small Cap Asia Growth Fund may invest in all types of
common stocks and equivalents (the following constitute equivalents: convertible
debt securities, warrants and options). The Lexington Crosby Small Cap Asia
Growth Fund may also invest in preferred stocks, bonds and other debt
obligations and money market instruments, including cash and cash deposits,
which will be denominated in U.S. Dollars or currencies related thereto.
----------
Lexington Global Fund, Inc.
The investment objective of the Lexington Global Fund is to seek long-term
growth of capital primarily through investment in common stocks of companies
domiciled in foreign countries and the United States. The Lexington Global Fund
will invest at least 65% of its total assets in at least three countries, one of
which may be the United States. The Lexington Global Fund will invest primarily
in the common stocks and common stock equivalents. The following constitute
common stock equivalents: convertible debt securities, warrants and options. The
Lexington Global Fund may also invest in preferred stocks, bonds and other debt
obligations, including money market instruments of foreign and domestic
companies and foreign and domestic government securities. The Lexington Global
Fund is not required to maintain any particular geographic or currency mix of
its investments. The Lexington Global Fund is not required to maintain any
particular proportion of stocks, bonds or other securities in its portfolio.
The Lexington Global Fund may invest primarily in foreign debt securities
when it appears that the capital appreciation available from investments in such
securities will equal or exceed the capital appreciation available from
investments in equity securities. The market value of debt securities varies
inversely to changes in prevailing interest rates. Investing in debt obligations
may provide an opportunity for capital appreciation when interest rates are
expected to decline.
The Lexington Global Fund may invest in securities of companies in the
following regions and the governments of those regions: the Pacific Basin,
Africa; Western Europe and North America; and such other areas and countries as
the Manager may determine from time to time. The Lexington Global Fund may
invest in companies located in developing countries without limitation.
Developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets which trade a small number of
companies. Prices on these
22
<PAGE>
exchanges tend to be volatile and in the past these exchanges have offered
greater potential for gain, as well as loss, than exchanges in developed
countries. While the Lexington Global Fund invests only in countries that it
considers as having relatively stable and friendly governments it is possible
that certain Lexington Global Fund investments could be subject to foreign
expropriation or exchange control restrictions. See "Risk Considerations."
----------
Lexington International Fund, Inc.
The investment objective of the Lexington International Fund is to seek
long-term growth of capital through investment in common stocks and equivalents
of companies domiciled in foreign countries. The Lexington International Fund
will invest at least 65% of its total assets in at least three foreign
countries. The Lexington International Fund will invest primarily in common
stocks and common stock equivalents. The following constitute common stock
equivalents: convertible debt securities, warrants and options. The Lexington
International Fund may also invest in preferred stocks, bonds and other debt
obligations, including money market instruments of foreign and domestic
companies and foreign and domestic government securities. The Lexington
International Fund is not required to maintain any particular geographic or
currency mix of its investments. The Lexington International Fund is not
required to maintain any particular proportion of stocks, bonds or other
securities in its portfolio.
The Lexington International Fund may invest primarily in foreign debt
securities when it appears that the capital appreciation available from
investments in such securities will equal or exceed the capital appreciation
available from investments in equity securities. The market value of debt
securities varies inversely to changes in prevailing interest rates. Investing
in debt obligations may provide an opportunity for capital appreciation when
interest rates are expected to decline. The Lexington International Fund will
invest in investment grade obligations and non-rated obligations of comparable
quality.
The Lexington International Fund may invest in securities of companies in
the following regions and the governments of those regions: the Pacific Basin;
Africa; North America; Western Europe; and such other areas and countries as the
Manager may determine from time to time. The Lexington International Fund may
invest in companies located in developing countries without limitation.
Developing countries may have relatively unstable governments, economies based
on only a few industries, and securities markets which trade a small number of
companies. Prices on these exchanges tend to be volatile and in the past these
exchanges have offered greater potential
23
<PAGE>
for gain, as well as loss, than exchanges in developed countries. While the
Lexington International Fund invests only in countries that it considers as
having relatively stable and friendly governments it is possible that certain
Lexington International Fund investments could be subject to foreign
expropriation or exchange control restrictions. See "Risk Considerations."
----------
Lexington Ramirez Global Income Fund
The investment objective of the Lexington Ramirez Global Income Fund is to
seek high current income. Capital appreciation is a secondary objective. The
Lexington Ramirez Global Income Fund invests primarily in lower rated and
unrated foreign debt securities whose credit quality is generally considered
equal to U.S. corporate debt securities known as "junk bonds." Junk bonds and
similarly rated foreign debt securities involve a high degree of risk and are
predominantly speculative. See "Portfolio Securities" and "Risk Considerations."
The Lexington Ramirez Global Income Fund, under normal conditions, invests
substantially all of its assets in debt securities of domestic companies,
companies of developed foreign countries, and companies in emerging markets. The
debt securities in which the Lexington Ramirez Global Income Fund invests
consist of bonds, notes, debentures and other similar instruments. The Lexington
Ramirez Global Income Fund may invest in debt securities issued by governments,
their agencies and instrumentalities, central banks, commercial banks and other
corporate entities. The Lexington Ramirez Global Income Fund may invest up to
100% of its total assets in domestic and foreign debt securities that are rated
below investment grade. The Lexington Ramirez Global Income Fund may also invest
in securities that are in default as to payment of principal and/or interest,
and bank loan participations and assignments.
The Lexington Ramirez Global Income Fund's investments in emerging markets
will primarily consist of the following: foreign "junk bonds," "Brady Bonds,"
and sovereign debt securities issued by emerging market governments. The
Lexington Ramirez Global Income Fund may invest in debt securities of emerging
market issuers without regard to ratings. Many emerging market debt securities
are not rated by United States rating agencies. The Lexington Ramirez Global
Income Fund's ability to achieve its investment objectives is thus more
dependent on the Manager's credit analysis than would be the case if the
Lexington Ramirez Global Income Fund were to invest in higher quality bonds.
Currently, most emerging market debt securities are considered to have a credit
quality below investment grade.
----------
24
<PAGE>
Lexington Troika Dialog Russia Fund, Inc.
The investment objective of the Lexington Troika Dialog Russia Fund is to
seek long-term capital appreciation through investment primarily in the equity
securities of Russian companies. Under normal conditions, the Lexington Troika
Dialog Russia Fund seeks to achieve its objective by investing at least 65% of
its total assets in the securities of Russian Companies. The securities in which
the Lexington Troika Dialog Russia Fund may invest are common stock, preferred
stock, convertible preferred stock, bonds, notes or debentures convertible into
common or preferred stock, direct investments in Russian companies, stock
purchase warrants or rights, and American Depository Receipts or Global
Depository Receipts. The Lexington Troika Dialog Russia Fund may invest the
remaining 35% of its total assets in debt securities issued by Russian
Companies, debt securities issued or guaranteed by the Russian Government or a
Russian governmental entity, debt securities of corporate and government issuers
outside Russia, equity securities of issuers outside Russia which Lexington
Troika Dialog believes will experience growth in revenue and profits from
participation in the development of the economies of the Commonwealth of
Independent States, and Short-Term and Medium-Term Debt Securities.
The Lexington Troika Dialog Russia Fund intends to invest its assets in
Russian Companies in a broad array of industries, including the following: oil
and gas, energy generation and distribution, communications, mineral extraction,
trade, financial and business services, transportation, manufacturing, real
estate, textiles, food processing and construction. The Lexington Troika Dialog
Russia Fund is not permitted to invest more than 25% of the value of its total
assets in any one industry. It may, however, invest an unrestricted amount of
its assets in the oil and gas industry. The Lexington Troika Dialog Russia
Fund's investments will include investments in Russian Companies that have
characteristics and business relationships common to companies outside of
Russia. As a result, outside economic forces may cause fluctuations in the value
of securities held by the Lexington Troika Dialog Russia Fund.
Under current conditions, the Lexington Troika Dialog Russia Fund expects
to invest at least 20% of its total assets in very liquid assets to maintain
liquidity and provide stability. As the Russian equity markets develop, however,
and the liquidity of Russian securities becomes less problematic, the Lexington
Troika Dialog Russia Fund will invest a greater percentage of its assets in
Russian equity securities.
----------
25
<PAGE>
Lexington Worldwide Emerging Markets Fund, Inc.
The investment objective of the Lexington Worldwide Emerging Markets Fund
is to seek long-term growth of capital primarily through investment in equity
securities and equivalents of companies domiciled in, or doing business in,
emerging countries and emerging markets. Under normal conditions, the Lexington
Worldwide Emerging Markets Fund seeks to achieve its objective by investing at
least 65% of its total assets in the equity securities and equivalents of
emerging market companies. Under normal conditions, the Lexington Worldwide
Emerging Markets Fund invests in emerging country and emerging market securities
of at least three countries outside of the United States. In the opinion of the
Manager, emerging market countries include, but are not limited to, the
following: Algeria, Argentina, Bangladesh, Bolivia, Botswana, Brazil, Chile,
China, Colombia, Costa Rica, Cyprus, Czech Republic, Dominican Republic,
Ecuador, Egypt, Finland, Ghana, Greece, Hong Kong, Hungary, India, Indonesia,
Israel, Ivory Coast, Jamaica, Jordan, Kenya, Malaysia, Mauritius, Mexico,
Morocco, Nicaragua, Nigeria, Pakistan, Panama, Peru, Philippines, Poland,
Portugal, Russia, Singapore, Slovakia, South Africa, South Korea, Sri Lanka,
Taiwan, Thailand, Trinidad & Tobago, Tunisia, Turkey, Uruguay, Venezuela,
Zambia, Zimbabwe.
The Lexington Worldwide Emerging Markets Fund may also invest in equity
securities and equivalents of companies that derive 50% or more of their total
revenue from either goods or services produced in emerging market countries or
sales made in those countries. The Lexington Worldwide Emerging Markets Fund's
investments in emerging country equity securities are not subject to any maximum
limit, and the Lexington Worldwide Emerging Markets Fund intends to invest
substantially all of its assets in emerging country and emerging market equity
securities. The Lexington Worldwide Emerging Markets Fund may invest the
remaining 35% of its total assets in equity securities without regard to whether
they qualify as emerging country or emerging market equity securities, debt
securities denominated in the currency of an emerging market or issued or
guaranteed by an emerging market company or the government of an emerging
country, and Short-Term and Medium-Term Debt Securities.
----------
Lexington Convertible Securities Fund
The investment objective of the Lexington Convertible Securities Fund is
total return which it seeks to achieve by providing capital appreciation,
current income and conservation of shareholders capital. Under normal
conditions, the Lexington Convertible Securities Fund seeks to achieve its
objective by investing at least 65% of its total assets in debt securities
convertible into shares of common stock ("convertible securities"). The
26
<PAGE>
Lexington Convertible Securities Fund may invest without limitation in
high-yield debt securities rated below investment grade. Such lower rated
securities are commonly referred to as "junk bonds." Junk bonds are considered
speculative and pose a greater risk of loss of principal and interest than
investment grade securities. See "Portfolio Securities" and "Risk
Considerations." Common stock received upon the conversion or sale of
convertible securities held by the Lexington Convertible Securities Fund will
either continue to be held by the Lexington Convertible Securities Fund or be
sold.
The convertible securities held by the Lexington Convertible Securities
Fund may consist of securities rated in the six highest rating categories by a
major rating service and non-rated debt securities. The Lexington Convertible
Securities Fund will not invest in any security which has been rated lower than
"B" by S&P or Moody's, which are both major rating services, or non-rated
securities of comparable quality.
No more than 35% of the Lexington Convertible Securities Fund's total
assets will be invested in securities other than convertible securities. The
Lexington Convertible Securities Fund may invest in dividend and non-dividend
paying non-convertible common stocks, corporate bonds, covered call options and
put options, stock index options, U.S. Government securities, repurchase
agreements and money market securities.
----------
Lexington Growth and Income Fund
The Lexington Growth and Income Fund's principal investment objective is
long-term capital appreciation. Income is a secondary objective. Generally, the
Lexington Growth and Income Fund invests its assets in publicly traded common
stocks and senior securities convertible into common stocks of domestic and
foreign companies.
----------
Lexington SmallCap Value Fund
The investment objective of the Lexington SmallCap Value Fund is to seek
long-term capital appreciation. Under normal conditions, the Lexington SmallCap
Value Fund seeks its objective by investing in common stocks and equivalents of
domestic companies with a market capitalization under $1 billion. Warrants,
options and convertible debt securities are common stock equivalents in which
the Lexington SmallCap Value Fund may invest. The Lexington SmallCap Value Fund
will invest at least 90% of its assets in domestic companies which have market
capitalizations between $20 million and $1 billion at the time of investment.
The remainder of its
27
<PAGE>
assets may be invested in securities of companies with market capitalizations
below $20 million, above $1 billion, foreign companies with dollar denominated
shares traded in the United States, American Depository Shares or Receipts, real
estate investment trusts, and cash.
The Lexington SmallCap Value Fund will invest it assets primarily in the
equity securities of domestic companies listed on stock exchanges or traded over
the counter. The Lexington SmallCap Value Fund may invest in foreign companies
whose shares are traded in U.S. dollar denominated markets.
The companies in which the Lexington SmallCap Value Fund intends to invest
will generally have the following characteristics: a market capitalization of
less than $1 billion; high relative ratio of revenue per share to stock price; a
low relative ratio of price to book value per share; a positive cash flow and
other measures of financial stability; and a low stock price relative to
historical levels.
----------
Lexington Goldfund
The Lexington Goldfund's principal investment objective is to attain
capital appreciation and such hedge against loss of buying power as may be
obtained through investment in gold and equity securities of companies engaged
in mining or processing gold throughout the world. Under normal conditions, at
least 65% of the value of the total assets of the Lexington Goldfund will be
invested in gold and the securities of companies engaged in mining or processing
gold ("gold-related securities"). The Lexington Goldfund may also invest in
other precious metals, including platinum, palladium and silver. The Lexington
Goldfund intends to invest less than half of the value of its assets in gold and
other precious metals and more than half of the value of its assets in
gold-related securities, including securities of foreign issuers.
The Lexington Goldfund is designed to provide investors with a means to
protect against declines in the value of the U.S. dollar against world
currencies. To the extent that the Lexington Goldfund's investments in
gold-related securities appreciate in value relative to the U.S. dollar, the
Lexington Goldfund's investments may serve to offset declines in the buying
power of the U.S. dollar. Management believes that, over the long term,
investing in gold will protect capital from adverse monetary and political
developments. Investments in gold may provide more of a hedge against a decline
in the buying power of the dollar, devaluation and inflation than other types of
investments. The value of gold-related debt securities, however, will generally
not react to fluctuations in the price of gold. The market value of debt
securities of companies engaged in mining or processing gold can be expected to
fluctuate inversely with prevailing interest rates.
----------
28
<PAGE>
Lexington GNMA Income Fund
The investment objective of the Lexington GNMA Income Fund is to seek a
high level of current income, consistent with liquidity and safety of principal.
Under normal market conditions, the Lexington GNMA Income Fund will invest at
least 80% of the value of its total assets in Government National Mortgage
Association ("GNMA") mortgage-backed securities (also known as "GNMA
Certificates"). Lexington GNMA Certificates represent part ownership of a pool
of mortgage loans. The timely payment of interest and principal on each
certificate is guaranteed by the full faith and credit of the United States
Government. The principal on Lexington GNMA Certificates is scheduled to be paid
back by the borrower over the length of the loan. The Lexington GNMA Income Fund
will invest the remaining 20% of its total assets in other securities issued or
guaranteed by the U.S. Government, including U.S. Treasury securities.
The Lexington GNMA Income Fund will purchase "modified pass through" type
GNMA Certificates. "Modified pass through" GNMA Certificates entitle the holder
to receive all interest and principal payments owed by the borrower even if the
borrower has not made payment. The Lexington GNMA Income Fund intends to use the
proceeds from principal payments to purchase additional GNMA Certificates or
other U.S. Government guaranteed securities.
----------
Lexington Money Market Trust
The investment objective of the Lexington Money Market Trust is to seek as
high a level of current income as is consistent with the preservation of capital
and liquidity by investing in short-term money market instruments. The following
are the money market instruments in which the Lexington Money Market Trust will
invest: U.S. Government securities, time deposits, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements and other money
market instruments. The Lexington Money Market Trust seeks to maintain a stable
net asset value of $1 per share.
The Lexington Money Market Trust will invest in money market instruments
that have been rated in one of the two highest rating categories by both S&P and
Moody's, both major rating agencies. A "Tier 1" security is one that has been
rated by either S&P or Moody's in the highest rating category, or, if unrated,
is of comparable quality. A "Tier 2" security is one that has been rated in the
second highest category by either S&P or Moody's, or, if unrated, is of
comparable quality. Up to 5% of the total assets of the Lexington Money Market
Trust may be invested in a single Tier 1 security (other than U.S. Government
securities). In addition, the Lexington Money Market Trust may not invest more
than 5% of its total assets in Tier 2 securities, and may not invest more than
1% of its total assets in any single Tier 2 security.
29
<PAGE>
The Lexington Money Market Trust may only invest in money market
instruments with a remaining maturity of 397 days or less, provided that the
Fund's average weighted maturity does not exceed 90 days.
PORTFOLIO SECURITIES
Equity Securities
The Lexington Convertible Securities Fund, Lexington Goldfund and Lexington
Growth and Income Fund may purchase common stocks. The Lexington Crosby SmallCap
Asia Growth Fund, Lexington Global Fund, Lexington International Fund, Lexington
SmallCap Value Fund, Lexington Troika Dialog Russia Fund and Lexington Worldwide
Emerging Markets Fund emphasize investments in common stock and common stock
equivalents. The following constitute common stock equivalents: warrants,
options and convertible debt securities. Common stock equivalents may be
converted into or provide the holder with the right to common stock. These funds
may also invest in other types of equity securities, including preferred stocks,
and equity derivative securities. The Lexington Troika Dialog Russia Fund may
invest directly in Russian companies.
Debt Securities
Debt securities will constitute at least 65% of the Lexington Convertible
Securities Fund's and up to 100% of the Lexington Ramirez Global Income Fund's
total assets, and the GNMA Income Fund will have substantially all of its assets
invested in GNMA Certificates and U.S. Government securities. The debt
securities in which the Lexington Funds may invest include bond, notes,
debentures and other similar instruments. The debt securities acquired by the
Lexington Convertible Securities Fund may include high yield, lower-rated debt
securities known as "junk bonds," and the Lexington Ramirez Global Income Fund
may invest 100% of its total assets in junk bonds. The Lexington Ramirez Global
Income Fund may invest in securities that are in default as to payment of
principal and/or interest. The Lexington Ramirez Global Income Fund may also
invest in "Brady Bonds" and sovereign debt securities issued by emerging market
governments.
The Lexington Global Fund, Lexington Goldfund, Lexington International
Fund, Lexington Troika Dialog Russia Fund and Lexington Worldwide Emerging
Markets Fund may invest primarily in debt securities when the Manager believes
that debt securities will provide capital appreciation through favorable changes
in relative foreign exchange rates, in relative interest rate levels or in the
creditworthiness of issuers.
30
<PAGE>
It is likely that many of the debt securities in which the Lexington Troika
Dialog Russia Fund and Lexington Worldwide Emerging Markets Fund invest will be
unrated and may have speculative characteristics. The Lexington Crosby Small Cap
Asia Growth Fund and Lexington International Fund will only invest in investment
grade debt obligations.
Junk Bonds. The Lexington Convertible Securities Fund and Lexington Ramirez
Global Income Fund may invest in high yield, lower rated debt securities known
as "junk bonds." Junk bonds are debt obligations rated below investment grade
and non-rated securities of comparable quality. Junk bonds are considered
speculative and thus pose a greater risk of default than investment grade
securities. Investments of this type are subject to greater risk of loss of
principal and interest, but in general provide higher yields than higher rated
debt obligations. Bonds issued by companies domiciled in emerging markets are
usually rated below investment grade.
Zero Coupon Bonds. The Lexington Ramirez Global Fixed Income Fund may
invest in zero coupon bonds. Zero coupon bond prices are highly sensitive to
changes in market interest rates. The original issue discount on the zero coupon
bonds must be included ratably in the income of the Lexington Ramirez Global
Fixed Income Fund as the income accrues even though payment has not been
received. The Lexington Ramirez Global Fixed Income Fund nevertheless intend to
distribute an amount of cash equal to the currently accrued original issue
discount, and this may require liquidating securities at times they might not
otherwise do so and may result in capital loss. See "Tax Information" in the
Statement of Additional Information.
Loan Participation and Assignments. The Lexington Ramirez Global Income
Fund may invest in loans arranged through private negotiations between a foreign
entity and one or more lenders. The majority of the Lexington Ramirez Global
Fixed Income's investments in loans in emerging markets is expected to be in the
form of participation in loans ("Participations") and assignments of portions of
loans from third parties ("Assignments"). Participations typically will result
in the Lexington Ramirez Global Fixed Income having a contractual relationship
only with the Lender, not with the borrower. The Lexington Ramirez Global Fixed
Income will have the right to receive payments of principal, interest and any
fees to which it is entitled only from the Lender selling the Participation and
only upon receipt by the Lender of the payments from the borrower. As a result,
the Lexington Ramirez Global Fixed Income will assume the credit risk of both
the borrower and the Lender that is selling the Participation. When the
Lexington Ramirez Global Fixed Income purchases Assignments from Lenders, the
Lexington Ramirez Global Fixed Income will acquire direct rights against the
borrower
31
<PAGE>
on the Loan. The Lexington Ramirez Global Fixed Income may have difficulty
disposing of Assignments and Participation. The liquidity of such securities is
limited and the Lexington Ramirez Global Fixed Income anticipates that such
securities could be sold only to a limited number of institutional investors.
The lack of a liquid secondary market could have an adverse impact on the value
of such securities.
Short-Term and Medium-Term Debt Securities. The Lexington Troika Dialog
Russia Fund and Lexington Worldwide Emerging Markets Fund may, under normal
conditions, invest up to 35% of their total assets in Short-Term and Medium-Term
Debt Securities. The Short-Term and Medium-Term Debt Securities in which the
Funds may invest are foreign and domestic money market securities, including
short-term (less than twelve months to maturity) and medium-term (not greater
than five years to maturity) high-quality obligations issued by the U.S.
Government, foreign governments, foreign and domestic corporations and banks,
and repurchase agreements.
Brady Bonds. The Lexington Ramirez Global Income Fund may invest in "Brady
Bonds." Brady Bonds are securities created through the exchange of existing
commercial bank loans for new bonds in developing countries. Brady Bonds issued
by Brazil, Mexico and Venezuela currently are rated below investment grade.
Brady Bonds have been issued only recently and do not have a long payment
history.
Depositary Receipts
The Lexington SmallCap Value and Lexington Troika Dialog Russia Funds may
invest in American Depositary Receipts ("ADRs") and similar securities. ADRs are
securities traded in the U.S. that are backed by securities of foreign issuers.
Investment Companies
Each Lexington Fund (except the Lexington Money Market Trust) may invest up
to 10% of its total assets in shares of other investment companies that invest
in securities in which it may otherwise invest.
U.S. Government Securities
All Lexington Funds may invest in fixed-rate and floating- or variable-rate
U.S. government securities. The U.S. Government guarantees payments of interest
and principal of U.S. Treasury bills, notes and bonds, mortgage-related
securities of the GNMA, and other securities issued by the U.S. government.
Other securities issued by U.S. government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality,
32
<PAGE>
for example those issued by the Federal Home Loan Bank, whereas others, such as
those issued by the FNMA, Farm Credit System and Student Loan Marketing
Association, have an additional line of credit with the U.S. Treasury.
Short-term U.S. government securities generally are considered to be among
the safest short-term investments. However, the U.S. government does not
guarantee the net asset value of the Funds' shares. With respect to U.S.
government securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. government will provide support to such agencies
or instrumentalities. Accordingly, such U.S. government securities may involve
risk of loss of principal and interest.
OTHER INVESTMENT PRACTICES
The following table and sections summarize certain investment practices of
the Funds. These practices may involve risks. The Glossary section at the end of
this Prospectus briefly describes each of the investment techniques summarized
below. The Statement of Additional Information, under the heading "Investment
Objectives and Policies of the Funds," contains more detailed information about
certain of these practices.
33
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Lexington Lexington Lexington
Crosby Ramirez Troika Worldwide Lexington
Small Cap Lexington Lexington Global Dialog Emerging Convertible
Asia Growth Global International Income Russia Markets Securities
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Repurchase agreements1 X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Reverse dollar roll
transactions2
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing not to exceed X
10% of total fund assets
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing not to exceed X X X X X
one-third of total fund assets
- ------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreement X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Dollar roll transactions X
- ------------------------------------------------------------------------------------------------------------------------------------
Leverage X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Securities lending not to exceed
10% of total fund assets
- ------------------------------------------------------------------------------------------------------------------------------------
Securities lending not to exceed X X X X X
one-third of total fund assets
- ------------------------------------------------------------------------------------------------------------------------------------
When-issued and forward X X X X X X
commitment securities
- ------------------------------------------------------------------------------------------------------------------------------------
Forward currency contracts2 X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase options on securities
and currencies3 X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase options on securities X X X
and indices3
- ------------------------------------------------------------------------------------------------------------------------------------
Write covered call options3 X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Write covered put options3 X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate futures contracts4 X
- ------------------------------------------------------------------------------------------------------------------------------------
Futures and swaps and options X X X X X X
on futures4
- ------------------------------------------------------------------------------------------------------------------------------------
Equity swap
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to
5% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to X
10% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to X X X X X X
15% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Lexington Lexington Lexington
Growth and SmallCap Lexington Money
Income Value Lexington GNMA Income Market
Fund Fund Goldfund Fund Trust
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Repurchase agreements1 X X X X X
- ------------------------------------------------------------------------------------------------------------------
Reverse dollar roll
transactions2
- ------------------------------------------------------------------------------------------------------------------
Borrowing not to exceed X
10% of total fund assets
- ------------------------------------------------------------------------------------------------------------------
Borrowing not to exceed X X
one-third of total fund assets
- ------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreement X X
- ------------------------------------------------------------------------------------------------------------------
Dollar roll transactions
- ------------------------------------------------------------------------------------------------------------------
Leverage X
- ------------------------------------------------------------------------------------------------------------------
Securities lending not to exceed
10% of total fund assets
- ------------------------------------------------------------------------------------------------------------------
Securities lending not to exceed X X
one-third of total fund assets
- ------------------------------------------------------------------------------------------------------------------
When-issued and forward X X X
commitment securities
- ------------------------------------------------------------------------------------------------------------------
Forward currency contracts2 X
- ------------------------------------------------------------------------------------------------------------------
Purchase options on securities
and currencies3
- ------------------------------------------------------------------------------------------------------------------
Purchase options on securities
and indices3
- ------------------------------------------------------------------------------------------------------------------
Write covered call options3 X
- ------------------------------------------------------------------------------------------------------------------
Write covered put options3
- ------------------------------------------------------------------------------------------------------------------
Interest rate futures contracts4
- ------------------------------------------------------------------------------------------------------------------
Futures and swaps and options X
on futures4
- ------------------------------------------------------------------------------------------------------------------
Equity swap
- ------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to X
5% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to
10% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------
Illiquid securities limited to X X
15% of fund's net assets
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
1 Under the Investment Company Act, repurchase agreements and reverse dollar
roll transactions are considered to be loans by a fund and must be fully
collateralized by collateral assets. If the seller defaults on its
obligations to repurchase the underlying security, a fund may experience
delay or difficulty in exercising it rights to realize upon the security,
may incur a loss if the value of the security declines and may incur
disposition costs in liquidating the security.
2 A fund that may invest in forward currency contracts may not invest more
than 70% of its assets in such contracts.
3 A fund will not enter into options on securities, securities indices or
currencies or related options (including options on futures) if the sum of
initial margin deposits and premiums paid for any such option or options
would exceed 5% of its total assets, and it will not enter into options
with respect to more than 25% of its total assets.
4 A Fund may purchase and sell futures contracts and related options under
the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased
under open futures contracts shall not exceed 30% of the Fund's total
assets, at market value; and (b) no more than 5% of the assets, at market
value at the time of entering into a contract, shall be committed to margin
deposits in relation to futures contracts.
Borrowing
Funds may borrow up to 5% of their total assets for temporary or emergency
purposes.
Defensive Investments and Portfolio Turnover
Each Lexington Fund may invest up to 100% of its total assets in cash or
high-quality debt obligations for temporary defensive purposes.
The "portfolio turnover rate" is the frequency a Fund buys and sells
securities. Frequent transactions involve added expense. The following funds
expect a portfolio turnover rate of greater than 100%:
Hedging and Risk Management Practices
The Lexington Funds (other than the Money Market Trust) may "hedge" against
changes in financial markets, currency rates and interest rates. A typical hedge
is designed to offset a decline that could hurt the value of the Fund's
securities. The Lexington Funds may hedge with "derivatives." Derivatives are
instruments whose value is linked to, or derived from, another instrument, like
an index or a commodity. Some Lexington Funds (see chart) may invest in options
and futures contracts.
Hedging transactions involve certain risks. Although a Fund may benefit
from hedging, unanticipated changes in interest rates or securities prices may
result in greater losses for a Fund than if it did not hedge. If a Fund does not
correctly predict a hedge, it may lose money. In addition, a Fund pays
35
<PAGE>
commissions and other costs in connection with such investments. Hedging
transactions may not exist is some countries.
Investment Restrictions
The investment objective of each Lexington Fund is fundamental and may not
be changed without shareholder approval but, unless otherwise stated, each
Fund's other investment policies may be changed by its Board. If a Fund changes
its investment objective or policies, you should consider whether that Fund is
right for you. The Lexington Funds are subject to additional investment policies
and restrictions described in the Statement of Additional Information, some of
which are fundamental.
RISK CONSIDERATIONS
Small Companies
The Lexington Crosby Small Cap Asia Growth Fund and Lexington Small Cap
Value Fund emphasize investments in smaller companies that may benefit from the
development of new products and services. Such smaller companies may present
greater opportunities for capital appreciation but may involve greater risk than
larger, more mature issuers. Such smaller companies may have limited product
lines, markets or financial resources, and their securities may trade less
frequently and in more limited volume than those of larger, more mature
companies. As a result, the prices of their securities may fluctuate more than
those of larger issuers.
Many companies traded on securities markets in many foreign countries are
smaller, newer and less seasoned than companies whose securities are traded on
securities markets in the United States. Investments in smaller companies
involve greater risk than is customarily associated with investing in larger
companies. Smaller companies may have limited product lines, markets or
financial or managerial resources and may be more susceptible to losses and
risks of bankruptcy. Additionally, market making and arbitrage activities are
generally less extensive in such markets and with respect to such companies,
which may contribute to increased volatility and reduced liquidity of such
markets or such securities. Accordingly, each of these markets and companies may
be subject to greater influence by adverse events generally affecting the
market, and by large investors trading significant blocks of securities, than is
usual in the United States. To the extent that any of these countries
experiences rapid increases in its money supply and investment in equity
securities for speculative purposes, the equity securities traded in any such
country may trade at price-earning multiples higher than those of comparable
companies trading on securities
36
<PAGE>
markets in the United States, which may not be sustainable. In addition, risks
due to the lack of modern technology, the lack of a sufficient capital base to
expand business operations, the possibility of permanent or temporary
termination of trading, and greater spreads between bid and ask prices may exist
in such markets.
Foreign Securities
The Lexington Crosby Small Cap Asia Growth Fund, Lexington Global Fund,
Lexington Goldfund, Lexington Growth and Income Fund, Lexington International
Fund, Lexington Ramirez Global Income Fund, Lexington Troika Dialog Russia Fund
and Lexington Worldwide Emerging Markets Fund have the right to purchase
securities in foreign countries. Accordingly, shareholders should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks of loss inherent in domestic investments. The Lexington Crosby Small Cap
Asia Growth Fund and Lexington Global Fund, and particularly the Lexington
Ramirez Global Income Fund, Lexington Troika Dialog Russia Fund and Lexington
Worldwide Emerging Markets Fund, may invest in securities of companies domiciled
in, and in markets of, so-called emerging market countries. These investments
may be subject to higher risks than investments in more developed countries.
Foreign investments involve the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends) or
other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country and repatriation of investments), default in
foreign government securities, and political or social instability or diplomatic
developments that could adversely affect investments. In addition, there is
often less publicly available information about foreign issuers than those in
the U.S. Foreign companies are often not subject to uniform accounting, auditing
and financial reporting standards. Further, these funds may encounter
difficulties in pursuing legal remedies or in obtaining judgments in foreign
courts. Additional risk factors, including use of domestic and foreign custodian
banks and depositories, are described elsewhere in this Prospectus and in the
Statement of Additional Information.
Brokerage commissions, fees for custodial services and other costs relating
to investments in other countries are generally greater than in the U.S. Foreign
markets have different clearance and settlement procedures from those in the
U.S., and certain markets have experienced times when
37
<PAGE>
settlements did not keep pace with the volume of securities transactions. The
inability of a fund to make intended security purchases due to settlement
difficulties could cause it to miss attractive investment opportunities.
Inability to sell a portfolio security due to settlement problems could result
in loss to the fund if the value of the portfolio security declined or result in
claims against the fund. In certain countries, there is less government
supervision and regulation of business and industry practices, stock exchanges,
brokers, and listed companies than in the U.S. The securities markets of many of
the countries in which these funds may invest may also be smaller, less liquid,
and subject to greater price volatility than those in the U.S.
Because certain foreign securities may be denominated in foreign
currencies, the value of such securities will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of a
foreign currency against the U.S. dollar results in a corresponding change in
the U.S. dollar value of a fund's securities denominated in the currency. Such
changes also affect the fund's income and distributions to shareholders. A fund
may be affected either favorably or unfavorably by changes in the relative rates
of exchange between the currencies of different nations, and a fund may
therefore engage in foreign currency hedging strategies. Such strategies,
however, involve certain transaction costs and investment risks, including
dependence upon the Manager's ability to predict movements in exchange rates.
Some countries in which one of these funds may invest also may have fixed
or managed currencies that are not freely convertible at market rates into the
U.S dollar. Certain currencies may not be internationally traded. A number of
these currencies have experienced steady devaluation relative to the U.S.
dollar, and such devaluations in the currencies may have a detrimental impact on
the fund. Many countries in which a fund may invest have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuation in inflation rates may have negative
effects on certain economies and securities markets. Moreover, the economies of
some countries may differ favorably or unfavorably from the U.S. economy in such
respects as the rate of growth of gross domestic product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments. Certain
countries also limit the amount of foreign capital that can be invested in their
markets and local companies, creating a "foreign premium" on capital investments
available to foreign investors such as the fund. The fund may pay a "foreign
premium" to establish an investment position which it cannot later recoup
because of changes in that country's foreign investment laws.
38
<PAGE>
Lower-Quality Debt
The Lexington Convertible Securities, Lexington Troika Dialog Russia and
Lexington Ramirez Global Income Funds are authorized to invest high-yield,
lower-rated debt securities. Lower-rated debt securities are considered highly
speculative and changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than with higher-grade debt securities.
Concentration in Securities of Russian Companies
The Lexington Troika Dialog Russia Fund concentrates its investment in
companies that have their principal activities in Russia. Consequently, the
Lexington Troika Dialog Russian Fund's share value may be more volatile than
that of investment companies not sharing this geographic concentration. Since
the breakup of the Soviet Union at the end of 1991, Russia has experienced
dramatic political and social change. The political system in Russia is emerging
from a long history of extensive state involvement in economic affairs. The
country is undergoing a rapid transition from a centrally-controlled command
system to a market-oriented, democratic model. The Lexington Troika Dialog
Russia Fund may be affected unfavorably by political or diplomatic developments,
social instability, changes in government policies, taxation and interest rates,
currency repatriation restrictions and other political and economic developments
in the law or regulations in Russia and, in particular, the risks of
expropriation, nationalization and confiscation of assets and changes in
legislation relating to foreign ownership. See "Russia" and "Russian Company" in
the Glossary.
The political environment in Russia in 1997 is more stable than in 1993 and
earlier when clashes between reformers and reactionaries were continuous,
setting the stage for an attempted coup d'etat in October 1993. Nevertheless,
there is still a great deal of uncertainty surrounding the political future of
the country. The civil war in Chechnya has highlighted the political tensions
that exist between the central government in Moscow and some of the regions
within the Russian Federation and has contributed to political instability by
weakening confidence domestically and internationally in the government. The
risk exists that armed conflict in Chechnya will continue, which could deter
foreign investment and international aid and further weaken the reformist
government's control. A continuing trend away from reformers toward
conservatives could further deter foreign investment if foreign policy
initiatives contrary to western interests (Iran, Iraq) lead to a deterioration
in relations between the Russian Federation and the West. The risk also exists
that the political tensions associated with the war in Chechnya will lead to
attempts for independence in other regions within the
39
<PAGE>
Russian Federation. The war in Chechnya and other inflammatory issues may also
lead to greater tensions and divisions between the President and the
legislature.
The military could have a negative impact on Russia's political and
economic future. The declining stature of Russia as a world power has led to a
widespread sentiment among Russians for a return to Russia's status as a
superpower. Demobilization of troops, cuts in the military budget, the growth of
significant gaps in living standards between the military and civilian sectors,
and the perception of an external threat from NATO could lead to further
political unrest.
Moreover, it is uncertain whether Russia's privatization process will
continue. Although government officials have publicly pledged their continued
support for the reform process. It is also unclear whether the reforms intended
to liberalize prevailing economic structures based on free market principles
will be successful, particularly in terms of foreign ownership of Russian
companies.
The planned economy of the former Soviet Union was run with qualitatively
different objectives and assumptions from those prevalent in a market system and
Russian businesses do not have any recent history of operating within a
market-oriented economy. In general, relative to companies operating in Western
economies, companies in Russia are characterized by a lack of: (i) management
with experience of operating in a market economy; (ii) modern technology; and,
(iii) a sufficient capital base with which to develop and expand their
operations. It is unclear what will be the future effect on Russian companies,
if any, of Russia's continued attempts to move toward a more market-oriented
economy.
Russia's economy has experienced severe economic recession, if not
depression, since 1990 during which time the economy has been characterized by
high rates of inflation, high rates of unemployment, declining gross domestic
product, deficit government spending, and a devaluing currency. The economic
reform program has involved major disruptions and dislocations in various
sectors of the economy. The economic problems have been exacerbated by a growing
liquidity crisis which culminated in a bank liquidity crisis in August 1995. The
taxation system has had numerous attempts at reform, but a failure to collect
taxes is an ongoing major problem.
Russia presently receives significant financial assistance from a number of
countries through various programs. To the extent these programs are reduced or
eliminated in the future, Russian economic development may be adversely
impacted.
40
<PAGE>
The Russian securities markets are substantially smaller, less liquid and
significantly more volatile than the securities markets in the United States. In
addition, there is little historical data on these securities markets because
they are of recent origin. A substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges and
over-the-counter markets. A limited number of issuers represent a
disproportionately large percentage of market capitalization and trading volume.
Some issuers may be exposed to center-regional conflicts in jurisdiction in the
areas of taxation and overall corporate governance which could put the Fund's
investments at risk. In addition, because the Russian securities markets are
smaller and less liquid than in the United States, obtaining prices on portfolio
securities from independent sources may be more difficult than in other markets.
Although evolving rapidly, even the largest of Russia's stock exchanges are
not well developed compared to Western stock exchanges. The actual volume of
exchange-based trading in Russia is low and active on-market trading generally
occurs only in the shares of a few private companies. Most secondary market
trading of equity securities occurs through over-the-counter trading facilitated
by a growing number of licensed brokers. Shares are traded on the
over-the-counter market primarily by the management of enterprises, investment
funds, short-term speculators and foreign investors.
Interest Rates
The market value of debt securities that are interest rate sensitive is
inversely related to changes in interest rates. That is, an interest rate
decline produces an increase in a security's market value, and an interest rate
increase produces a decrease in value. The longer the remaining maturity of a
security, the more sensitive that security is to changes in interest rates.
Changes in the ability of an issuer to make payments of interest and principal
and in the market's perception of the issuer's creditworthiness also affect the
market value of that issuer's debt securities.
Prepayments of principal of mortgage-related securities by mortgagors or
mortgage foreclosures affect the average life of the mortgage-related securities
in a fund's portfolio. Mortgage prepayments are affected by the level of
interest rates and other factors, including general economic conditions and the
underlying location and age of the mortgage. In periods of rising interest
rates, the prepayment rate tends to decrease, lengthening the average life of a
pool of mortgage-related securities. In periods of falling interest rates, the
prepayment rate tends to increase, shortening the average life of a pool.
Because prepayments of principal generally occur when interest rates are
declining, it is likely that the Lexington GNMA Income Fund may have to reinvest
the proceeds of prepayments at lower interest rates
41
<PAGE>
than those of their previous investments. If this occurs, a fund's yield will
decline correspondingly. Thus, mortgage-related securities may have less
potential for capital appreciation in periods of falling interest rates than
other fixed-income securities of comparable duration, although they have a
comparable risk of decline in market value in periods of rising interest rates.
To the extent that the Lexington GNMA Income Fund purchases mortgage-related
securities at a premium, unscheduled prepayments, which are made at par, result
in a loss equal to any unamortized premium. Duration is one of the fundamental
tools used by the Manager in managing interest rate risks including prepayment
risks. See "Duration" in the Glossary.
Non-diversified Portfolio. The Lexington Goldfund and Lexington Troika
Dialog Russia Fund are "non-diversified" investment companies under the
Investment Company Act. This means that the Lexington Goldfund and Lexington
Troika Dialog Russia Fund are not limited in the proportion of their total
assets that may be invested in a single company. The Lexington Goldfund and
Lexington Troika Dialog Russia Fund may invest a greater portion of their assets
in fewer companies than "diversified" funds, and thus may be subject to greater
risk. The Lexington Goldfund and Lexington Troika Dialog Russia Fund, however,
intend to comply with the diversification requirements of federal tax laws to
qualify as a regulated investment company.
MANAGEMENT OF THE FUNDS
Board of Directors/Trustee
Each Lexington Fund has either a Board of Directors or a Board of Trustees
that establishes its policies and supervises and reviews its management.
Day-to-day operations of the Lexington Funds are administered by the officers of
the Lexington Funds and by the Manager and Sub-Advisers pursuant to the terms of
an investment management agreement with each fund and investment sub-advisory
agreements between the Manager and the Sub-Advisers.
Board of Advisers
The Lexington Troika Dialog Russia Fund's Board of Directors will receive
oversight assistance from a Board of Advisers which will be composed of experts
in Russian political and economic affairs. The Board of Advisers will be
responsible for providing the Board of Directors with periodic updates on
political and macroeconomic conditions and trends in Russia, and their potential
implication for the overall investment environment in
42
<PAGE>
Russia. This will enhance the Board of Directors' ability to oversee and
safeguard the assets of the Lexington Troika Dialog Russia Fund.
Investment Adviser
Lexington Management Corporation is the Manager of the Lexington Funds. The
Manager was formed in 1938 and is an investment adviser registered as such with
the Securities and Exchange Commission under the Investment Advisers Act of
1940, as amended. The Manager advises private clients as well as the Lexington
Funds. The Manager is a wholly-owned subsidiary of Lexington Global Asset
Managers, Inc., a Delaware corporation. Descendants of Lunsford Richardson, Sr.,
their spouses, trusts and other related entities have a controlling interest in
Lexington Global Asset Managers, Inc.
THE SUB-ADVISERS
Lexington Convertible Securities Fund
The Manager has entered into a Sub-Advisory Agreement with Ariston Capital
Management Corporation ("Ariston"). Under the Sub-Advisory Agreement, Ariston
will provide the Lexington Convertible Securities Fund with investment
management and administrative services. Ariston also serves as investment
adviser to private and institutional investment accounts. Such accounts own a
significant number of shares of the Lexington Convertible Securities Fund as
part of their investment program. Ariston was founded in 1977 and provides
investment management to individuals, corporations, pension and profit sharing
plans, and other qualified retirement plan accounts. Ariston is recognized for
its expertise in portfolio management, specializing in convertible securities
and market forecasting.
Lexington Crosby Small Cap Asia Growth Fund
The Manager has entered into a Sub-Advisory Agreement with Crosby Asset
Management (US) Inc. ("Crosby"). Under the Sub-Advisory Agreement, Crosby will
provide the Lexington Crosby Small Cap Asia Growth Fund with investment
management services. Crosby was established on October 4, 1990 in the British
Virgin Islands. Crosby manages assets and provides investment advice for
investment company and institutional private accounts around the world. It is a
subsidiary of the Crosby Group.
43
<PAGE>
Lexington Ramirez Global Income Fund
The Manager has entered into a Sub-Advisory Agreement with MFR Advisors,
Inc. ("MFR"). Under the Sub-Advisory Agreement, MFR will provide the Lexington
Ramirez Global Income Fund with investment and economic research services. MFR
does not manage any assets for investment companies, but is an institutional
manager for private clients. MFR is a subsidiary of Maria Fiorini Ramirez, Inc.
Lexington SmallCap Value Fund
The Manager has entered into a Sub-Advisory Agreement with Capital
Technology Inc. ("CTI"). Under the Sub-Advisory Agreement, CTI will provide the
Lexington SmallCap Value Fund with investment advice and management of the
Fund's investment program. CTI was founded in Charlotte, North Carolina in 1977
and invests exclusively in domestic smaller capitalization stocks. CTI currently
manages assets both small and mid cap growth and value styles for primarily
institutional clients.
Lexington Troika Dialog Russia Fund
The Manager has entered into a Sub-Advisory Agreement with Troika Dialog
Asset Management ("TDAM"). Under the Sub-Advisory Agreement, TDAM will provide
the Lexington Troika Dialog Russia Fund with investment advice and management of
the Fund's investment program. TDAM is a wholly owned subsidiary of Troika
Dialog which was founded in Moscow, Russia in 1991 by Dialog Bank and Troika
Capital Corporation.
The Manager as owner of the registered service mark "Lexington" will
sublicense the Sub-Advised Funds to include the word "Lexington" as part of
their names subject to revocation by the Manager in the event that the Funds
cease to engage the Manager or its affiliates as investment manager or
distributor. Crosby has authorized the Lexington Crosby Small Cap Asia Growth
Fund to include the word "Crosby" as part of its corporate name subject to
revocation by Crosby in the event the Lexington Crosby Small Cap Asia Growth
Fund ceases to engage Crosby as Sub-Adviser. In that event the Funds will be
required upon demand of the Manager (or with regard to the Lexington Crosby
Small Cap Asia Growth Fund, Crosby) to change their respective names to delete
the word "Lexington" (or with regard to the Lexington Crosby Small Cap Asia
Growth Fund, "Crosby") therefrom.
44
<PAGE>
PORTFOLIO MANAGERS
Lexington Convertible Securities Fund
Richard B. Russell manages the Lexington Convertible Securities Fund. Mr.
Russell is President of Ariston Capital Management Corporation, the Lexington
Convertible Securities Fund's Sub-Adviser. He is a graduate of the School of
Business at the University of Washington and has completed additional training
at the New York Institute of Finance. He is a recognized authority on portfolio
management, particularly through the use of convertible securities and market
forecasting. He has spent his entire professional career as an independent money
manager, dating from 1972. Before founding Ariston in 1977, he was a full-time
manager of private family assets. Mr. Russell has conducted extensive research
on investment topics.
Lexington Crosby Small Cap Asia Growth Fund
Christina Lam is a lead manager (Nigel Webber is the other lead manager) on
a portfolio management team that manages the Lexington Crosby Small Cap Asia
Growth Fund. Ms. Lam is Vice President and Portfolio Manager of the Lexington
Crosby Small Cap Asia Growth Fund. Ms. Lam joined Crosby Asset Management in
1991. She is responsible for the investment management of the listed equity
portfolios under the management of Crosby Asset Management which include a major
Asian small capitalization account. After graduating with a Law Degree with
Honors from Warwick University, she qualified as a Barrister from Lincoln's Inn
in London. She moved to Hong Kong in 1987 where she joined Schroder Securities
Limited in Hong Kong as an investment analyst, where her coverage included the
utilities, industrials and retail sectors and conglomerates.
Nigel Webber is a lead manager (Ms. Lam is the other lead manager) on a
portfolio management team that manages the Lexington Crosby Small Cap Asia
Growth Fund. Mr. Webber is Vice President and Portfolio Manager of the Lexington
Crosby Small Cap Asia Growth Fund. Mr. Webber is responsible for the Fund's
overall investment strategy. Mr. Webber was appointed a Managing Director of
Crosby Asset Management in October 1993 with primary responsibility for business
development. He joined Crosby Asset Management after being a partner in Causeway
Capital Limited, a leading independent U.K. investment management firm
specializing in private equity investment and smaller listed companies. He
started his career at KPMG Peat Marwick, followed by five years at Citicorp
International Bank Limited in London and New York and three years with
Mercantile House Holdings PLC a leading financial services group. In 1987, he
joined as Managing Director, an investment company specializing in the
45
<PAGE>
financial sector where he first became associated with the Crosby Group. He was
a Director and member of the investment committee of The Thai Development
Capital Fund Limited and The China Investment Company Ltd., two funds managed by
Crosby Asset Management from their launch until September 1993.
Lexington Global Fund
Richard Saler is part of an investment management team that manages the
Lexington Global Fund. Mr. Saler is Senior Vice President, Director of
International Investment Strategy of the Manager. Mr. Saler is responsible for
international investment analysis and portfolio management at the Manager. He
has ten years of investment experience. Mr. Saler has focused on international
markets since first joining the Manager in 1986. In 1991 he was a strategist
with Nomura Securities and rejoined the Manager in 1992. Mr. Saler is a graduate
of New York University with a B.S. Degree in Marketing and an M.B.A. in Finance
from New York University's Graduate School of Business Administration.
Phillip A. Schwartz is part of an investment management team that manages
the Lexington Global Fund. Mr. Schwartz is a Vice President of the Manager,
Chartered Financial Analyst and member of the New York Security Analysts
Association. He is responsible for international investment analysis and
portfolio management at the Manager, and has eight years investment experience.
Prior to joining Lexington in 1993, Mr. Schwartz was Vice President of European
Research Sales with Cheuvreux Devirieu in Paris and New York, serving the
institutional market. Prior to Cheuvreux, he was affiliated with Olde and Co.
and Kidder, Peabody as a stockbroker. Mr. Schwartz earned his B.A. and M.A.
degrees from Boston University.
Alan Wapnick is part of an investment management team that manages the
Lexington Global Fund. Mr. Wapnick is Senior Vice President, Director of
Domestic Investment Equity Strategy at the Manager. Mr. Wapnick is responsible
for domestic investment analysis and portfolio management at LMC. He has 26
years investment experience. Prior to joining the Manager 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.
Lexington GNMA Income Fund
Denis P. Jamison manages the Lexington GNMA Income Fund. Mr. Jamison is
Senior Vice President and Director Fixed Income Strategy of Lexington Management
Corporation. Mr. Jamison is responsible for fixed-
46
<PAGE>
income portfolio management. He is a member of the New York Society of Security
Analysts. Prior to joining the Manager in 1981, Mr. Jamison had spent nine years
at Arnold Bernhard & Company, an investment counseling and financial services
organization. At Bernhard, he was a Vice President supervising the security
analyst staff and managing investment portfolios. He is a specialist in
government, corporate and municipal bonds. Mr. Jamison is a graduate of the City
College of New York with a B.A. in Economics.
Lexington Goldfund
Robert W. Radsch, CFA, is portfolio manager of the Lexington Goldfund. Mr.
Radsch is a Vice President of the Manager. Prior to joining Lexington in July
1994, he was Senior Vice President, Portfolio Manager and Chief Economist for
the Bull & Bear Group. He has extensive experience managing gold, silver and
platinum on an international basis having managed precious metals and
international funds for more than 13 years. Mr. Radsch is a graduate of Yale
University with a B.A. degree and holds an M.B.A. in Finance from Columbia
University.
Lexington Growth and Income Fund
Mr. Wapnick is portfolio manager of the Lexington Growth and Income Fund.
Lexington International Fund
Mr. Saler and Mr. Schwartz manage the Lexington International Fund as an
investment management team. Mr. Saler is the lead manager and Mr. Schwartz is
the co-manager.
Lexington Money Market Trust
Mr. Jamison is portfolio manager of the Lexington Money Market Trust.
Lexington Ramirez Global Income Fund
Maria Fiorini Ramirez, President and Chief Executive Officer of MFR
Advisors Inc., began her career as a credit analyst with American Express
International Banking Corporation in 1968. In 1972, she moved to Banco Nazionale
De Lavoro in New York. The following year, she started a ten year association
with Merrill Lynch, serving as Vice President and Senior Money Market Economist.
She joined Becker Paribas in 1984 as Vice President and Senior Money Market
Economist before joining Drexel Burnham Lambert that same year as First Vice
President and Money Market Economist. She was promoted to Managing Director of
Drexel in 1986. From April, 1990 to
47
<PAGE>
August 1992, Ms. Ramirez was the President and Chief Executive Officer of Maria
Ramirez Capital Consultants, Inc., a subsidiary of John Hancock Freedom
Securities Corporation. Ms. Ramirez established MFR in August, 1992, MFR is
Sub-Adviser to the Lexington Ramirez Global Income Fund. Ms. Ramirez holds a
B.A. in Business Administration and Economics from Pace University.
Lexington Small Cap Value Fund
Dennis Hamilton is one of two lead managers (Robb W. Rowe is the other lead
manager) of a portfolio management team that manages the Lexington SmallCap
Value Fund. Mr. Hamilton is Vice President and Portfolio Manager of CTI. He is
responsible for issue selection and the day to day investment activities of the
SmallCap Value Fund. Mr. Hamilton joined CTI in 1994 after being a principal at
Mercer Investment Consulting, Inc. He has also served as Director of Pension
Investment for several multi-billion dollar corporate pension funds and was
President and Chief Investment Officer of Western Reserve Capital Management,
Inc., an SEC registered investment advisor. He is an Honors graduate of Colgate
University and earned an MBA from Harvard Business School in 1971.
Robb W. Rowe is one of two lead managers (Mr. Hamilton is the other lead
manager) of a portfolio management team that manages the Lexington SmallCap
Value Fund. Mr. Rowe is President and principal shareholder of CTI. He is
responsible for the SmallCap Value Fund's overall investment strategy. Mr. Rowe
joined CTI in 1982 after being Vice President and Regional Manager of AG Becker
Co. He is a graduate of Ripon College and receive an MBA from the University of
Chicago in 1971.
Lexington Troika Dialog Russia Fund
Peter Derby is a manager on a portfolio management team (the other members
of the portfolio management team include Gavin Rankin and Ruben Vardanian) that
manages the Lexington Troika Dialog Russia Fund. Mr. Derby is the Chairman of
the Board of TDAM and is the President, Chief Executive Officer and founder of
Troika Dialog and is the President and Chief Executive Officer of Dialog Bank, a
position he has held since 1991. Mr. Derby participated in the drafting of
corporate, banking and securities legislation in Russia and is currently a
member of the Expert Council of Russia's Federal Securities Exchange Commission.
Mr. Derby holds numerous director positions in Russian enterprises and
charities; he is a founding and current Member of the Board of the Moscow
International Currency Exchange, and is a Member of the Board of Directors of
the American Chamber of Commerce in Russia.
48
<PAGE>
Mr. Derby is Treasurer and Member of the Board of Junior Achievement in Russia.
He is a founding Member of the Russian-American Professional Club in New York
City.
Gavin Rankin is is the lead manager of a portfolio management team (the
other members of the portfolio management team include Mr. Peter Derby and Mr.
Ruben Vardanian) that manages the Lexington Troika Dialog Russia Fund. Mr.
Rankin Head of Research for TDAM and Troika Dialog. He is responsible, along
with other members of the portfolio management team, for the Fund's overall
investment strategy. Before joining Troika Dialog, he was the Founder and Chief
Executive Officer of Lonpra A.S., an investment banking firm in Czechoslovakia
in 1991. Mr. Rankin received a degree in law (L.L.B.) from the University of
Buckingham in England and also qualified as a Chartered Accountant with Price
Waterhouse. Mr. Rankin has extensive experience in East European equity research
and management.
Ruben Vardanian is a manager on a portfolio management team (the other
members of the portfolio management team include Mr. Peter Derby and Mr. Gavin
Rankin) that manages the Lexington Troika Dialog Russia Fund. Mr. Vardanian is
President of TDAM and Executive Director of Troika Dialog. Mr. Vardanian, a
Russian national, is a sitting member of the Moscow Times Index Composition
Committee. He is a Director and former Chairman of the Board of Directors of the
Depository Clearing Company. He is also Chairman of the Board of Directors of
the Russian capital markets self-regulatory organization (PAUFOR). Mr. Vardanian
received a Masters Degree with Distinction from the Finance Department of Moscow
State University. He received post-graduate training with Banca CRT in Italy and
the Emerging Markets Division of Merrill Lynch in New York.
Lexington Worldwide Emerging Markets Fund
Mr. Saler is the lead manager of an investment management team that manages
the Lexington Worldwide Emerging Markets Fund.
49
<PAGE>
HOW TO DO BUSINESS WITH THE FUNDS
How to Contact the Funds .................................................... 51
How to Invest in the Funds .................................................. 51
How to Redeem an Investment in the Funds .................................... 54
Exchange Privileges and Restrictions ........................................ 56
FUND INFORMATION
How Net Asset Value Is Determined ........................................... 57
Dividends and Distributions ................................................. 58
Taxation .................................................................... 60
General Information ......................................................... 61
Backup Withholding .......................................................... 63
Glossary .................................................................... 64
50
<PAGE>
HOW TO CONTACT THE FUNDS
Call a Lexington shareholder service representative for information on the
Funds or your account, at:
(800) 526-0056 or
(201) 845-7300 for Service
(800) 526-0052 for 24 Hour
Account Information
Mail your completed application, any checks, investment or redemption
instructions and correspondence to the Transfer Agent:
Transfer Agent:
State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
How to Invest in the Funds
The Funds' shares are offered directly to the public, with no sales load,
at their nextdetermined net asset value after receipt of an order with payment.
The Funds' shares are offered for sale by State Street Bank and Trust Company
(the "Transfer Agent") and through selected securities brokers and dealers.
If an order, together with payment in proper form, is received by the
Transfer Agent by 4:00 p.m., New York time, on any day that the New York Stock
Exchange ("NYSE") is open for trading, fund shares will be purchased at the
fund's next-determined net asset value. Orders for fund shares received after
the Funds' cutoff times will be purchased at the next-determined net asset value
after receipt of the order.
The minimum investment in each fund is described in this section. The
Manager or the Distributor, in its discretion, may waive these minimums. The
Funds do not accept third-party checks or cash investments. Checks must be in
U.S. dollars and, to avoid fees and delays, drawn only on banks located in the
U.S. See the Statement of Additional Information for further details.
51
<PAGE>
Initial Investments
Minimum Initial Investment (except Lexington
Troika Dialog Russia Fund): $1,000
Minimum Initial Investment for the Lexington Troika
Dialog Russia Fund: $5,000
Initial Investments by Check
o Complete the New Account Application. Tell us in which fund(s) you
want to invest and make your check payable to The Lexington Funds.
o Mail the New Account Application and check to the Transfer Agent at
the address given above.
o A charge may be imposed on checks that do not clear.
o The Funds and the Distributor each reserve the right to reject any
purchase order in whole or in part.
Initial Investments by Wire
o Shares of the following Funds may be purchased by wire: Lexington
Crosby SmallCap Asia Growth Fund and Lexington Money Market Trust.
o Telephone the Funds toll-free at 1-800-526-0056. Provide the Transfer
Agent with your name, dollar amount to be invested and fund(s) in
which you want to invest. They will provide you with further
instructions to complete your purchase. Complete information regarding
your account must be included in all wire instructions to ensure
accurate handling of your investment.
o Request your bank to transmit immediately available funds by wire for
purchase of shares in your name to the following:
State Street Bank and Trust Company
Attention: Mutual Funds Dept.
Account # 99043713
For Credit to: (shareholder(s) name)
Shareholder Account Number: (shareholder(s) account number)
Name of Fund: (Lexington Fund name)
o A completed New Account Application must then be forwarded to the Fund
at the address on the Application.
o Your bank may charge a fee for any wire transfers.
52
<PAGE>
o The Funds and the Distributor each reserve the right to reject any
purchase order in whole or in part.
Minimum Subsequent Investment: $50
Subsequent Investments by Check
o Make your check payable to The Lexington Funds. Enclose the detachable
form which accompanies the Transfer Agent's confirmation of a prior
transaction with your check. If you do not have the detachable form,
mail your check with written instructions indicating the fund name and
account number to which your investment should be credited.
o A charge may be imposed on checks that do not clear.
Subsequent Investments by Wire
o You do not need to contact the Transfer Agent prior to making
subsequent investments by wire. Instruct your bank to wire funds to
the Transfer Agent using the bank wire information under "Initial
Investments by Wire" above.
"Lex-O-Matic" the Automatic Investment Plan
o A shareholder may make additional purchases of shares automatically on
a monthly or quarterly basis with the automatic investing plan,
"Lex-O-Matic."
o "Lex-O-Matic" will be established on existing accounts only. You may
not use an "Lex-O-Matic" investment to open a new account. The minimum
automatic investment amount is $50.
o Your bank must be a member of the Automated Clearing House.
o To establish Lex-O-Matic, attach a voided check (checking account) or
preprinted deposit slip (savings account) from your bank account to
your Lexington Account Application or your letter of instruction.
Investments will automatically be transferred into your Lexington
Account from your checking or savings account.
o Investments may be transferred either monthly or quarterly on or about
the 15th day of the month.
o You should allow 20 business days for this service to become
effective.
o You may cancel your Lex-O-Matic at any time provided that a letter is
sent to the Transfer Agent ten days prior to the scheduled investment
date. Your request will be processed upon receipt.
53
<PAGE>
By investing in the Lexington Funds, you appoint the Transfer Agent as your
agent to establish an open account to which all shares purchased will be
credited, along with any dividends and capital gain distributions which are paid
in additional shares (see "Dividends and Distributions"). Stock certificates
will be issued, upon written request, for full shares of Lexington Funds.
Certificates will not be issued for 30 days unless payment is made by certified
check, cashier's check or federal funds wire. In order to facilitate redemptions
and transfers, most shareholders elect not to receive certificates
You may purchase shares of the Lexington Funds through broker-dealers or
financial institutions that have selling agreements with LFD. Broker-dealers and
financial institutions that process such orders for customers may charge a fee
for their services. The fee may be avoided by purchasing shares directly from
the Lexington Funds.
HOW TO REDEEM AN INVESTMENT IN THE FUNDS
The Funds will redeem all or any portion of an investors outstanding shares
upon request. Redemptions can be made on any day that the NYSE is open for
trading. The redemption price is the net asset value per share next determined
after the shares are validly tendered for redemption and such request is
received by the Transfer Agent. Payment of redemption proceeds is made promptly
regardless of when redemption occurs and normally within three days after
receipt of all documents in proper form, including a written redemption order
with appropriate signature guarantee. Redemption proceeds will be mailed or
wired in accordance with the shareholders instructions. The Funds may suspend
the right of redemption under certain extraordinary circumstances in accordance
with the rules of the SEC. In the case of shares purchased by check and redeemed
shortly after the purchase, the Transfer Agent will not mail redemption proceeds
until it has been notified that the monies used for the purchase have been
collected, which may take up to 15 days from the purchase date. Shares tendered
for redemptions through brokers or dealers (other than the Distributor) may be
subject to a service charge by such brokers or dealers. Procedures for
requesting a redemption are set forth below.
A 2% redemption fee will be charged on the redemption of shares of the
Troika Dialog Russia Fund held less than 365 days. The redemption fee will not
apply to shares representing the reinvestment of dividends and capital gains
distributions. The redemption fee will be applied on a share by share basis
using the "first shares in, first shares out" (FIFO) method. Therefore, the
oldest shares are considered to have been sold first.
54
<PAGE>
Redeeming by Written Instruction
o Write a letter giving your name, account number, the name of the fund
from which you wish to redeem and the dollar amount or number of
shares you wish to redeem.
o Signature-guarantee your letter if you want the redemption proceeds to
go to a party other than the account owner(s), your predesignated bank
account or if the dollar amount of the redemption exceeds $25,000.
Signature guarantees may be provided by an eligible guarantor
institution such as a commercial bank, an NASD member firm such as a
stock broker, a savings association or national securities exchange.
Contact the Transfer Agent for more information.
o If a redemption request is sent to the Fund in New Jersey, it will be
forwarded to the Transfer Agent and the effective date of redemption
will be the date received by the Transfer Agent.
o Checks for redemption proceeds will normally be mailed within three
business days, but will not be mailed until all checks in payment for
the shares to be redeemed have been cleared. Shareholders who redeem
all their shares will receive a check representing the value of the
shares redeemed plus the accrued dividends through the date of
redemption. Where shareholders redeem only a portion of their shares,
all dividends declared but unpaid will be distribute on the next
dividend payment date.
Redeeming by Telephone
o Shares of the Money Market Trust may redeemed by telephone. Call the
Fund toll free at 1-800-526-0056.
o A redemption authorization and signature guarantee must be given
before a shareholder may redeem by telephone. A redemption
authorization form is contained in the New Account Application and
authorization forms may be obtained by calling the Funds.
o Shareholders may elect on the redemption authorization form to have
redemption proceeds, in any amount of $200 or more, either mailed to
the registered address, wired to a bank account or mailed to any other
designated person. A new form must be completed whenever these
instructions are revised.
o Telephone redemption privileges may be cancelled by instructing the
Transfer Agent in writing. Your request will be processed upon
receipt.
55
<PAGE>
o Exchange by telephone, see below "Exchange Privileges and Restrictions."
Redeeming by Check
o Checkwriting is available on the Money Market Trust.
o The minimum amount per check is $100 or more up to $500,000 at no
charge. Checks for less than $100 or over $500,000 will not be
honored.
o All checks require only one signature unless otherwise indicated.
o Checks will be returned to you at the end of each month.
o Redemption checks are free, but a charge of $15.00 may be imposed for
any stop payments requested.
o Redemption checks should not be used to close your account.
o Procedures for redemptions by telephone, at no charge, or check may
only be used for shares for which share certificates have not been
issued, and may not be used to redeem shares purchased by check which
have been on the books of the Fund for less than 15 days.
Systematic Withdrawal Plan
Under a Systematic Withdrawal Plan, a shareholder with an account value of
$10,000 or more in a fund may receive (or have sent to a third party) periodic
payments (by check or wire). If the proceeds are to be mailed to a third party a
signature guarantee is required. The minimum payment amount is $100 from each
fund account. Payments may be made either monthly or quarterly on the 1st of
each month. Depending on the form of payment requested, shares will be redeemed
up to five business days before the redemption proceeds are scheduled to be
received by the shareholder. The redemption may result in the recognition of
gain or loss for income tax purposes.
EXCHANGE PRIVILEGES AND RESTRICTIONS
Shares of the Lexington Funds may be exchanged for shares of equivalent
value of any Lexington Fund. If an exchange involves investing in a Lexington
Fund not already owned, the dollar amount of the exchange must meet the minimum
initial investment amount. An exchange may result, in a recognized gain or loss
for income tax purposes. Exchanges of over $500,000 will take three days to
complete. See the discussion of fund telephone procedures and limitations of
liability under "Telephone Transactions" above.
56
<PAGE>
Purchasing and Redeeming Shares by Exchange
o You may make exchange requests in writing or by telephone. Telephone
exchanges may only be made if you have completed a Telephone
Authorization form. Telephone exchanges may not be made within 7 days
of a previous exchange.
o The minimum exchange required is $500.
o Telephone exchanges may only involve shares held on deposit by the
Transfer Agent, not shares held in certificate form by the
shareholder.
o Any new account established by a shareholder will also have the
privilege of exchange by telephone in the Lexington Funds. All
accounts involved in a telephonic exchange must have the same dividend
option as the account from which the shares are transferred.
HOW NET ASSET VALUE IS DETERMINED
The net asset value of each Fund is determined once daily as of 4:00 p.m.,
New York time, on each day that the NYSE is open for trading. Per share net
asset value is calculated by dividing the value of each fund's total net assets
by the total number of that fund's shares then outstanding.
As more fully described in the Statement of Additional Information,
portfolio securities are valued using current market valuations: either the last
reported sales price or, in the case of securities for which there is no
reported last sale and fixed-income securities, the mean between the closing bid
and asked price. Securities traded over-the-counter are valued at the mean
between the last current bid and asked price. Securities for which market
quotations are not readily available or which are illiquid are valued at their
fair values as determined in good faith under the supervision of the Funds'
officers, and by the Manager and the Boards, in accordance with methods that
are specifically authorized by the Boards. Short-term obligations with
maturities of 60 days or less are valued at amortized cost as reflecting fair
value. When Fund management deems it appropriate prices obtained for the day of
valuation from a third party pricing service will be used for the Lexington
Troika Dialog Russia Fund.
The value of securities denominated in foreign currencies and traded on
foreign exchanges or in foreign markets will be translated into U.S. dollars at
the last price of their respective currency denomination against U.S. dollars
quoted by a major bank or, if no such quotation is available, at the rate of
exchange determined in accordance with policies established in good faith by the
Boards. Because the value of securities denominated in foreign currencies must
be translated into U.S. dollars, fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of fund shares even
without any change in the foreign-currency denominated values of such
securities.
57
<PAGE>
Because foreign securities markets may close before the Funds determine
their net asset values, events affecting the value of portfolio securities
occurring between the time prices are determined and the time the Funds
calculate their net asset values may not be reflected unless the Manager, under
supervision of the Board, determines that a particular event would materially
affect a fund's net asset value.
DISTRIBUTION PLAN
The Lexington Convertible Securities Fund, Lexington Goldfund, Lexington
Growth and Lexington Income Fund, Lexington International Fund, Lexington
Ramirez Global Income Fund, Lexington SmallCap Value Fund and Lexington Troika
Dialog Russia Fund have each adopted a Distribution Plan. The Distribution Plan
provides that the Funds may pay distribution fees up to 0.25% of their average
daily net assets for distribution services.
SHAREHOLDER SERVICE AGREEMENTS
The Lexington Crosby Small Cap Asia Growth Fund, Lexington Global Fund,
Lexington GNMA Income Fund and Lexington Worldwide Emerging Markets Fund may
enter into Shareholder Servicing Agreements with one or more Shareholder
Servicing Agents. The Shareholder Servicing Agents provide various services to
shareholders. For these services, each Shareholder Servicing Agent receives fees
up to 0.25% of the average daily net assets of the Fund represented by shares
owned during the period for which payment is made. The Manager, at no additional
cost to the Funds, may pay to Shareholder Servicing Agents additional amounts
from its past profits. Each Shareholder Servicing Agent may, from time to time,
voluntarily waive all or a portion of the fees payable to it.
58
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each fund distributes substantially all of its net investment income and
net capital gains to shareholders each year. The amount and frequency of fund
distributions are not guaranteed and are at the discretion of the Board.
Currently, the Lexington Funds intend to distribute according to the following
schedule:
<TABLE>
<CAPTION>
Income Dividends Capital Gains
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lexington Convertible Declared and paid quarterly Declared and paid annually
Securities
Lexington Growth and Income
Lexington Ramirez Global
Income
- ---------------------------------------------------------------------------------------------------------------------------
Lexington GNMA Income Declared and paid monthly Declared and paid annually
- ---------------------------------------------------------------------------------------------------------------------------
Lexington Crosby SmallCap Declared and paid annually Declared and paid annually
Asia Growth
Lexington International
Lexington SmallCap Value
Lexington Troika Dialog
Russia
Lexington Global
Lexington Worldwide
Emerging Markets
- ---------------------------------------------------------------------------------------------------------------------------
Lexington Goldfund Declared daily and paid Declared and paid in
semi-annually annually
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unless investors request cash distributions in writing, all dividends and
other distributions will be reinvested automatically in additional shares of the
applicable fund and credited to the shareholders account at the closing net
asset value on the reinvestment date.
Distributions Affect a Fund's Net Asset Value
Distributions are paid to you as of the record date of a distribution of a
fund, regardless of how long you have held the shares. Dividends and capital
gains awaiting distribution are included in each fund's daily net asset value.
The share price of a fund drops by the amount of the distribution, net of any
subsequent market fluctuations. For example, assume that on December 31, the
Growth and Income Fund declared a dividend in the amount of $0.50 per share. If
the Growth and Income Fund's share price was $10.00 on December 30, the Fund's
share price on December 31 would be $9.50, barring market fluctuations.
59
<PAGE>
"Buying a Dividend"
If you buy shares of a fund just before a distribution, you will pay the
full price for the shares and receive a portion of the purchase price back as a
taxable distribution. This is called "buying a dividend." In the example above,
if you bought shares on December 30, you would have paid $10.00 per share. On
December 31, the Fund would pay you $0.50 per share as a dividend and your
shares would now be worth $9.50 per share. Unless your account is a tax-deferred
account, dividends paid to you would be included in your gross income for tax
purposes even though you may not have participated in the increase of net asset
value of the Fund, regardless of whether you reinvested the dividends.
TAXATION
Each of the funds has elected and intends to continue to qualify to be
treated as a regulated investment company under Subchapter M of the Code, by
distributing substantially all of its net investment income and net capital
gains to its shareholders and meeting other requirements of the Code relating to
the sources of its income and diversification of assets. Accordingly, the Funds
generally will not be liable for federal income tax or excise tax based on net
income except to the extent their earnings are not distributed or are
distributed in a manner that does not satisfy the requirements of the Code. If a
fund is unable to meet certain Code requirements, it may be subject to taxation
as a corporation. Funds investing in foreign securities also may incur tax
liability to the extent they invest in "passive foreign investment companies."
See "Portfolio Securities" and the Statement of Additional Information.
For federal income tax purposes, any dividends derived from net investment
income and any excess of net short-term capital gain over net long-term capital
loss that investors (other than certain tax-exempt organizations that have not
borrowed to purchase fund shares) receive from the Funds are considered ordinary
income. Part of the distributions paid by the Funds may be eligible for the
dividends-received deduction allowed to corporate shareholders under the Code.
Distributions of the excess of net long-term capital gain over net short-term
capital loss from transactions of a fund are treated by shareholders as
long-term capital gains regardless of the length of time the fund's shares have
been owned. Distributions of income and capital gains are taxed in the manner
described above, whether they are taken in cash or are reinvested in additional
shares of the Funds.
Each fund will inform its investors of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise investors of the tax status of those distributions
60
<PAGE>
and dividends. Investors (including tax exempt and foreign investors) are
advised to consult their own tax advisers regarding the particular tax
consequences to them of an investment in shares of the Funds. Additional
information on tax matters relating to the Funds and their shareholders is
included in the Statement of Additional Information.
GENERAL INFORMATION
The Funds
The Lexington Convertible Securities Fund, Lexington Money Market Trust and
Lexington Ramirez Global Income Fund are business trusts organized under the
laws of Massachusetts. The Lexington Crosby Small Cap Asia Growth Fund,
Lexington Global Fund, Lexington GNMA Income Fund, Lexington Growth and
Lexington Income Fund, Lexington International Fund, Lexington SmallCap Value
Fund, Lexington Troika Dialog Russia Fund and Lexington Worldwide Emerging
Markets Fund are Maryland corporations. The assets and liabilities of each
business trust and corporation are separate and distinct from each other
business trust or corporation.
The Funds offer other classes of shares to eligible investors and may in
the future designate other classes of shares for specific purposes.
Shareholder Rights
Shares issued by the Funds have no preemptive, conversion or subscription
rights. Each whole share is entitled to one vote as to any matter on which it is
entitled to vote and each fractional share is entitled to a proportionate
fractional vote. Shareholders have equal and exclusive rights as to dividends
and distributions as declared by each fund and to the net assets of each fund
upon liquidation or dissolution. Each fund votes separately on matters affecting
only that fund (e.g., approval of the Investment Management Agreement). Voting
rights are not cumulative, so the holders of more than 50% of the shares voting
in any election of Trustees or Directors can, if they so choose, elect all of
the Trustees or Directors of that Fund. Although the Funds are not required, and
do not intend, to hold annual meetings of shareholders, such meetings may be
called by each Fund's Board at its discretion, or upon demand by the holders of
10% or more of the outstanding shares of the Fund for the purpose of electing or
removing Trustees or Directors. Shareholders may receive assistance in
communicating with other shareholders in connection with the election or removal
of Trustees or Directors pursuant to the provisions of Section 16(c) of the
Investment Company Act.
61
<PAGE>
Performance Information
From time to time, the Funds may publish their total return, and, in the
case of certain funds, current yield and tax equivalent yield in advertisements
and communications to investors. Total return information generally will include
a fund's average annual compounded rate of return over the most recent four
calendar quarters and over the period from the fund's inception of operations. A
fund may also advertise aggregate and average total return information over
different periods of time. Each fund's average annual compounded rate of return
is determined by reference to a hypothetical $1,000 investment that includes
capital appreciation and depreciation for the stated period according to a
specific formula. Aggregate total return is calculated in a similar manner,
except that the results are not annualized. Total return figures will reflect
all recurring charges against each fund's income.
Current yield as prescribed by the SEC is an annualized percentage rate
that reflects the change in value of a hypothetical account based on the income
received from the fund during a 30-day period. It is computed by determining the
net change, excluding capital changes, in the value of a hypothetical
preexisting account having a balance of one share at the beginning of the
period. A hypothetical charge reflecting deductions from shareholder accounts
for management fees or shareholder services fees, for example, is subtracted
from the value of the account at the end of the period, and the difference is
divided by the value of the account at the beginning of the base period to
obtain the base period return. The result is then annualized. See "Performance
Information" in the Statement of Additional Information. Investment results of
the Funds will fluctuate over time, and any presentation of the Funds' total
return or current yield for any prior period should not be considered as a
representation of what an investors total return or current yield may be in any
future period. The Funds' Annual Report contains additional performance
information and is available upon request and without charge by calling (800)
526-0056.
Legal Opinion
The validity of shares offered by this Prospectus will be passed on by
Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York 10022.
Shareholder Reports and Inquiries
During the year, the Funds will send you the following information:
o Confirmation statements are mailed after every transaction that
affects your account balance, except for most money market
transactions
62
<PAGE>
(monthly) and preauthorized automatic investment, exchange and
redemption services (quarterly).
o Annual and semiannual reports are mailed approximately 60 days after
December 31 and June 30.
o 1099 tax form(s) are mailed by January 31.
Unless otherwise requested, only one copy of each shareholder report or
other material sent to shareholders will be mailed to each household with
accounts under common ownership and the same address regardless of the number of
shareholders or accounts at that household or address. Any questions should be
directed to The Lexington Funds at (800) 526-0056.
BACKUP WITHHOLDING
Tax-payer identification number (TIN)
Be sure to complete the Tax-Payer Identification Number section of the
fund's application when you open an account. Federal tax law requires the fund
to withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax-payer identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required.
A shareholder who does not have a TIN should apply for one immediately by
contacting the local office of the Social Security Administration or the IRS.
Backup withholding could apply to payments made to a shareholders account while
awaiting receipt of a TIN. Special rules apply for certain entities. For
example, for an account established under the Uniform Gifts to Minors Act, the
TIN of the minor should be furnished. If a shareholder has been notified by the
IRS that he or she is subject to backup withholding because he or she failed to
report all interest and dividend income on his or her tax return and the
shareholder has not been notified by the IRS that such withholding will cease,
the shareholder should cross out the appropriate item in the Account
Application. Dividends paid to a foreign shareholders account by a fund may be
subject to up to 30% withholding instead of backup withholding.
A shareholder who is an exempt recipient should furnish a TIN and check the
appropriate box. Exempt recipients include certain corporations, certain
tax-exempt entities, tax-exempt pension plans and IRAs, governmental agencies,
financial institutions, registered securities and commodities dealers and
others. For further information, see Section 3406 of the Code and consult a tax
adviser.
63
<PAGE>
----------
This Prospectus is not an offering of the securities herein described in
any state in which the offering is unauthorized. No salesperson dealer or other
person is authorized to give any information or make any representation other
than those contained in this Prospectus, the Statement of Additional
Information, or in the Funds' official sales literature.
----------
GLOSSARY
o Cash equivalents. Cash equivalents are short-term, interest-bearing
instruments or deposits and may include, for example, commercial paper,
certificates of deposit, repurchase agreements, bankers' acceptances, U.S.
Treasury Bills, bank money market deposit accounts, master demand notes and
money market mutual funds. These consist of high-quality debt obligations,
certificates of deposit and bankers' acceptances rated at least A-1 by S&P
or Prime1 by Moody's, or the issuer has an outstanding issue of debt
securities rated at least A by S&P or Moody's, or are of comparable quality
in the opinion of the Manager.
o Collateral assets. Collateral assets include cash, letters of credit, U.S.
government securities or other high-grade liquid debt or equity securities
(except that instruments collateralizing loans by the Money Market Funds
must be debt securities rated in the highest grade). Collateral assets are
separately identified and rendered unavailable for
o Convertible security. A convertible security is a fixed-income security (a
bond or preferred stock) that may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the
same or a different issuer. Convertible securities are senior to common
stock in a corporation's capital structure but are usually subordinated to
similar non-convertible securities. The price of a convertible security is
influenced by the market value of the underlying common stock.
o Covered call option. A call option is "covered" if the fund owns the
underlying securities, has the right to acquire such securities without
additional consideration, has collateral assets sufficient to meet its
obligations under the option or owns an off setting call option.
o Covered put option. A put option is "covered" if the fund has collateral
assets with a value not less than the exercise price of the option or holds
a put option on the underlying security.
o Depositary receipts. Depositary receipts include American depositary
receipts ("ADRs"), European depositary receipts ("EDRs"), global depositary
receipts ("GDRs") and other similar instruments. Depositary receipts
64
<PAGE>
are receipts typically issued in connection with a U.S. or foreign bank or
trust company and evidence ownership of underlying securities issued by a
foreign corporation.
o Derivatives. Derivatives include forward currency exchange contracts, stock
options, currency options, stock and stock index options, futures contracts
and swaps and options on futures contracts on U.S. government and foreign
government securities and currencies.
o Dollar roll transaction. A dollar roll transaction is similar to a reverse
repurchase agreement except it requires a fund to repurchase a similar
rather than the same security.
o Duration. Traditionally, a debt security's "term to maturity" characterizes
a security's sensitivity to changes in interest rates. "Term to maturity,"
however, measures only the time until a debt security provides its final
payment, taking no account of prematurity payments. Most debt securities
provide interest ("coupon") payments in addition to a final ("par") payment
at maturity, and some securities have call provisions allowing the issuer
to repay the instrument in full before maturity date, each of which affect
the security's response to interest rate changes. "Duration" is considered
a more precise measure of interest rate risk than "term to maturity."
Determining duration may involve the Manager's estimates of future economic
parameters, which may vary from actual future values. Fixed income
securities with effective durations of three years are more responsive to
interest rate fluctuations than those with effective durations of one year.
For example, if interest rates rise by 1%, the value of securities having
an effective duration of three years will generally decrease by
approximately 3%.
o Emerging market companies. A company is considered to be an emerging market
company if its securities are principally traded in the capital market of
an emerging market country; it derives at least 50% of its total revenue
from either goods produced or services rendered in emerging market
countries or from sales made in such emerging market countries, regardless
of where the securities of such companies are principally traded; or it is
organized under the laws of, and with a principal office in, an emerging
market country. An emerging market country is one having an economy and
market that are or would be considered by the World Bank or the United
Nations to be emerging or developing.
o Equity derivative securities. These include, among other things, options on
equity securities, warrants and future contracts on equity securities.
o Equity swaps. Equity swaps allow the parties to exchange the dividend
income or other components of return on an equity investment (e.g., a group
of equity securities or an index) for a component of return on
65
<PAGE>
another non-equity or equity investment Equity swaps transitions may be
volatile and may present the fund with counterparty risks.
o FHLMC. The Federal Home Loan Mortgage Corporation.
o FNMA. The Federal National Mortgage Association.
o Forward currency contracts. A forward currency contract is a contract
individually negotiated and privately traded by currency traders and their
customers and creates an obligation to purchase or sell a specific currency
for an agreed-upon price at a future date. The Funds generally do not enter
into forward contracts with terms greater than one year. A fund generally
enters into forward contracts only under two circumstances. First, if a
fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S.
dollar price of the security by entering into a forward contract to buy the
amount of a foreign currency needed to settle the transaction. Second, if
the Manager believes that the currency of a particular foreign country will
substantially rise or fall against the U.S. dollar, it may enter into a
forward contract to buy or sell the currency approximating the value of
some or all of a fund's portfolio securities denominated in such currency.
A fund will not enter into a forward contract if, as a result, it would
have more than one-third of total assets committed to such contracts
(unless it owns the currency that it is obligated to deliver or has caused
its custodian to segregate segregable assets having a value sufficient to
cover its obligations). Although forward contracts are used primarily to
protect a fund from adverse currency movements, they involve the risk that
currency movements will not be accurately predicted.
o Futures and options on futures. An interest rate futures contract is an
agreement to purchase or sell debt securities, usually U.S. government
securities, at a specified date and price. For example, a fund may sell
interest rate futures contracts (i.e., enter into a futures contract to
sell the underlying debt security) in an attempt to hedge against an
anticipated increase in interest rates and a corresponding decline in debt
securities it owns. Each fund will have collateral assets equal to the
purchase price of the portfolio securities represented by the underlying
interest rate futures contracts it has an obligation to purchase.
o GNMA. The Government National Mortgage Association.
o Highly rated debt securities. Debt securities rated within the three
highest grades by Standard & Poor's Corporation ("S&P") (AAA to A), Moodys
Investors Services, Inc. ("Moody's") (Aaa to A) or Fitch Investor Services,
Inc. ("Fitch") (AAA to A), or in unrated debt securities deemed to be of
comparable quality by the Manager using guidelines approved by the Board of
66
<PAGE>
Trustees. See the Appendix to the Statement of Additional Information for a
description of these ratings.
o Illiquid securities. The Funds treat any securities subject to restrictions
on repatriation for more than seven days, and securities issued in
connection with foreign debt conversion programs that are restricted as to
remittance of invested capital or profit, as illiquid. The Funds also treat
repurchase agreements with maturities in excess of seven days as illiquid.
Illiquid securities do not include securities that are restricted from
trading on formal markets for some period of time but for which an active
informal market exists, or securities that meet the requirements of Rule
144A under the Securities Act of 1933 and that, subject to the review by
the Board and guidelines adopted by the Board, the Manager has determined
to be liquid.
o Investment grade. Investment grade debt securities are those rated within
the four highest grades by S&P (at least BBB), Moody's (at least Baa) or
Fitch (at least Baa) or in unrated debt securities deemed to be of
comparable quality by the Manager using guidelines approved by the Board of
Trustees.
o Leverage. Some funds may use leverage in an effort to increase return.
Although leverage creates an opportunity for increased income and gain, it
also creates special risk considerations. Leveraging also creates interest
expenses that can exceed the income from the assets retained.
o Municipal securities. Municipal securities are obligations issued by, or on
behalf of, states, territories and possessions of the U.S. and the District
of Columbia, and their political subdivisions, agencies, authorities and
instrumentalities, including It industrial development bonds, as well as
obligations of certain agencies and instrumentalities of the U.S.
government. Municipal securities eve classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from revenue derived from
a particular facility, class of facilities or the proceeds of a special
excise or other specific revenue source, but not from the issuer's general
taxing power. Private activity bonds and industrial revenue bonds, in most
cases, are revenue bonds that do not carry the pledge of the credit of the
issuing municipality but generally are guaranteed by the corporate entity
on whose behalf they are issued. Notes short-term instruments that are
obligations of the issuing municipalities or agencies sold in anticipation
of a bond sale, collection of taxes or other receipt of revenues.
o Options on securities, securities indices and currencies. A fund may
purchase call options on securities that it intends to purchase (or on
currencies
67
<PAGE>
in which those securities are denominated) in order to limit the risk of a
substantial increase in the market price of such security (or an adverse
movement in the applicable currency). A fund may purchase put options on
particular securities (or on currencies in which those securities are
denominated) in order to protect against a decline in the market value of
the underlying security below the exercise price less the premium paid for
the option (or an adverse movement in the applicable currency relative to
the U.S. dollar). Prior to expiration, most options are expected to be sold
in a closing sale transaction. Profit or loss from the sale depends upon
whether the amount received is more or less than the premium paid plus
transaction costs. A fund may purchase put and call options on stock
indices in order to hedge against risks of stock market or industry wide
stock price fluctuations.
o Participation interests. Participation interests are issued by financial
institutions and represent undivided interests in municipal securities.
Participation interests may have fixed, floating or variable rates of
interest. Some participation interests are subject to a "nonappropriation"
or "abatement" feature by which, under certain conditions, the issuer of
the underlying municipal security, without penalty, may terminate its
payment obligation. In such event, the Funds must look to the underlying
collateral.
o Repurchase agreement. With a repurchase agreement, a fund acquires a U.S.
government security or other high-grade liquid debt instrument (for the
Money Market Funds, the instrument must be rated in the highest grade) from
a financial institution that simultaneously agrees to repurchase the same
security at a specified time and price.
o Reverse dollar roll transactions. When a fund engages in a reverse dollar
roll, it purchases a security from a financial institution and concurrently
agrees to resell a similar security to that institution at a later date at
an agreed-upon price.
o Reverse repurchase agreement. In a reverse repurchase agreement, a fund
sells to a financial institution a security that it holds and agrees to
repurchase the same security at an agreed-upon price and date.
o Russia. "Russia" refers to the Russian Federation, which does not include
other countries that formerly comprised the Soviet Union.
o Russian Company. "Russian Company" means a legal entity (i) that is
organized under the laws of, or with a principal office and domicile in,
Russia, (ii) for which the principal equity securities trading market is in
Russia, or (iii) that derives at least 50% of its revenues or profits from
goods produced or sold, investments made, or services performed, in Russia
or that has at least 50% of its assets situated in Russia.
68
<PAGE>
o Securities lending. A fund may lend securities to brokers, dealers and
other financial organizations. Each securities loan is collateralized with
collateral assets in an amount at least equal to the current market value
of the loaned securities, plus accrued interest. There is a risk of delay
in receiving collateral or in recovering the securities loaned or even a
loss of rights in collateral should the borrower fail financially.
o S&P 500. Standard & Poor's 500 Composite Stock Price Index.
o U.S. government securities. These include U.S. Treasury bills, notes, bonds
and other obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
o Warrant. A warrant typically is a long-term option that permits the holder
to buy a specified number of shares of the issuer's underlying common stock
at a specified exercise price by a particular expiration date. A warrant
not exercised or disposed of by its expiration date expires worthless.
o When-issued and forward commitment securities. The Funds may purchase U.S.
government or other securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" or "delayed delivery" basis. The
price is fixed at the time the commitment is made, but delivery and payment
for the securities take place at a later date. When-issued securities and
forward commitments may be sold prior to the settlement date, but a fund
will enter into when-issued and forward commitments only with the intention
of actually receiving or delivering the securities. No income accrues on
securities that have been purchased pursuant to a forward commitment or on
a when-issued basis prior to delivery to a fund. At the time a fund enters
into a transaction on a when-issued or forward commitment basis, it
supports its obligation with collateral assets equal to the value of the
when-issued or forward commitment securities and causes the collateral
assets to be marked to market daily. There is a risk that the securities
may not be delivered and that the fund may incur a loss.
o Zero coupon bonds. Zero coupon bonds are debt obligations that do not pay
current interest and are consequently issued at a significant discount from
face value. The discount approximates the total interest the bonds will
accrue and compound over the period to maturity or the first
interest-payment date at a rate of interest reflecting the market rate of
interest at the time of issuance.
69
<PAGE>
----------
Investment Manager
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 shall be sent to:
Transfer Agent
State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
Custodian
Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, New York 10022
Legal Counsel
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Auditors
KMPG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
----------
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1997
This statement of additional information which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Ramirez Global
Income Fund (the "Fund"), dated April 30, 1997 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
Institutional/Financial Adviser Services:-1-800-367-9160
24-Hour Account Information:-1-800-526-0052
Lexington Management Corporation ("LMC") serves as the Fund's Investment
Adviser. MFR Advisors, Inc. serves as the Fund's Sub-Adviser. Lexington Funds
Distributor, Inc. ("LFD") serves as the Fund's Distributor.
TABLE OF CONTENTS
Page
Investment Objective and Policies ......................................... 2
Derivative Instruments: Options, Futures and Forward Currency Strategies .. 4
Risk Factors .............................................................. 10
Investment Restrictions ................................................... 12
Portfolio Transactions .................................................... 13
Valuation of Fund Shares .................................................. 14
Investment Adviser, Sub-Adviser, Distributor and Administrator ............ 15
Taxes ..................................................................... 17
Distribution Plan ......................................................... 21
Custodian, Transfer Agent and Dividend Disbursing Agent ................... 22
Management of the Fund .................................................... 22
Investment Return Information ............................................. 25
Other Information ......................................................... 26
Financial Statements ...................................................... 27
1
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks high current income. Capital appreciation is a secondary
objective. The Fund is a non-diversified open-end management investment company.
The Fund, under normal circumstances, invests substantially all of its assets in
debt securities of issuers in the United States, developed foreign countries and
emerging markets. For purposes of its investment objective, the Fund considers
an emerging country to be any country whose economy and market the World Bank or
United Nations considers to be emerging or developing. The Fund may also invest
in debt securities traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in such emerging
countries and emerging markets or sales made in such countries. Determinations
as to eligibility will be made by LMC and MFR based on publicly available
information and inquiries made to the companies. It is possible in the future
that sufficient numbers of emerging country or emerging market debt securities
would be traded on securities markets in industrialized countries so that a
major portion, if not all, of the Fund's assets would be invested in securities
traded on such markets, although such a situation is unlikely at present.
Currently, investing in many of the emerging countries and emerging markets
is not feasible or may involve political risks. Accordingly, LMC currently
intends to consider investments only in those countries in which it believes
investing is feasible and does not involve such risks. The list of acceptable
countries will be reviewed by LMC and MFR and approved by the Board of Trustees
on a periodic basis and any additions or deletions with respect to such list
will be made in accordance with changing economic and political circumstances
involving such countries. (See Appendix B in the Prospectus.)
Selection of Debt Investments
LMC is the investment manager and MFR is the sub-adviser of the Fund. In
determining the appropriate distribution of investments among various countries
and geographic regions for the Fund, LMC and MFR ordinarily consider the
following factors: prospects for relative economic growth among the different
countries in which the Fund may invest; expected levels of inflation; government
policies influencing business conditions; the outlook for currency
relationships; and the range of the individual investment opportunities
available to international investors.
Although the Fund values assets daily in terms of U.S. dollars, the Fund
does not intend to convert holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may invest in the following types of money market instruments
(i.e., debt instruments with less than 12 months remaining until maturity)
denominated in U.S. dollars or other currencies: (a) obligations issued or
guaranteed by the U.S. or foreign governments, their agencies, instrumentalities
or municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Fund may not
invest more than 25% of its total assets in bank securities; (e) repurchase
agreements with respect to the foregoing; and (f) other substantially similar
short-term debt securities with comparable characteristics.
Samurai and Yankee Bonds
Subject to its respective fundamental investment restrictions, the Fund may
invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in the United States by
non-U.S. issuers ("Yankee bonds"). It is the policy of the Fund to invest in
Samurai or Yankee bond issues only after taking into account considerations of
quality and liquidity, as well as yield.
Commercial Bank Obligations
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respect from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
2
<PAGE>
fundamental investment policy or restriction of the Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
Repurchase Agreements, Reverse Repurchase Agreements and Roll Transactions
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Fund intends to enter into repurchase
agreements only with banks and broker/dealers believed by LMC and MFR to present
minimal credit risks in accordance with guidelines approved by the Company's
Board of Trustees. LMC and MFR will review and monitor the creditworthiness of
such institutions, and will consider the capitalization of the institution, LMC
and MFR's prior dealings with the institution, any rating of the institution's
senior long-term debt by independent rating agencies and other relevant factors.
The Fund will invest only in repurchase agreements collateralized at all
times in an amount at least equal to the repurchase price plus accrued interest.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase were less than the repurchase price, the Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings there may be restrictions on the
Fund's ability to sell the collateral and the Fund could suffer a loss. However,
with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Fund intends to comply
with provisions under such Code that would allow the immediate resale of such
collateral. The Fund will not enter into a repurchase agreement with a maturity
of more than seven days if, as a result, more than 15% of the value of its net
assets would be invested in such repurchase agreements and other illiquid
investments and securities for which no readily available market exists.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer, in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. The Fund also may engage in "roll"
borrowing transactions which involve the Fund's sale of fixed income securities
together with a commitment (for which the Fund may receive a fee) to purchase
similar, but not identical, securities at a future date. The Fund will maintain,
in a segregated account with a custodian, cash, U.S. government securities or
other liquid, high grade debt securities in an amount sufficient to cover its
obligation under "roll" transactions and reverse repurchase agreements.
Borrowing
The Fund is prohibited from borrowing money in order to purchase securities.
The Fund may borrow up to 5% of its total assets for temporary or emergency
purposes other than to meet redemptions. Any borrowing by the Fund may cause
greater fluctuation in the value of its shares than would be the case if the
Fund did not borrow.
Short Sales
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales as a form of hedging to offset potential
declines in long positions in securities it owns and in order to maintain
portfolio flexibility. The Fund only may make short sales "against the box." In
this type of short sale, at the time of the sale, the Fund owns the security it
has sold short or has the immediate and unconditional right to acquire the
identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold
and does not receive the proceeds from the sale. To make delivery to the
purchaser, the executing broker borrows the securities being sold short on
behalf of the seller. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. To secure its obligation to deliver securities sold
short, the Fund will deposit in a separate account with its custodian an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities at no cost. The Fund could close out a short
position by purchasing and delivering an equal amount of the securities sold
short, rather than by delivering securities already held by the Fund, because
the Fund might want to continue to receive interest and dividend payments on
securities in its portfolio that are convertible into the securities sold short.
The Fund might make a short sale "against the box" in order to hedge against
market risks when LMC and MFR believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security, or when LMC and MFR want to
sell the security the Fund owns at a current attractive price, but also wishes
to defer recognition or gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code
3
<PAGE>
of 1986, as amended (the "Code"). In such case, any future losses in the Fund's
long position should be reduced by a gain in the short position. Conversely, any
gain in the long position should be reduced by a loss in the short position. The
extent to which such gains or losses in the long position are reduced will
depend upon the amount of the securities sold short relative to the amount of
the securities the Fund owns, either directly or indirectly, and, in the case
where a Fund owns convertible securities, changes in the investment values or
conversion premiums of such securities. There will be certain additional
transaction costs associated with short sales "against the box," but the Fund
will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
Illiquid Securities
The Fund may invest up to 15% of net assets in illiquid securities.
Securities may be considered illiquid if the Fund cannot reasonably expect to
receive approximately the amount at which the Fund values such securities within
seven days. The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities, such as securities eligible for trading on U.S. securities exchanges
or in the over-the-counter markets. Moreover, restricted securities, which may
be illiquid for purposes of this limitation often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
With respect to liquidity determinations generally, the Company's Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the
Securities Act of 1933, are liquid or illiquid. The Board has delegated the
function of making day-to-day determinations of liquidity to LMC and MFR in
accordance with procedures approved by the Fund's Board of Trustees. LMC and MFR
take into account a number of factors in reaching liquidity decisions,
including, but not limited to: (i) the frequency of trading in the security;
(ii) the number of dealers that make quotes for the security; (iii) the number
of dealers that have undertaken to make a market in the security; (iv) the
number of other potential purchasers; and (v) the nature of the security and how
trading is effected (e.g., the time needed to sell the security, how offers are
solicited and the mechanics of transfer). LMC and MFR will monitor the liquidity
of securities held by the Fund and report periodically on such decisions to the
Board of Trustees.
DERIVATIVE INSTRUMENTS: OPTIONS, FUTURES AND FORWARD CURRENCY STRATEGIES
Writing Covered Call Options
The Fund may write (sell) covered call options. Covered call options
generally will be written on securities and currencies which, in the opinion of
LMC and MFR are not expected to make any major price moves in the near future
but which, over the long term, are deemed to be attractive investments for the
Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker/dealer
through whom such option was sold, requiring him to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold. LMC, MFR and the Fund believe that writing of
covered call options is less risky than writing uncovered or "naked" options,
which the Fund will not do.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
the Fund's investment objectives. When writing a covered call option, the Fund
in return for the premium gives up the opportunity for profit from a price
increase in the underlying security or currency above the exercise price, and
retains the risk of loss should the price of the security or currency decline.
Unlike one who owns securities or currencies not subject to an option, the Fund
has no control over when it may be required to sell the underlying securities or
currencies, since the option may be exercised at any time prior to the option's
expiration. If a call option which the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency. The Fund does not
consider a security or currency covered by a call option to be "pledged" as that
term is used in the Fund's fundamental investment policy which limits the
pledging or mortgaging of its assets.
The premium which the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying security or currency, the relationship of the exercise price
to such market price, the historical price volatility of the underlying security
or currency, and the length of the option period. In determining whether a
particular
4
<PAGE>
call option should be written on a particular security or currency, LMC and MFR
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options. The premium
received by the Fund for writing covered call options will be recorded as a
liability in the Fund's statement of assets and liabilities. This liability will
be adjusted daily to the option's current market value, which will be the latest
sales price at the time which the net asset value per share of the Fund is
computed at the close of regular trading on the NYSE (currently, 4:00 Eastern
time, unless weather, equipment failure or other factors contribute to an
earlier closing time), or, in the absence of such sale, the latest asked price.
The liability will be extinguished upon expiration of the option, the purchase
of an identical option in a closing transaction, or delivery of the underlying
security or currency upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both. If the Fund desires to sell a
particular security or currency from its portfolio on which it has written a
call option, or purchased a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security or
currency. There is no assurance that the Fund will be able to effect such
closing transactions at favorable prices. If the Fund cannot enter into such a
transaction, it may be required to hold a security or currency that it might
otherwise have sold, in which case it would continue to be at market risk with
respect to the security or currency.
The Fund will pay transaction costs in connection with the writing of
options and in entering into closing purchase contracts. Transaction costs
relating to options activity normally are higher than those applicable to
purchases and sales of portfolio securities.
Call options written by the Fund normally will have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to or above the current market values of the underlying securities
or currencies at the time the options are written. From time to time, the Fund
may purchase an underlying security or currency for delivery in accordance with
the exercise of an option, rather than delivering such security or currency from
its portfolio. In such cases, additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction
if the cost of the transaction is less or more, respectively, than the premium
received from the writing of the option. Because increases in the market price
of a call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
Writing Covered Put Options
The Fund may write covered put options. A put option gives the purchaser of
the option the right to sell, and the writer (seller) the obligation to buy, the
underlying security or currency at the exercise price during the option period.
The option may be exercised at any time prior to its expiration date. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
The Fund would write put options only on a covered basis, which means that
the Fund would either (i) set aside cash, U.S. government securities or other
liquid, high-grade debt securities in an amount not less than the exercise price
at all times while the put option is outstanding (the rules of the Options
Clearing Corporation currently require that such assets be deposited in escrow
to secure payment of the exercise price), (ii) sell short the security or
currency underlying the put option at the same or higher price than the exercise
price of the put option, or (iii) purchase a put option, if the exercise price
of the purchased put option is the same or higher than the exercise price of the
put option sold by the Fund. The Fund generally would write covered put options
in circumstances where LMC and MFR wish to purchase the underlying security or
currency for the Fund's portfolio at a price lower than the current market price
of the security or currency. In such event, the Fund would write a put option at
an exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund also would receive interest
on debt securities or currencies maintained to cover the exercise price of the
option, this technique could be used to enhance current return during periods of
market uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the exercise
price less the premiums received.
Purchasing Put Options
The Fund may purchase put options. As the holder of a put option, the Fund
would have the right to sell the underlying security or currency at the exercise
price at any time during the option period. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
5
<PAGE>
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund as a hedging technique in order to protect
against an anticipated decline in the value of the security or currency. Such
hedge protection is provided only during the life of the put option when the
Fund, as the holder of the put option, is able to sell the underlying security
or currency at the put exercise price regardless of any decline in the
underlying security's market price or currency's exchange value. For example, a
put option may be purchased in order to protect unrealized appreciation of a
security or currency when LMC and MFR deem it desirable to continue to hold the
security or currency because of tax considerations. The premium paid for the put
option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency eventually is sold.
The Fund also may purchase put options at a time when the Fund does not own
the underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction cost, unless the put option is sold
in a closing sale transaction.
The premium paid by the Fund when purchasing a put option will be recorded
as an asset in the Fund's statement of assets and liabilities. This asset will
be adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (at the close of regular trading on the NYSE), or, in the absence of
such sale, the latest bid price. The asset will be extinguished upon expiration
of the option, the writing of an identical option in a closing transaction, or
the delivery of the underlying security or currency upon the exercise of the
option.
Purchasing Call Options
The Fund may purchase call options. As the holder of a call option, the Fund
would have the right to purchase the underlying security or currency at the
exercise price at any time during the option period. The Fund may enter into
closing sale transactions with respect to such options, exercise them or permit
them to expire. Call options may be purchased by the Fund for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable the Fund to acquire the
security or currency at the exercise price of the call option plus the premium
paid. At times, the net cost of acquiring the security or currency in this
manner may be less than the cost of acquiring the security or currency directly.
This technique also may be useful to the Fund in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying security or
currency itself, the Fund is partially protected from any unexpected decline in
the market price of the underlying security or currency and in such event could
allow the call option to expire, incurring a loss only to the extent of the
premium paid for the option.
The Fund also may purchase call options on underlying securities or
currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose
where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options also may be purchased at times to
avoid realizing losses that would result in a reduction of the Fund's current
return. For example, where the Fund has written a call option on an underlying
security or currency having a current market value below the price at which such
security or currency was purchased by the Fund, an increase in the market price
could result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency with the same
exercise price and expiration date as the option previously written.
Aggregate premiums paid for put and call options will not exceed 5% of the
Fund's total assets at the time of purchase.
The Fund may attempt to accomplish objectives similar to those involved in
using Forward Contracts (defined below), as described in the Prospectus, by
purchasing put or call options on currencies. A put option gives the Fund as
purchaser the right (but not the obligation) to sell a specified amount of
currency at the exercise price until the expiration of the option. A call option
gives the Fund as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price until its expiration. The
Fund might purchase a currency put option, for example, to protect itself during
the contract period against a decline in the dollar value of a currency in which
it holds or anticipates holding securities. If the currency's value should
decline against the dollar, the loss in currency value should be offset, in
whole or in part, by an increase in the value of the put. If the value of the
currency instead should rise against the dollar, any gain to the Fund would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which the Fund anticipates
purchasing securities.
6
<PAGE>
Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. The Securities and Exchange Commission ("SEC")
staff considers OTC options to be illiquid securities. The Fund will not
purchase an OTC option unless the Fund believes that daily valuations for such
options are readily obtainable. OTC options differ from exchange-traded options
in that OTC options are transacted with dealers directly and not through a
clearing corporation (which guarantees performance). Consequently, there is a
risk of non-performance by the dealer. Since no exchange is involved, OTC
options are valued on the basis of a quote provided by the dealer. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time.
Interest Rate and Currency Futures Contracts
The Fund may enter into interest rate or currency futures contracts
("Futures" or "Futures Contracts") as a hedge against changes in prevailing
levels of interest rates or currency exchange rates in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by the Fund. The Fund's hedging may include sales of Futures as an
offset against the effect of expected increases in interest rates or currency
exchange rates, and purchases of Futures as an offset against the effect of
expected declines in interest rates or currency exchange rates.
The Fund will not enter into Futures Contracts for speculation and the Fund
only will enter into Futures Contracts which are traded on national futures
exchanges and are standardized as to maturity date and underlying financial
instrument. The principal interest rate and currency Futures exchanges in the
United States are the Board of Trade of the City of Chicago and the Chicago
Mercantile Exchange. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures are exchanged in London at the London International Financial Futures
Exchange.
Although techniques other than sales and purchases of Futures Contracts
could be used to reduce the Fund's exposure to interest rate and currency
exchange rate fluctuations, the Fund may be able to hedge exposure more
effectively and at a lower cost through using Futures Contracts.
The Fund will not enter into a Futures Contract if, as a result thereof,
more than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to "margin" (down payment)
deposits on such Futures Contracts.
An interest rate Futures Contract provides for the future sale by one party
and purchase by another party of a specified amount of a specific financial
instrument (debt security or currency) for a specified price at a designated
date, time and place. Brokerage fees are incurred when a Futures Contract is
bought or sold, and margin deposits must be maintained at all times the Futures
Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of October Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in October, the "delivery month") by the
purchase of another Futures Contract of October Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
Persons who trade in Futures Contracts may be broadly classified as
"hedgers" and "speculators." Hedgers, such as the Fund, whose business activity
involves investment or other commitment in securities or other obligations, use
the Futures markets primarily to offset unfavorable changes in value that may
occur because of fluctuations in the value of the securities and obligations
held or expected to be acquired by them or fluctuations in the value of the
currency in which the securities or obligations are denominated. Debtors and
other obligors also may hedge the interest cost of their
7
<PAGE>
obligations. The speculator, like the hedger, generally expects neither to
deliver nor to receive the financial instrument underlying the Futures Contract,
but, unlike the hedger, hopes to profit from fluctuations in prevailing interest
rates or currency exchange rates.
The Fund's Futures transactions will be entered into for traditional hedging
purposes; that is, Futures Contracts will be sold to protect against a decline
in the price of securities or currencies that the Fund owns, or Futures
Contracts will be purchased to protect the Fund against an increase in the price
of securities or currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must
be deposited by the Fund, in a segregated account with the Fund's custodian, in
order to initiate Futures trading and to maintain the Fund's open positions in
Futures Contracts. A margin deposit made when the Futures Contract is entered
into ("initial margin") is intended to assure the Fund's performance of the
Futures Contract. The margin required for a particular Futures Contract is set
by the exchange on which the Futures Contract is traded, and may be modified
significantly from time to time by the exchange during the term of the Futures
Contract. Futures Contracts customarily are purchased and sold on margins that
may range upward from less than 5% of the value of the Futures Contract being
traded.
If the price of an open Futures Contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin deposit ("margin
variation"). If the value of a position increases because of favorable price
changes in the Futures Contract so that the margin deposit exceeds the required
margin, however, the broker will pay the excess to the Fund. In computing daily
net asset values, the Fund will mark to market the current value of its open
Futures Contracts. The Fund expects to earn interest income on its margin
deposits.
Risks of Using Futures Contracts.
The prices of Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates, which in turn are
affected by fiscal and monetary policies and national and international
political and economic events.
There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in the Fund's
portfolio being hedged. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for Futures and
for debt securities or currencies, including technical influences in Futures
trading; and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading,
with respect to interest rate levels, maturities, and creditworthiness of
issuers. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss of 150% of
the original margin deposit, if the Contract were closed out. Thus, a purchase
or sale of a Futures Contract may result in losses in excess of the amount
invested in the Futures Contract. However, the Fund presumably would have
sustained comparable losses if, instead of the Futures Contract, it had invested
in the underlying financial instrument and sold it after the decline.
Furthermore, in the case of a Futures Contract purchase, in order to be
certain that the Fund has sufficient assets to satisfy its obligations under a
Futures Contract, the Fund sets aside and commits to back the Futures Contract
an amount of cash, U.S. government securities and other liquid, high grade debt
securities equal in value to the current value of the underlying instrument less
margin deposit.
In the case of a Futures contract sale, the Fund either will set aside
amounts, as in the case of a Futures Contract purchase, own the security
underlying the contract or hold a call option permitting the Fund to purchase
the same Futures Contract at a price no higher than the contract price. Assets
used as cover cannot be sold while the position in the corresponding Futures
Contract is open, unless they are replaced with similar assets. As a result, the
commitment of a significant portion of the Fund's assets to cover could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a Futures Contract may vary either up or
8
<PAGE>
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of Futures Contract,
no trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures Contract prices occasionally have moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of Futures positions and subjecting some
Futures traders to substantial losses.
Options on Futures Contracts
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put), rather than to purchase or sell the Futures Contract, at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contracts are based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing call and put options on Futures, the Fund
may purchase call and put options on the underlying securities or currencies
themselves. Such options would be used in a manner identical to the use of
options on Futures Contracts.
To reduce or eliminate the leverage then employed by the Fund, or to reduce
or eliminate the hedge position then currently held by the Fund, the Fund may
seek to close out an option position by selling an option covering the same
securities or contract and having the same exercise price and expiration date.
Trading in options on Futures Contracts began relatively recently. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop.
Forward Currency Contracts and Options on Currency
A forward currency contract ("Forward Contract") is an obligation, generally
arranged with a commercial bank or other currency dealer, to purchase or sell a
currency against another currency at a future date and price as agreed upon by
the parties. The Fund may accept or make delivery of the currency at the
maturity of the Forward Contract or, prior to maturity, enter into a closing
transaction involving the purchase or sale of an offsetting contract. The Fund
will utilize Forward Contracts only on a covered basis. The Fund engages in
forward currency transactions in anticipation of, or to protect itself against,
fluctuations in exchange rates. The Fund might sell a particular foreign
currency forward, for example, when it holds bonds denominated in a foreign
currency but anticipates, and seeks to be protected against, a decline in the
currency against the U.S. dollar. Similarly, the Fund might sell the U.S. dollar
forward when it holds bonds denominated in U.S. dollars but anticipates, and
seeks to be protected against, a decline in the U.S dollar relative to other
currencies. Further, the Fund might purchase a currency forward to "lock in" the
price of securities denominated in that currency which it anticipates
purchasing.
Forward Contracts are transferable in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A Forward Contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. The Fund will enter into such
Forward Contracts with major U.S. or foreign banks and securities or currency
dealers in accordance with guidelines approved by the Fund's Board of Trustees.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot (i.e., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency
9
<PAGE>
movements will not be predicted accurately, causing the Fund to sustain losses
on these Contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund either may sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency which it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second Contract entitling it to sell the same amount of the same
currency on the maturity date of the first Contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first Contract and
the offsetting Contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts usually are entered
into on a principal basis, no fees or commissions are involved. The use of
Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does establish
a rate of exchange in advance. In addition, while Forward Contracts limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase. Although Forward Contracts presently are not regulated by the CFTC,
the CFTC, in the future, may assert authority to regulate Forward Contracts. In
that event, the Fund's ability to utilize Forward Contracts in the manner set
forth above may be restricted.
Interest Rate and Currency Swaps
The Fund usually will enter into interest rate swaps on a net basis, that
is, the two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as swaps,
caps, floors, collars and other derivative transactions are entered into for
good faith hedging purposes, LMC, MFR and the Fund believe that they do not
constitute senior securities under the 1940 Act and, thus, will not treat them
as being subject to the Fund's borrowing restrictions. The Fund will not enter
into any swap, cap, floor, collar or other derivative transaction unless, at the
time of entering into the transaction, the unsecured long-term debt rating of
the counterparty combined with any credit enhancements is rated at least A by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") or has an equivalent rating from a nationally recognized statistical
rating organization or is determined to be of equivalent credit quality by LMC
and MFR. If a counterparty defaults, the Fund may have contractual remedies
pursuant to the agreements related to the transactions. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, for that reason, they are
less liquid than swaps.
RISK FACTORS
Emerging Countries
The Fund may invest in debt securities in emerging markets. Investing in
securities in emerging countries may entail greater risks than investing in debt
securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interests; (iv) foreign taxation; and (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property.
Political and Economic Risks
Investing in securities of non-U.S. companies may entail additional risks
due to the potential political and economic instability of certain countries and
the risks of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation by any
country, the Fund could lose its entire investment in any such country.
An investment in the Fund is subject to the political and economic risks
associated with investments in emerging markets. Even though opportunities for
investment may exist in emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or policies
of any other government which exercises a
10
<PAGE>
significant influence over those countries, may halt the expansion of or reverse
the liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of emerging market countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Fund. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by securities purchased
by the Fund will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Fund could lose a
substantial portion of its investments in such countries. The Fund's investments
would similarly be adversely affected by exchange control regulation in any of
those countries.
Religious and Ethnic Instability
Certain countries in which the Fund may invest may have vocal minorities
that advocate radical religious or revolutionary philosophies or support ethnic
independence. Any disturbance on the part of such individuals could carry the
potential for wide-spread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause the loss of the
Fund's investment in those countries.
Foreign Investment Restrictions
Certain countries prohibit or impose substantial restrictions on investments
in their capital markets, particularly their equity markets, by foreign entities
such as the Fund. As illustrations, certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investments
by foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for repatriation, as
well as by the application to it of other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental Regulation
Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the securities held by the Fund will not
be registered with the SEC or regulators of any foreign country, nor will the
issuers thereof be subject to the SEC's reporting requirements. Thus, there will
be less available information concerning foreign issuers of securities held by
the Fund than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, LMC and MFR will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. Government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers.
Currency Fluctuations
Because the Fund, under normal circumstances, may invest substantial
portions of its total assets in the securities of foreign issuers which are
denominated in foreign currencies, the strength or weakness of the U.S. dollar
against such foreign currencies will account for part of the Fund's investment
performance. A decline in the value of any particular currency against the U.S.
dollar will cause a decline in the U.S. dollar value of the Fund's holdings of
securities denominated in such currency and, therefore, will cause an overall
decline in the Fund's net asset value and any net investment income and capital
gains to be distributed in U.S. dollars to shareholders of the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the U.S., and other economic and financial conditions affecting the world
economy.
11
<PAGE>
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
Adverse Market Characteristics
Securities of many foreign issuers may be less liquid and their prices more
volatile than securities of comparable U.S. issuers. In addition, foreign
securities exchanges and brokers generally are subject to less governmental
supervision and regulation than in the U.S. and foreign securities exchange
transactions usually are subject to fixed commissions, which generally are
higher than negotiated commissions on U.S. transactions. In addition, foreign
securities exchange transactions may be subject to difficulties associated with
the settlement of such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause it to miss attractive opportunities. Inability
to dispose of a portfolio security due to settlement problems either could
result in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. LMC and MFR will
consider such difficulties when determining the allocation of the Fund's assets,
although LMC and MFR do not believe that such difficulties will have a material
adverse effect on the Fund's portfolio trading activities.
Non-U.S. Withholding Taxes
The Fund's net investment income from foreign issuers may be subject to
non-U.S. withholding taxes, thereby reducing the Fund's net investment income.
See "Taxes."
INVESTMENT RESTRICTIONS
The Fund's investment policy, and the investment restrictions set forth
below, may not be changed without the affirmative vote (defined as the lesser
of: 67% of the shares represented at a meeting at which 50% of the outstanding
shares are present or 50% of the outstanding shares) of the Fund's shareholders.
These restrictions may be summarized as follows:
The Fund shall not:
(1) issue any senior security (as defined in the 1940 Act), except that
(a) the Fund may enter into commitments to purchase securities in
accordance with the Fund's investment program, including reverse
repurchase agreements, delayed delivery and when-issued securities,
which may be considered the issuance of senior securities to the
extent permitted under applicable regulations; (b) the Fund may
engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, the
interpretation of the 1940 Act or an exemptive order; (c) the Fund
may engage in short sales of securities to the extent permitted in
its investment program and other restrictions; (d) the purchase or
sale of futures contracts and related options shall not be
considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as
authorized by the 1940 Act;
(2) borrow money, except that (a) the Fund may enter into certain
futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and
when-issued securities and reverse repurchase agreements, and (c)
for temporary emergency purposes, the Fund may borrow money in
amounts not exceeding 5% of the value of its total assets at the
time when the loan is made.
(3) underwrite securities of other issuers;
(4) concentrate its investments in a particular industry to an extent
greater than 25% of the value of its total assets, provided that
such limitation shall not apply to securities issued or guaranteed
by the U.S. Government or its agencies;
(5) invest in commodity contracts, except that the Fund may, to the
extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions
in financial and index futures contracts and related options for
hedging purposes, may engage in
12
<PAGE>
transactions on a when-issued or forward commitment basis and may
enter into forward currency contracts. The Fund will not purchase
real estate, interests in real estate or real estate limited
partnership interests except that, to the extent appropriate under
its investment program, the Fund may invest in securities secured by
real estate or interests therein issued by companies, including real
estate investment trusts, which deal in real estate or interests
therein.
(6) make loans to other persons except: (a) through the purchase of a
portion or portions of an issue or issues of securities issued or
guaranteed by the U.S. Government or its agencies, or (b) through
investments in "repurchase agreements" (which are arrangements under
which the Fund acquires a debt security subject to an obligation of
the seller to repurchase it at a fixed price within a short period),
provided that no more than 5% of the Fund's assets may be invested
in repurchase agreements;
(7) purchase the securities of another investment company or investment
trust, except in the open market and then only if no profit, other
than the customary broker's commission, results to a sponsor or
dealer, or by merger or other reorganization;
(8) buy securities from or sell securities (other than securities issued
by the Fund) to any of its officers, Trustees or LMC as principal;
(9) contract to sell any security or evidence of interest therein,
except to the extent that the same shall be owned by the Fund;
(10) purchase or retain securities of an issuer when one or more of the
officers and Trustees of the Fund or of the investment adviser, or a
person owning more that 10% of the stock of either, own beneficially
more than 1/2 of 1% of the securities of such issuer and such
persons owning more than 1/2 of 1% of such securities together own
beneficially more than 5% of the securities of such issuer;
(11) invest more than 5% of its total assets in the securities of any
one issuer (except securities issued or guaranteed by the U.S.
Government) except that such restriction shall not apply to 50% of
the Fund's portfolio;
(12) purchase any security if such purchase would cause the Fund to own
at the time of purchase more than 10% of the outstanding voting
securities of any one issuer;
(13) invest more than 15% of its net assets in illiquid securities.
Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual
course of business without taking a materially reduced price. Such
securities include, but are not limited to, time deposits and
repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended,
shall not be deemed illiquid solely by reason of being unregistered.
LMC shall determine whether a particular security is deemed to be
liquid based on the trading markets for the specific security and
other factors; and
(14) invest in interest in oil, gas or other mineral exploration or
development programs.
The following investment policy of the Fund is not a fundamental policy and
may be changed by a vote of a majority of the Fund's Board of Trustees without
shareholder approval. The Fund may purchase and sell futures contracts and
related options under the following conditions: (a) the then-current aggregate
futures market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the Fund's total
assets, at market value; and (b) no more than 5% of the Fund's total assets, at
market value at the time of entering into a contract, shall be committed to
margin deposits in relation to futures contracts.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Fund's Board of Trustees, LMC is
responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers that execute such transactions on behalf of the
Fund. In executing portfolio transactions, LMC seeks the best net results for
the Fund, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although LMC
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Fund may engage in soft dollar arrangements for research
services, as described below, the Fund has no obligation to deal with any
broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
13
<PAGE>
Debt securities generally are traded on a "net" basis with a dealer acting
as principal for its own account without a stated commission, although the price
of the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, LMC may select brokers to execute
the Fund's portfolio transactions on the basis of the research and brokerage
services they provide to LMC for its use in managing the Fund and its other
advisory accounts. Such services may include furnishing analyses, reports and
information concerning issuers, industries, securities, geographic regions,
economic factors and trends, portfolio strategy, and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research and brokerage services
received from such brokers are in addition to, and not in lieu of, the services
required to be performed by LMC under the Advisory Agreement (defined below). A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that LMC
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of LMC to the Fund and
its other clients and that the total commissions paid by the Fund will be
reasonable in relation to the benefits received by the Fund over the long term.
Research services may also be received from dealers who execute Fund
transactions.
Investment decisions for the Fund and for other investment accounts managed
by LMC are made independently of each other in light of differing conditions.
However, the same investment decision occasionally may be made for two or more
of such accounts. In such cases, simultaneous transactions may occur. Purchases
or sales are then allocated as to price or amount in a manner deemed fair and
equitable to all accounts involved. While in some cases this practice could have
a detrimental effect upon the price or value of the security as far as the Fund
is concerned, in other cases LMC believes that coordination and the ability to
participate in volume transactions will be beneficial to the Fund.
Portfolio Trading and Turnover
The Fund engages in portfolio trading when LMC concludes that the sale of a
security owned by the Fund and/or the purchase of another security of better
value can enhance principal and/or increase income. A security may be sold to
avoid any prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Fund's investment objectives,
a security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Fund
generally does not intend to trade for short-term profits, the securities in the
Fund's portfolio will be sold whenever LMC believes it is appropriate to do so,
without regard to the length of time a particular security may have been held
(except to the extent necessary to avoid non-compliance with the "Short-Short
Limitation" described below in "Taxes General"). The Fund anticipates that its
portfolio turnover rate will exceed 100%. A 100% portfolio turnover rate would
occur if the lesser of the value of purchases or sales of portfolio securities
for the Fund for a year (excluding purchases of U.S. Treasury and other
securities with a maturity at the date of purchase of one year or less) were
equal to 100% of the average monthly value of the securities, excluding
short-term investments, held by the Fund during such year. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly. The portfolio turnover rates
for the Fund for the last three fiscal years were as follows: 1994, 10.20%,
1995, 164.72% and 1996, 71.83%.
VALUATION OF FUND SHARES
As described in the Prospectus, the Fund's net asset value per share for
each class of shares is determined at the close of regular trading on the New
York Stock Exchange ("NYSE") (currently, 4:00 Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing business
time) on each business day the NYSE is open for business. Currently, the NYSE is
closed on weekends and on certain days relating to the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Long-term debt obligations are valued at the mean of representative quoted
bid or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
LMC deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term debt investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuation represents fair value.
14
<PAGE>
Options on currencies purchased by the Fund are valued at their last bid
price in the case of listed options or at the average of the last bid prices
obtained from dealers in the case of OTC options. The value of each security
denominated in a currency other than U.S. dollars will be translated into U.S.
dollars at the prevailing market rate as determined by LMC on that day.
Securities and assets for which market quotations are not readily available
(including restricted securities which are subject to limitations as to their
sale) are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Trustees. The valuation procedures applied in
any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearest cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If none of these alternatives
are available or none are deemed to provide a suitable methodology for
converting a foreign currency into U.S. dollars, management at the direction of
the Board of Trustees, in good faith, will establish a conversion rate for such
currency.
European, Far Eastern or Latin American securities trading may not take
place on all days on which the NYSE is open. Further, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's
respective net asset values therefore may not take place contemporaneously with
the determination of the prices of securities held by the Fund. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's net asset value unless LMC, under the supervision of the Fund's Board
of Trustees, determines that the particular event would materially affect net
asset value. As a result, the Fund's net asset value may be significantly
affected by such trading on days when a shareholder cannot purchase or redeem
shares of the Fund.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
The Fund has entered into an investment advisory contract with LMC, P.O. Box
1515, Park 80 West Plaza Two, Saddle Brook, New Jersey 07663. LMC, as such
provides investment advice and in general conducts the management and investment
program of the Fund under the supervision and control of the Trustees of the
Fund. LMC has entered into a sub-advisory contract with MFR Advisors, Inc.,
("MFR"), One World Financial Center, 200 Liberty Street, New York, New York
10281, under which MFR will provide the Fund with economic and research
services.
Pursuant to an investment advisory agreement, the Fund pays LMC an
investment advisory fee of 1% of the Fund's average net asset value, after
deduction of Fund expenses, if any, in excess of the expense limitations set
forth below. Of this amount, LMC will pay MFR an annual sub-advisory fee of
0.50% of the Fund's average net assets, net of reimbursement, that exceed $15
million. The sub-advisory fee will be paid by LMC not by the Fund. The fees are
computed on the basis of current net assets at the end of each business day and
is payable at the end of each month.
For the fiscal years ended December 31, 1994, 1995 and 1996, the Fund paid
$41,599, $97,938 and $30,004, respectively, in net investment advisory fees to
LMC.
Investment Adviser, Sub-Adviser, Distributor, and Administrator
Lexington Management Corporation has agreed to voluntarily limit the total
operating expenses of the Fund (excluding interest, taxes, brokerage and
extraordinary expenses, but including management fee and operating expenses) to
an annual rate of 1.50% of the Fund's average net assets through April 30, 1998
or such later date to be determined by Lexington Management Corporation.
Under the terms of the investment advisory agreement, LMC also pays the
Fund's expenses for a trading function to place orders for the purchase and sale
of portfolio securities for the Fund; office rent, utilities, telephone,
furniture and
15
<PAGE>
supplies utilized at the Fund's principal office; salaries and payroll expenses
of persons serving as officers or Trustees of the Fund who are also employees of
LMC or any of its affiliates.
Any of the other expenses incurred in the operation of the Fund shall be
borne by the Fund, including, among other things, fees of its custodian,
transfer and shareholder servicing agent; cost of pricing and calculating its
daily net asset value and of maintaining its books and accounts required by the
Investment Company Act of 1940; expenditures in connection with meetings of the
Fund's Trustees and shareholders, except those called to accommodate LMC; fees
and expenses of Trustees who are not affiliated with or interested persons of
LMC; in maintaining registration of its shares under state securities laws or in
providing shareholder and dealer services; insurance premiums on property or
personnel of the Fund which inure to its benefit; costs of preparing and
printing reports, proxy statements and prospectuses of the Fund for distribution
to its shareholders; legal, auditing and accounting fees; fees and expenses of
registering and maintaining registration of its shares for sales under Federal
and applicable state securities laws; and all other expenses in connection with
issuance, registration and transfer of its shares.
If, for any fiscal year, the total of all ordinary business expenses of the
Fund, including all investment advisory fees but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, would
exceed the most restrictive expense limits imposed by any statute or regulatory
authority of any jurisdiction in which the Fund's securities are offered as
determined in the manner described above as of the close of business on each
business day during such fiscal year, the aggregate of all such investment
management fees shall be reduced by the amount of such excess but will not be
required to reimburse the Fund for any ordinary business expenses which exceed
the amount of its advisory fee for such fiscal year. The amount of any such
reduction to be borne by LMC shall be deducted from the monthly investment
advisory fee otherwise payable to LMC during such fiscal year; and if such
amount should exceed such monthly fee, LMC agrees to repay to the Fund such
amount of its investment management fee previously received with respect to such
fiscal year as may be required to make up the deficiency no later than the last
day of the first month of the next succeeding fiscal year. For purposes of this
paragraph, the term "fiscal year" shall exclude the portion of the current
fiscal year which shall have elapsed prior to the date hereof and shall include
the portion of the then current fiscal year which shall have elapsed at the date
of termination of the Advisory Agreement.
LMC also acts as administrator to the Fund and performs certain
administrative and 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's services are provided and investment advisory its 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 must
be approved by shareholders of the Fund at the first annual meeting, and any
renewal thereof as to the Agreement must be approved at least annually by a
majority of the Fund's Board of Trustees, including a majority of Trustees 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 (see
"Exchange Privilege") as well as private and institutional investment clients.
Included among these clients are persons and organizations which own significant
amounts of capital stock of LMC's parent company Piedmont Management Company
Inc. 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 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, the ability of the Fund
to participate in combined transactions may generally produce better overall
executions.
LFD 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
Trustees, including a majority who are not "interested persons."
MFR is a subsidiary of Maria Fiorini Ramirez, Inc. ("Ramirez"), which was
established in August of 1992 to provide global economic consulting, investment
advisory and broker-dealer services. Ramirez is the successor firm to Maria
Ramirez Capital Consultants, Inc. ("MRCC"). MRCC was formed in April 1990 as a
subsidiary of John Hancock Freedom Securities Corporation and offered in-depth
economic consulting services to clients. MFR currently does not manage any
assets for investment companies but is an institutional manager for private
clients. Under the terms of the Sub-Advisory Agreement, MFR will provide
economic and investment research.
16
<PAGE>
Of the Trustees, executive officers and employees ("affiliated persons") of
the Fund, Messrs. Corniotes, DeMichele, Faust, Hisey, Jamison, Kantor, Lavery,
Luehs and Mmes. Carnicelli, Carr, Curcio, Gilfillan and Mosca (see "Management
of the Trust") may also be deemed affiliates of LMC by virtue of being officers,
Trustees or employees thereof. As of February 28, 1997, all officers and
Trustees of the Fund as a group, were beneficial owners of less than 1% of the
shares of the Fund.
LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities have a majority voting control of
outstanding shares of Lexington Global Asset Managers, Inc. common stock.
TAXES
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.
If the Fund has a net capital loss (i.e., the excess of capital losses over
capital gains) for any year, the amount thereof may be carried forward up to
eight years and treated as a short-term capital loss which can be used to offset
capital gains in such years. As of December 31, 1995, the Fund has capital loss
carryforwards of approximately $99,152; $48,158; $6,712; $37,269; and $97,345,
which expire through 1996, 1998, 1999, 2001, and 2002, respectively. Under Code
Sections 382 and 383, if the Fund has an "ownership change," then the Fund's use
of its capital loss carryforwards in any year following the ownership change
will be limited to an amount equal to the net asset value of the Fund
immediately prior to the ownership change multiplied by the long-term tax-exempt
rate (which is published monthly by the Internal Revenue Service (the "ERS")) in
effect for the month in which the ownership change occurs (the rate for March,
1996 is 5.31%). The Fund will use its best efforts to avoid having an ownership
change. However, because of circumstances which may be beyond the control or
knowledge of the Fund, there can be no assurance that the Fund will not have, or
has not already had, an ownership change. If the Fund has or has had an
ownership change, then any capital gain net income for any year following the
ownership change in excess of the annual limitation on the capital loss
carryforwards will have to be distributed by the Fund and will be taxable to
shareholders as described under "Fund Distributions" below.
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
17
<PAGE>
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.
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.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of the Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of Section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction; and (2) the
capital interest on acquisition indebtedness under Code Section 263(g). Built-in
losses will be preserved where the Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed to
the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, or (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and Fund
grants a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto). However, for purposes of the
Short-Short Gain Test, the holding period of the asset disposed of may be
reduced only in the case of clause (1) above. In addition, the Fund may be
required to defer the recognition of a loss on the disposition of an asset held
as part of a straddle to the extent of any unrecognized gain on the offsetting
position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
Transactions that may be engaged in by the Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of such
date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital gain
or loss for the taxable year with respect to Section 1256 contracts (including
any capital gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is generally treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. The Fund, however, may elect not to have
this special tax treatment apply to Section 1256 contracts that are part of a
"mixed straddle" with other investments of the Fund that are not Section 1256
contracts. The ERS has held in several private rulings (and Treasury Regulations
now provide) that gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
18
<PAGE>
The Fund may enter into notional principal contracts, including interest
rate swaps, caps, floors, and collars. Under proposed Treasury Regulations, in
general, the net income or deduction from a notional principal contract for a
taxable year is included in or deducted from gross income for that taxable year.
The net income or deduction from a notional principal contract for a taxable
year equals the total of all of the periodic payments (generally, payments that
are payable or receivable at fixed periodic intervals of one year or less during
the entire term of the contract) that are recognized from that contract for the
taxable year and all of the non-periodic payments (including premiums for caps,
floors and collars) that are recognized from that contract for the taxable year.
No portion of a payment by a party to a notional principal contract is
recognized prior to the first year to which any portion of a payment by the
counterparty relates. A periodic payment is recognized ratably over the period
to which it relates. In general, a non-periodic payment must be recognized over
the term of the notional principal contract in a manner that reflects the
economic substance of the contract. A non-periodic payment that relates to an
interest rate swap, cap, floor or collar shall be recognized over the term of
the contract by allocating it in accordance with the values of a series of
cash-settled forward or option contracts that reflect the specified index and
notional principal amount upon which the notional principal contract is based
(or, in the case of a swap, under an alternative method contained in the
proposed regulations and, in the case of a cap or floor, under an alternative
method which the ERS may provide in a revenue procedure).
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's 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. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option.
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).
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.
19
<PAGE>
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.
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.
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. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.
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 ordinary income dividends and capital gain dividends, 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 ERS 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."
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
20
<PAGE>
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) 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 such shareholders furnish 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 be different 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.
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.
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 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
21
<PAGE>
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 Trustees 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 Trustees and the Qualified Trustees (as
defined below), cast in person at a meeting called for the purposes 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 by a majority vote of the Trustees of the Fund, including a
majority of the Qualified Trustees cast in person at a meeting called for the
purpose of voting 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 Trustees of the Fund, and of the Qualified Trustees
(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 Trustees
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 Trustees")
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" Trustees of the Fund shall be committed to the discretion of
the Qualified Trustees then in office.
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 custodian for the Fund's portfolio securities
including those to be held by foreign banks and foreign securities depositories
that 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, has been
retained to act as 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.
MANAGEMENT OF THE FUND
The Trustees and executive officers of the Fund and their principal
occupations are set forth below:
+S.M.S. CHADHA (59), Director. 3/16 Shanti Niketan, New Delhi 21, India.
Secretary, Ministry of External Affairs, New Delhi, India; Head of Foreign
Service Institute, New Delhi, India; Special Envoy of the Government of
India; Director, Special Unit for Technical Cooperation among Developing
Countries, United Nations Development Program, New York.
*+ROBERT M. DEMICHELE (52), President and Chairman. P.O. Box 1515, Saddle Brook,
N.J. 07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; President and Director, Lexington Global Asset Managers, Inc.;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.,
Chairman of the Board, Market Systems Research, Inc. and Market Systems
Research Advisors, Inc.; Director, Chartwell Re Corporation, Claredon
National Insurance Company, The Navigator's Group, Inc., Unione Italiana
Reinsurance, Vanguard Cellular Systems, Inc. and Weeden & Co.; Vice Chairman
of the Board of Trustees, Union College and Trustee, Smith Richardson
Foundation.
(d)BEVERLEY C. DUER, Trustee. 340 East 72nd Street, New York, New York, 10021.
Private Investor; formerly Manager of Operations Research Department, CPC
International, Inc.
*(d)BARBARA R. EVANS, Trustee. 5 Fernwood Road, Summit, N.J. 07901. Private
investor. Prior to May 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation.
*(d)LAWRENCE KANTOR, Vice President and Trustee. P.O. Box 1515, Saddle Brook,
N.J. 07663. Executive Vice President, Managing Director, Lexington
Management Corporation; Executive Vice President and Director, Lexington
Funds Distributor, Inc.; Executive Vice President and General Manager-Mutual
Funds, Lexington Global Asset Managers, Inc.
22
<PAGE>
+JERARD F. MAHER (50), Trustee. 300 Raritan Center Parkway, Edison, N.J. 08818.
General Counsel, Federal Business Center; Counsel, Ribis, Graham & Curtin.
+ANDREW M. McCOSH (56), Trustee. 12 Wyvern Park, Edinburgh EH 92 JY, Scotland,
U.K. Professor of the Organisation of Industry and Commerce, Department of
Business Studies, The University of Edinburgh, Scotland.
(d)DONALD B. MILLER, Trustee. 10725 Quail Covey Road, Boynton 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).
(d)JOHN G. PRESTON, Trustee. 3 Woodfield Road, Wellesley, Massachusetts.
Associate Professor of Finance, Boston College, Boston, Massachusetts 02181.
(d)MARGARET W. RUSSELL, Trustee. 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor; formerly Community Affairs Director, Union Camp
Corporation.
*(d)DENIS P. JAMISON, Vice President and Portfolio Manager. P.O. Box 1515,
Saddle Brook, N.J. 07663. Senior Vice President, Director of Fixed Income
Investment Strategy, Lexington Management Corporation. Mr. Jamison is a
Chartered Financial Analyst and a member of the New York Society of
Securities Analysts.
*MARIA FIORINI RAMIREZ, Vice President and Portfolio Manager. One World
Financial Center, 200 Liberty Street, New York, N.Y. 10281. President and
Chief Executive Officer, MFR Advisors, Inc. Prior to 1992, Managing
Director, Drexel Burnham Lambert.
*(d)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.; Secretary, Lexington Global Asset Managers, Inc.
*(d)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.; Executive Vice President and Chief
Financial Officer, Lexington Global Asset Managers, Inc.
*(d)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.
*(d)JANICE A. CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663.
*(d)CHRISTIE CARR, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.
*(d)SIOBHAN GILFILLAN, Assistant Treasurer, P.O. Box 1515, Saddle Brook, N.J.
07663.
*(d)THOMAS LUEHS, Assistant Treasurer, P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November, 1993, Supervisor Investment Accounting, Alliance Capital
Management, Inc.
*(d)SHERI MOSCA, Assistant Treasurer, P.O. Box 1515, Saddle Brook, N.J. 07663.
*(d)PETER CORNIOTES, Assistant Secretary, P.O. Box 1515, Saddle Brook, N.J.
07663. Assistant Vice President and Assistant Secretary, Lexington
Management Corporation. Assistant Secretary, Lexington Funds Distributor,
Inc.
*(d)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.
*"Interested person" and/or "affiliated person" of LMC as defined in the
Investment Company Act of 1940, as amended.
(d)Messrs. Chadha, Corniotes, DeMichele, Duer, Faust, Hisey, Jamison, Kantor,
Lavery, Luehs, Maher, McCosh, Miller and Preston 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.
The Board of Trustees met 5 times during the twelve months ended December
31, 1996, and each of the Trustees attended at least 75% of those meetings.
23
<PAGE>
Remuneration of Trustees and Certain Executive Officers
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisor is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by LMC. Each Trustee receives a
fee, allocated among all investment companies for which the Trustee serves.
Effective September 12, 1995 each Trustee receives annual compensation of
$24,000. Prior to September 12, 1995, the trustees who were not employed by the
Fund or its affiliates received annual compensation of $16,000.
Set forth below is information regarding compensation paid or accrued during
the period January 1, 1996 to December 31, 1996 for each Trustee:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Aggregate Total Compensation From Number of
Name of Director Compensation from Fund and Fund Complex Directorships in Fund
Fund Complex
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
S.M.S. Chadha $856 $13,696 16
- --------------------------------------------------------------------------------------------------------
Robert M. DeMichele 0 $0 17
- --------------------------------------------------------------------------------------------------------
Beverley C. Duer $1,712 $29,110 17
- --------------------------------------------------------------------------------------------------------
Barbara R. Evans 0 0 16
- --------------------------------------------------------------------------------------------------------
Lawrence Kantor 0 0 16
- --------------------------------------------------------------------------------------------------------
Jerard F. Maher $856 $16,046 17
- --------------------------------------------------------------------------------------------------------
Andrew M. McCosh $856 $13,696 16
- --------------------------------------------------------------------------------------------------------
Donald B. Miller $1,712 $26,760 16
- --------------------------------------------------------------------------------------------------------
Francis Olmsted* $1,068 $16,800 N/A
- --------------------------------------------------------------------------------------------------------
John G. Preston $1,712 $26,760 16
- --------------------------------------------------------------------------------------------------------
Margaret W. Russell $1,712 $25,048 16
- --------------------------------------------------------------------------------------------------------
Philip C. Smith $1,600 $25,080 16
- --------------------------------------------------------------------------------------------------------
Francis A. Sunderland* $744 $10,528 N/A
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Retired
Retirement Plan for Eligible Directors/Trustees
Effective September 12, 1995, the Trustees instituted a Retirement Plan for
Eligible Directors/Trustees (the "Plan") pursuant to which each Director/Trustee
(who is not an employee of any of the Funds, the Advisor, Administrator or
Distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Director/Trustee has attained age 65 and has
completed at least ten years of continuous and non-forfeited service with one or
more of the investment companies advised by LMC (or its affiliates)
(collectively, the "Covered Funds"). Each eligible Director/Trustee is entitled
to receive from the Covered Fund an annual benefit commencing on the first day
of the calendar quarter coincident with or next following his date of retirement
equal to 5% of his compensation multiplied by the number of such
Director/Trustee's years of service (not in excess of 15 years) completed with
respect to any of the Covered Portfolios. Such benefit is payable to each
eligible Trustee in quarterly installments for ten years following the date of
retirement or the life of the Director/Trustee. The Plan establishes age 72 as a
mandatory retirement age for Directors/Trustees; however, Director/Trustees
serving the Funds as of September 12, 1995 are not subject to such mandatory
retirement. Directors/Trustees serving the Funds as of September 12, 1995 who
elect retirement under the Plan prior to September 12, 1996 will receive an
annual retirement benefit at any increased compensation level if compensation is
increased prior to September 12, 1997 and receive spousal benefits (i.e., in the
event the Director/Trustee dies prior to receiving full benefits under the Plan,
the Director/Trustee's spouse (if any) will be entitled to receive the
retirement benefit within the 10 year period.)
Retiring Trustees will be eligible to serve as Honorary Trustees for one
year after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.
Set forth in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of December 31, 1996, the estimated credited years
of service for Messrs. Chadha, Duer, Maher, McCosh, Miller, Preston and Russell
are 1, 18, 1, 1, 22, 18 and 15, respectively.
24
<PAGE>
Highest Annual Compensation Paid by All Funds
---------------------------------------------
$20,000 $25,000 $30,000 $35,000
Years of
Service Estimated Annual Benefit Upon Retirement
------- ----------------------------------------
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
INVESTMENT RETURN INFORMATION
For purposes of quoting and comparing the performance of the Fund to that of
other mutual funds and to other relevant market indices in advertisements or in
reports to shareholders, performance may be stated in terms of total returns and
yield. 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:
P(l+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
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 or at
the end of the 1, 5 or 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 Funds' Registration Statement. 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.
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 a Fund's total return with data
published by Lipper Analytical Services, Inc., or with the performance of the
Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average, the Fund
calculates its aggregate total return for the specified periods of time by
assuming the investment of $10,000 in Fund shares and 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. Such alternative total return information will be given no
greater prominence in such advertising than the information prescribed under the
SEC rules.
Prior to January, 1995, the Fund was managed under a different investment
objective. The Fund's average annual total return for the one year, five year
and since inception 7/10/86, period ended December 31, 1995 are set forth in the
table below:
Average Annual
Period Total Return
------ ------------
1 year ended December 31, 1995 -20.16%
5 years ended December 31, 1995 7.85%
113 month period ended December 31, 1995 7.54%
In addition to the total return quotations discussed above, the Fund may
advertise its yield based on a 30-day (or one month) period ended on the date of
the most recent balance sheet included in the Fund's Registration Statement,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
25
<PAGE>
a-b
--------
YIELD = 2[(cd + 1)6 - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (1) computing the yield to maturity of each obligation
held by a Fund based on the market value of the obligation (including actual
accrued interest) at the close of business on the last day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest), (2) dividing that figure by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest as referred to above) to determine the interest income on the
obligation for each day of the subsequent month that the obligation is held by
the Fund (assuming a month of 30 days) and (3) computing the total of the
interest earned on all debt obligations and all dividends accrued on all equity
securities during the 30-day period. In computing dividends accrued, dividend
income is recognized by accruing 1/360 of the stated dividend rate of a security
each day that the security is held by the Fund. Undeclared earned income,
computed in accordance with generally accepted accounting principles, may be
subtracted from the maximum offering price calculation required pursuant to "d"
above.
The Fund may also from time to time advertise its yield based on a 90-day
period ended on the date of the most recent balance sheet included in the Fund's
Registration Statement, computed in accordance with the yield formula described
above, as adjusted to conform with the differing period for which the yield
computation is based.
Any quotation of performance stated in terms of yield (whether based on a
30-day or 90-day period) will be given no greater prominence than the
information prescribed under SEC rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such performance data represents past performance and that the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
SHAREHOLDER REPORTS
Shareholders will receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders will receive annual
financial statements audited by KPMG Peat Marwick LLP, the Fund's independent
auditors.
OTHER INFORMATION
As of February 20, 1997, the following persons are known by fund management
to have owned beneficially, directly or indirectly, five percent or more of the
outstanding shares of the Lexington Ramirez Global Income Fund: Smith Richardson
Foundation, 60 Jesup Road, Westport, Ct 06880, 8% and Bernard and Barbara Ponte,
943 W. Williams Ave., Fallon, NV 89406, 5%.
26
<PAGE>
Lexington Ramirez Global Income Fund
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (unaudited)
Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------
LONG-TERM DEBENTURES: 77.5%
Government Obligations: 54.4%
Argentina: 5.8%
750,000 Republic of Argentina
9.25%, due 2/23/01 ........................... $ 764,062
1,500,000 Republic of Argentina
5.25%, due 3/31/23 ........................... 946,875
-----------
1,710,937
-----------
Australia: 5.2%
930,000 *Commonwealth of Australia
9.00%, due 09/15/04 .......................... 811,982
940,000 *New South Wales
Treasury Corporation
6.50%, due 05/01/06 .......................... 691,537
-----------
1,503,519
-----------
Costa Rica: 2.5%
900,000 Banco Costa Rica
6.25%, due 05/21/10 .......................... 715,500
-----------
Dominican Republic: 3.1%
1,200,000 Central Bank of Dominican
Republic
6.375%, due 08/30/24 ......................... 915,000
-----------
Greece: 4.7%
330,000,000 *Hellenic Republic
14.00%, due 10/23/03 ......................... 1,356,462
-----------
Hungary: 4.3%
200,000,000 *Government of Hungary
21.00%, due 10/24/99 ......................... 1,262,480
-----------
Ireland: 5.9%
1,000,000 *Government of Ireland
6.50%, due 10/18/01 .......................... 1,720,439
-----------
Jordan: 3.6%
1,750,000 Kingdom of Jordan
4.00%, due 12/23/23 .......................... 1,036,875
-----------
Kazakhstan: 3.4%
1,000,000 Republic of Kazakhstan
9.25%, due 12/20/99 .......................... 1,000,001
-----------
New Zealand: 2.8%
1,150,000 *New Zealand Government
6.50%, due 02/15/00 .......................... 800,893
-----------
Poland: 3.0%
2,680,000 *Government of Poland
16.00%, due 10/12/98 ......................... 883,022
-----------
Portugal: 5.7%
110,000,000 *Obrig Do Tes Medio Prazo
11.875%, due 02/23/00 ........................ 844,416
-----------
100,000,000 *Obrig Do Tes Medio Prazo
11.875%, due 02/23/05 ........................ 824,420
-----------
1,668,836
-----------
(right column)
Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------
South Africa: 1.8%
1,100,000 *Electricity Supply Commission
11.00%, due 06/01/08 ......................... $ 172,173
2,000,000 *Republic of South Africa
12.00%, due 02/28/05 ......................... 349,692
-----------
521,865
-----------
Spain: 2.6%
80,000,000 *Bonos Y Oblig
Del Estado
10.15%, due 01/31/06 .......................... 750,643
-----------
Total Government Obligations
(Cost $15,249,770) ............................ 15,846,472
-----------
Corporate Bonds: 23.1%
Canada: 6.9%
1,000,000 CHC Helicopter
11.50%, due 07/15/02 .......................... 1,025,000
500,000 *Roger's Communication, Inc.
10.50%, due 02/14/06 .......................... 380,803
700,000 *Stelco, Inc.
10.40%, due 11/30/09 .......................... 603,628
-----------
2,009,431
-----------
Czech Republic: 3.5%
12,500,000 *CEZ, A.S.
11.30%, due 06/06/05 .......................... 464,044
14,800,000 *Skofin S.R.O., A.S.
11.625%, due 02/09/98 ......................... 546,275
-----------
1,010,319
-----------
Denmark: 6.0%
5,500,000 *Nykredit
7.00%, due 10/01/26 ........................... 877,832
5,500,000 *Realkredit Danmark
7.00%, due 10/01/26 ........................... 873,916
-----------
1,751,748
-----------
Thailand: 2.5%
17,500,000 *Italian-Thai Development
Company
12.50%, due 10/11/05 .......................... 734,912
-----------
United States: 4.2%
750,000 Chiquita Brands International, Inc.
10.25%, due 11/01/06 .......................... 802,500
250,000 Clark Material Handling Company
10.75%, due 11/15/06 .......................... 261,250
204,288 DLJ Mortgage Acceptance
7.25%, due 9/25/11** .......................... 148,804
-----------
1,212,554
-----------
Total Corporate Bonds
(Cost $6,513,554) ............................. 6,718,964
-----------
TOTAL LONG-TERM DEBENTURES
(Cost $21,763,324) ............................ 22,565,436
-----------
27
<PAGE>
Lexington Ramirez Global Income Fund
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (continued)(unaudited)
Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS: 20.0%
Greece: 3.7%
175,000,000 *Hellenic Treasury Bills
0%, due 01/31/97 .............................. $ 702,390
100,000,000 *Hellenic Treasury Bills
0%, due 05/31/97 .............................. 385,909
-----------
1,088,299
-----------
Indonesia: 3.2%
1,600,000,000 *Asia Pulp & Paper
0%, due 04/29/97 .............................. 645,108
700,000,000 *Chase Manhattan Bank
IDR Time Deposit
14.00%, due 1/16/97 ........................... 296,296
-----------
941,404
-----------
Mexico: 3.4%
8,000,000 *Cetes
0%, due 2/20/97 ............................... 978,965
-----------
New Zealand: 3.4%
1,400,000 *New Zealand Government
Treasury Bills
0%, due 1/15/97 ............................... 985,914
-----------
Slovakia: 2.7%
25,000,000 *European Bank for Research
& Development
12.50%, due 08/19/97 .......................... 782,567
-----------
(right column)
Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------
Turkey: 1.3%
50,000,000,000 *Government of Turkey
Treasury Bills
0%, due 4/09/97 ............................... $ 381,332
-----------
United States: 2.3%
700,000 U.S. Treasury Bills
5.155%, due 12/11/97 .......................... 665,518
-----------
Total Short-Term Investments
(cost $5,924,865) ............................. 5,823,999
-----------
Call Options in Currency:
1,400,000 *Written Call Option on New
Zealand Dollar strike price
.713 NZD expires 1/13/97
(premium $5,530) (Note 8) ..................... (1,610)
-----------
Total Investments: 97.5%
(cost $27,688,189+) (Note 1) ............... 28,387,825
Other assets in excess of
liabilities: 2.5% ............................. 721,995
-----------
Total Net Assets: 100%
(equivalent to $11.22 per share
on 2,594,444 shares outstanding) .............. $29,109,820
===========
*Principal amount represents local currency.
**Restricted Security (Note 9).
+Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
28
<PAGE>
Lexington Ramirez Global Income Fund
Statement of Assets and Liabilities
December 31, 1996
Assets
<TABLE>
<S> <C>
Investments, at value (cost $27,688,189) (Note 1) ............................................ $28,387,825
Cash ......................................................................................... 72,570
Receivable for investment securities sold .................................................... 89,375
Receivable for shares sold ................................................................... 233,960
Dividends and interest receivable ............................................................ 713,512
Unrealized gain on open forward contracts (Note 7) ........................................... 19,668
-----------
Total Assets ......................................................................... $29,516,910
-----------
Liabilities
Due to Lexington Management Corporation (Note 2) ............................................. 22,500
Payable for shares redeemed .................................................................. 232,128
Distributions payable ........................................................................ 107,377
Accrued expenses ............................................................................. 45,085
-----------
Total Liabilities .................................................................... 407,090
-----------
Net Assets (equivalent to $11.22 per share on 2,594,444 shares outstanding) (Note 4) ......... $29,109,820
===========
Net Assets consist of:
Additional paid-in capital (Note 1) .......................................................... 28,286,038
Distributions in excess of net investment income (Note 1) .................................... (86,311)
Accumulated net realized gain on investments and foreign currency transactions (Note 1) ...... 192,017
Unrealized appreciation on investments and foreign currency transactions ..................... 718,076
-----------
Total Net Assets ..................................................................... $29,109,820
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
29
<PAGE>
Lexington Ramirez Global Income Fund
Statement of Operations
Years ended December 31, 1996
<TABLE>
Investment Income
<S> <C> <C>
Interest ................................................................. $2,106,538
Less: foreign tax expense ................................................ 25,200
----------
Total investment income .......................................... $2,081,338
Expenses
Investment advisory fee (Note 2) ......................................... 175,988
Printing and mailing expenses ............................................ 55,988
Distribution expense (Note 3) ............................................ 43,997
Registration fees ........................................................ 25,558
Custodian fees ........................................................... 23,158
Professional fees ........................................................ 21,556
Transfer agent and shareholder services expense (Note 2) ................. 20,870
Directors' fees and expenses ............................................. 15,488
Accounting expenses (Note 2) ............................................. 12,686
Computer processing fees ................................................. 5,922
Other expenses ........................................................... 9,446
----------
Total expenses ................................................... 410,657
Less: expenses recovered under contract
with investment adviser (Note 2) ............................... (145,984) 264,673
---------- ----------
Net investment income ............................................ 1,816,665
Realized and Unrealized Gain (Loss) on Investments (Note 5)
Net realized gain (loss) on:
Investments .......................................................... 583,537
Foreign currency transactions ........................................ (389,687)
----------
Net realized gain ................................................ 193,850
Net change in unrealized appreciation/depreciation on:
Investments .......................................................... 207,852
Foreign currency translation of other assets and liabilities ......... 14,433
----------
Net change in unrealized appreciation ............................ 222,285
----------
Net realized and unrealized gain ............................. 416,135
----------
Increase in Net Assets Resulting from Operations ............................. $2,232,800
==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
30
<PAGE>
Lexington Ramirez Global Income Fund
Statements of Changes in Net Assets
Years ended December 31, 1996 and 1995
1996 1995
----------- -----------
Net investment income ............................... $ 1,816,665 $ 959,352
Net realized gain on investments and
foreign currency transactions ................... 193,850 331,370
Net change in unrealized appreciation of
investments and foreign currency translations ..... 222,285 492,391
----------- -----------
Increase in net assets resulting from operations .... 2,232,800 1,783,113
Distributions to shareholders from net
investment income ................................. (1,529,914) (901,633)
Distributions to shareholders from net realized
gains from security transactions .................. (92,247) -
Increase in net assets from capital share
transactions (Note 4) ............................. 16,244,449 1,022,692
----------- -----------
Net increase in net assets .......................... 16,855,088 1,904,172
Net Assets
Beginning of period ................................. 12,254,732 10,350,560
----------- -----------
End of period (including distributions in excess
of net investment income of $86,311 and
undistributed net investment income of
$16,186, respectively) ............................ $29,109,820 $12,254,732
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
31
<PAGE>
Lexington Ramirez Global Income Fund
Notes to Financial Statements
December 31, 1996 and 1995
1. Significant Accounting Policies
Lexington Ramirez Global Income Fund, Inc. (the "Fund") is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek high
current income. Capital appreciation is a secondary objective. The following is
a summary of significant accounting policies followed by the Fund in the
preparation of its financial statements:
Investments Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Long-term debt obligations held by the Fund are valued at
the mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality and type; however, when LMC deems it appropriate, prices
obtained for the day of valuation from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations. Equity
securities are valued at the last sale price on the exchange or in the principal
OTC market in which such securities are traded, as of the close of business on
the day the securities are being valued, lacking any sales, at the last
available bid price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by management
in good faith and approved by the Board of Directors. All investments quoted in
foreign currencies are valued in U.S. dollars on the basis of the foreign
currency exchange rates prevailing at the close of business. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income, adjusted for amortization of premiums and accretion of discounts, is
accrued as earned.
Foreign Currency Transactions Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk in the purchase or sale of securities
denominated in foreign currency. The Fund may also enter into such contracts to
hedge against changes in foreign currency exchange rates on portfolio positions.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as unrealized
gains or losses. Realized gains or losses are recognized when contracts are
closed and are reported in the statement of operations.
Federal Income Taxes It is the Fund's policy 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 is required.
Distributions Dividends from net investment income are normally declared and
paid quarterly and dividends from net realized capital gains are normally
declared and paid annually. However, the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. The character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. At December 31, 1996, reclassifications were
made to the Fund's capital accounts to reflect permanent book/tax differences
and income and gains available for distributions under income tax regulations.
Net investment income, net realized gains and net assets were not affected by
this change.
32
<PAGE>
Lexington Ramirez Global Income Fund
Notes to Financial Statements
December 31, 1996 and 1995 (continued)
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
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 1.00% of the Fund's average daily net assets. In
connection with providing investment advisory services, LMC has entered into a
sub-advisory contract with MFR Advisors Inc. ("MFR") under which MFR provides
the Fund with investment management services. Pursuant to the terms of the
sub-advisory contract between LMC and MFR, LMC pays MFR a monthly sub-advisory
fee at the annual rate of .50% of the Fund's average daily net assets over $15
million. LMC has agreed to voluntarily limit the total expenses of the Fund
(excluding interest, taxes, brokerage commissions and extraordinary expenses but
including management fee and operating expenses) to an annual rate of 1.50% of
the Fund's average net assets through December 31, 1997 or such later date as
may be determined by LMC. The investment advisory fee and expense reimbursement
are set forth in the statement of operations.
The Fund also reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $22,160, which were incurred by the Fund, but
paid by LMC.
3. Distribution Plan
The Fund has adopted 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 Funds Distributor, Inc. ("LFD"), the Fund's
distributor, in amounts not exceeding 0.25% per annum of the Fund's average
daily net assets. Total distribution expenses for the year ended December 31,
1996 were $43,997 and are set forth in the statement of operations.
4. Capital Stock
Transactions in capital stock were as follows:
Year ended Year ended
December 31, 1996 December 31, 1995
---------------------- ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold ................... 2,090,482 $23,291,607 356,354 $3,788,187
Shares issued on reinvestment
of dividends ................ 119,710 1,308,206 72,344 755,680
--------- ----------- ------- ----------
2,210,192 24,599,813 428,698 4,543,867
Shares redeemed ............... (755,281) (8,355,364) (345,326) (3,521,175)
--------- ----------- ------- ----------
Net increase .................. 1,454,911 $16,244,449 83,372 $1,022,692
========= =========== ======= ==========
33
<PAGE>
Lexington Ramirez Global Income Fund
Notes to Financial Statements
December 31, 1996 and 1995 (continued)
5. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1996, excluding short-term securities, were $21,471,435 and
$9,717,270, respectively.
At December 31, 1996, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$1,172,971 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $454,895.
6. Investment and Concentration Risks
The Fund's investments 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.
In addition to the risks described above, risks may arise from forward foreign
exchange contracts as the result of the potential inability of counterparties to
meet the terms of their contracts.
7. Forward Foreign Exchange Contracts
At December 31, 1996, the Fund was committed to sell foreign currencies under
the following forward foreign exchange contracts:
Unrealized
Settlement Contract Contract Current Gain at
Security Date Amount Rate Rate 12/31/96
-------- ---------- -------- -------- ------- ----------
Canadian Dollar ........... 1/31/97 $ 896,861 1.3380 1.3680 $19,668
=======
8. Option Contracts
When the Fund writes a call option, an amount equal to the premium received by
the Fund is recorded as a liability, the value of which is marked-to-market
daily. When a written option expires, the Fund realizes a gain equal to the
amount of the premium received. When the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of the closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a written call option
is exercised the cost of the security sold will be decreased by the premium
originally received. The risk in writing a covered call option is that the Fund
gives up the opportunity to participate in any increase in the price of the
underlying security beyond the exercise price.
34
<PAGE>
Lexington Ramirez Global Income Fund
Notes to Financial Statements
December 31, 1996 and 1995 (continued)
8. Option Contracts (continued)
The following written call option transactions occurred during the period ended
December 31, 1996:
Number of
Premiums Contracts
------------ ----------
Options written outstanding at December 31, 1995 ....... $ - 0
Options written during the period ended
December 31, 1996 .................................... 78,629 12
Options cancelled in closing purchase transactions ..... (26,458) (6)
Options expired ........................................ (46,641) (5)
------- ---
Options written, outstanding at December 31, 1996 ...... $ 5,530 1
======= ===
9. Restricted Securities
The following securities were purchased under Rule 144A of the Securities
Act of 1933 and, unless registered under the Act or exempted from registration,
may be sold only to qualified institutional investors.
Acquisition Principal Market % of Net
Security Date Amount Average Cost Value Assets
- -------- ----------- --------- ------------ ------ --------
DLJ Mortgage Acceptance .. 10/25/96 204,288 $0.74 $ 148,804 0.51%
Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities have been deemed to be illiquid. The Fund currently
limits investment in illiquid securities to 15% of the Fund's net assets, at
market value, at the time of purchase.
35
<PAGE>
Lexington Ramirez Global Income Fund
Financial Highlights
Selected per share data for a share outstanding throughout the period:
Year ended December 31,
------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net asset value, beginning
of period $10.75 $ 9.80 $10.95 $10.39 $10.35
------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment income 1.01 .96 .46 .53 .61
Net realized and unrealized gain
(loss) from investments and
foreign currency transactions .36 .95 (1.16) .58 .04
------ ------ ------ ------ ------
Total income (loss) from investment
operations 1.37 1.91 (.70) 1.11 .65
------ ------ ------ ------ ------
Less distributions:
Distributions from net investment
income (.86) (.96) (.45) (.55) (.61)
Distributions from net realized
gains (.04) - - - -
------ ------ ------ ------ ------
Total distributions (.90) (.96) (.45) (.55) (.61)
------ ------ ------ ------ ------
Net asset value, end of period $11.22 $10.75 $ 9.80 $10.95 $10.39
====== ====== ====== ====== ======
Total return 13.33% 20.10% (6.52%) 10.90% 6.51%
Ratios to average net assets:
Expenses, before reimbursement
or waiver 2.33% 3.07% 1.80% 1.44% 1.54%
Expenses, net of reimbursement
or waiver 1.50% 2.75% 1.50% 1.44% 1.50%
Net investment income, before
reimbursement or waiver 9.49% 9.48% 4.18% 4.83% 5.88%
Net investment income 10.32% 9.80% 4.48% 4.83% 5.92%
Portfolio turnover 71.83% 164.72% 10.20% 31.06% 31.24%
Net assets, end of period
(000's omitted) $29,110 $12,255 $10,351 $14,576 $13,085
36
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Lexington Ramirez Global Income Fund:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Ramirez Global
Income Fund as of December 31, 1996, 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, 1996 by correspondence with the custodian. As to securities sold
but not delivered, we performed other appropriate auditing procedures. 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 Ramirez Global Income Fund as of December 31, 1996, 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 14, 1997
37
<PAGE>
PART C. OTHER INFORMATION
- ------- -----------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1996 was filed
electronically on February 27, 1997 (as form type N-30D). Financial
statements from this 1996 Annual Report have been included in the
Statement of Additional Information.
Page in the Financial
(a) Financial statements: Statements Exhibit
- --------------------------- ---------------------
Report of Independent Auditors 37
dated February 14, 1997
Statement of Net Assets (Including 26-28
the Portfolio of Investments) at
December 31, 1996 (1)
Statement of Assets and Liabilities 29
at December 31, 1996
Statement of Operations for the year 30
ended December 31, 1996 (2)
Statements of Changes in Net Assets for 31
the years ended December 31, 1996 and 1995
Notes to Financial Statements 32-36
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. Declaration of Trust - Filed electronically
2. By-Laws - Filed 5/20/86 - Filed electronically
3. Not Applicable
4. Stock Certificate Specimen - Filed 11/4/94 -
Incorporated by reference
5. Investment Advisory Agreement between Registrant and
Lexington Management Corporation - Filed electronically
4/29/96 - Incorporated by reference
5a. Sub-advisory Agreement between Lexington Management
Corporation and MFR Advisors, Inc. - Filed electronically
4/29/96 - Incorporated by reference
6. Distribution Agreement between Registrant and Lexington
Funds Distributor, Inc. - Filed electronically
7. Not Applicable
8a. Custodian Agreement between Registrant and
Chase Manhattan Bank, N.A. - Filed electronically
4/29/96 - Incorporated by reference
8b. Transfer Agency Agreement between Registrant
and State Street Bank and Trust Company -
Filed electronically 4/29/96 - Incorporated by reference
9. Form of Administrative Services Agreement between
Registrant and Lexington Management Corporation - Filed
electronically 4/28/95 - Incorporated by reference
10. Opinion of Counsel as to Legality of Securities being
registered - Filed 5/20/86 - 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. Retirement Plans - Filed electronically 4/29/96 -
- Incorporated by reference
15. Distribution Plan under Rule 12b-1 and Related Agreements -
Filed electronically
16. Performance Calculation - Filed 5/2/88 - Incorporated
by reference
17. Financial Data Schedule Filed electronically
<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 February 14, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Shares of beneficial interest 500
(no 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 General Laws of the State of Massachusetts
and the Trust's Restated Declaration of Trust, the Trust shall indemnify
each of its Trustees to receive such indemnification (including those
who serve at its request as directors, officers or trustees of another
organization in which it has any interest as a shareholder, creditor or
otherwise), against all liabilities and expenses, including amounts paid
in satisfaction of judgements, in compromise of fines and penalties, and
counsel fees, reasonably incurred by him in connection with the defense
or disposition of any action, suit or other proceeding by the Trust or
any other person, whether civil or criminal, in which he may be involved
or with which he may be threatened, while in office or thereafter, by
reason of this being or having been such a Trustee, officer, employee or
agent, except with respect to any matter as to which he shall have been
adjudicated to have acted in bad faith or with willful misfeasance or
reckless disregard of duties or gross negligence; provided, however,
that as to any matter disposed of by a compromise payment by such
Trustee, officer, employee or agent, pursuant to a consent, decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a
written opinion from independent counsel approved by the Trustee to the
effect that if the foregoing matter had been adjudicated they would
likely have been adjudicated in favor of such Trustee, officer, employee
or agent. The rights accruing to any Trustee, officer, employee or
agent under these provisions shall not exclude any other right to which
he may lawfully be titled; provided, however, that no Trustee, officer,
employee or agent may satisfy any right of indemnity or reimbursement
granted herein or to which he may otherwise be entitled except out of
Trust Property, and no Shareholder shall be personally liable to any
Person with respect to any claim for indemnity or reimbursement or
otherwise. The Trustees may make advance payments in connection with
indemnification under the Declaration of Trust, provided that the
indemnified Trustee, officer, employee or agent shall have given a
written undertaking to reimburse the Trust in the event it is
subsequently determined that he is entitled to such indemnification.
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").
<PAGE>
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Corporate Leaders Trust Fund
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 Crosby Small Cap Asia Growth Fund, Inc.
Lexington SmallCap Value Fund, Inc.
Lexington Troika Dialog Russia Fund, Inc.
<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 Curcio* Vice President and Vice President
Secretary and 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 Trustee & Vice
and 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 Ramirez Global Income Fund, Park
80 West -Plaza Two, Saddle Brook, New Jersey 07663 will maintain
physical possession 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, 1004 Baltimore, 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 Ramirez Global Income Fund,
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.
The Registrant will hold a meeting of its public shareholders,
if requested to do so by the holders of at least 10 percent of
the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of
removal of a director or directors and to assist in
communications with other shareholders.
<PAGE>
Registration No. 33-5827
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON RAMIREZ GLOBAL INCOME FUND<PAGE>
<PAGE>
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to
this filing:
Form of Declaration of Trust
Form of By-Laws
Form of Distribution Agreement
Consent of Kramer, Levin, Kamin & Frankel
Consent of independent auditors for the inclusion of their report herein
Form of 12b-1 Distribution Plan
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 has duly caused
this Registration statement 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 28th day of February, 1997.
LEXINGTON RAMIREZ GLOBAL INCOME FUND
/s/ Robert M. DeMichele
___________________________________
By: Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/Robert M. DeMichele Chairman of the Board February 28,1997
- ------------------------- Principal Executive
Robert M. Demichele Officer
/s/Richard M. Hisey Principal Financial February 28,1997
- ------------------------- and Accounting Officer
Richard M. Hisey
/s/Lisa Curcio Principal Compliance February 28,1997
- ------------------------- Officer
Lisa Curcio
*SMS Chadha Trustee February 28,1997
- -------------------------
SMS Chadha
*Beverley C. Duer, P.E. Trustee February 28, 1997
- --------------------------
Beverley C. Duer, P.E.
*Barbara M. Evans Trustee February 28,1997
- -------------------------
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Trustee February 28, 1997
- -------------------------
Lawrence Kantor
*Jerard F. Maher Trustee February 28, 1997
- -------------------------
Jerard F. Maher
*Andrew M. McCosh Trustee February 28, 1997
- ------------------------
Andrew M. McCosh
*Donald B. Miller Trustee February 28, 1997
- ------------------------
Donald B. Miller
*John G. Preston Trustee February 28, 1997
- ------------------------
John G. Preston
*Margaret W. Russell Trustee February 28, 1997
- ------------------------
Margaret W. Russell
*By: /s/Lisa Curcio
--------------
Lisa Curcio
Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
RAMIREZ GLOBAL INCOME FUND, a Massachusetts business trust, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ S.M.S. Chadha
_____________________________
S.M.S. Chadha
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
RAMIREZ GLOBAL INCOME FUND, a Massachusetts business trust, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ Jerard F. Maher
_____________________________
Jerard F. Maher
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
RAMIREZ GLOBAL INCOME FUND, a Massachusetts business trust, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ Andrew M. McCosh
_____________________________
Andrew M. McCosh
LEXINGTON TAX EXEMPT BOND TRUST
AMENDMENT NO. 1
TO
DECLARATION OF TRUST
Pursuant to Sections 1.1 and 9.2 of the Declaration of Trust of
Lexington Tax-Exempt Bond Trust (the Trust ), the undersigned,
constituting all of the Trustees, hereby amend said Declaration of Trust
by changing the name of the Trust to:
LEXINGTON RAMIREZ GLOBAL INCOME FUND
The Declaration of Trust is hereby amended by substituting the words
Lexington Ramirez Global Income Fund for the words Lexington Tax-Exempt
Bond Trust where they appear therein.
This Amendment may be executed in several counterparts, each of
which shall be deemed to be an original, and such counterparts, together,
shall constitute one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
In witness whereof, we have duly executed this Amendment this 10th
day of January 1995.
/s/ Robert M. DeMichele /s/ Beverly C. Duer
______________________________ ______________________________
Robert M. DeMichele Beverly C. Duer
/s/ Barbara R. Evans /s/ Lawrence Kantor
______________________________ ______________________________
Barbara R. Evans Lawrence Kantor
/s/ Donald B. Miller /s/ Francis Olmsted
_____________________________ ______________________________
Donald B. Miller Francis Olmsted
/s/ John G. Preston /s/ Margaret W. Russell
______________________________ ______________________________
John G. Preston Margaret W. Russell
/s/ Philip C. Smith /s/ Francis A. Sunderland
______________________________ ______________________________
Philip C. Smith Francis A. Sunderland
*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=*-=
DECLARATION OF TRUST
OF
LEXINGTON TAX EXEMPT BOND TRUST
Dated February 24, 1986
DECLARATION OF TRUST made on February 24, 1986 by Robert M.
DeMichele, Harry B. Freeman, Jr., Francis Olmsted, Philip C. Smith,
William Stack, and Leon Stern (the Trustees ).
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the
trust assets be divided into transferable shares of beneficial interest,
as hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust established hereunder shall be held and
managed in trust for the benefit of the holders, from time to time, of the
shares of beneficial interest issued hereunder and subject to the
provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The name of the trust created hereby is
Lexington Tax Exempt Bond Trust , and as far as may be practicable, the
Trustees shall conduct the business and activities of the trust created
hereby and execute all documents and take all actions under that name,
which name (and the word Trust whenever used in this Declaration, except
where the context requires otherwise) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally, and shall not
refer to the officers, agents, employees or Shareholders of the trust
created hereby or of such Trustees.
Section 1.2. Definitions. Wherever they are used herein, the
following terms have the following meanings:
Affiliated Person shall have the meaning set forth in Section
2(a)(3) of the 1940 Act.
By-Laws shall mean the By-Laws, if any, adopted pursuant to Section
2.10 hereof, as from time to time amended.
Commission shall mean the Securities and Exchange Commission.
Custodian shall mean any Person other than the Trustees who has
custody of any Trust Property as required by Section 17(f) of the 1940
Act.
Declaration shall mean this Declaration of Trust as amended from
time to time.
Distributor shall have the meaning set forth in Section 3.1 hereof.
Interested Person shall have the meaning set forth in Section
2(a)(19) of the 1940 Act.
Investment Advisor shall have the meaning set forth in Section 3.2
hereof.
Majority Shareholder Vote shall mean the vote of a majority of the
outstanding voting securities, as defined in Section 2(a)(42) of the 1940
Act.
1940 Act shall mean the Investment Company Act of 1940, as amended
form time to time.
Person shall mean an individual, a company, a corporation,
partnership, trust, or association, a joint venture, an organization, a
business, a firm or other entity, whether or not a legal entity, or a
country, state, municipality or other political subdivision or any
governmental agency or instrumentality.
Principal Underwriter shall have the meaning set forth in Section
2(a)(29) of the 1940 Act.
Shareholder shall mean a record owner of Shares.
Shares shall mean the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
Transfer Agent shall mean any Person other than the Trustees who
maintains the Shareholder records of the trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
Trust shall mean LEXINGTON TAX EXEMPT BOND TRUST.
Trust Property shall mean any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of
the Trust or the Trustees.
Trustees shall mean the individuals who have signed this
Declaration of Trust, so long as they shall continue in office in
accordance with the terms hereof, and all other individuals who may from
time to time duly elected or appointed, qualified and serving as Trustees
in accordance with the provisions of Article II hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons
in his capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Powers. The Trustees, subject only to the specific
limitations contained in this Declaration, shall have exclusive and
absolute power, control and authority over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the sole
owners of the Trust Property and business in their own right, including
such power, control and authority to do all such acts and things as in
their sole judgment and discretion are necessary, incidental or desirable
for the carrying out of or conducting of the business of the Trust or in
order to promote the interests of the Trust, but with such powers of
delegation as may be permitted by this Declaration. The enumeration of
any specific power, control or authority herein shall not be construed as
limiting the aforesaid power, control and authority or any other specific
power, control or authority. The Trustees shall have power to conduct and
carry on the business of the Trust, or any part thereof, to have one or
more offices and to exercise any or all of its trust powers and rights, in
the Commonwealth of Massachusetts, in any other states, territories,
districts, colonies and dependencies of the United States and in any
foreign countries. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
Without limiting the foregoing, the Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the
conduct of such operations.
(b) To invest and reinvest funds in, and hold for investment, the
securities (including but not limited to bonds, debentures, time notes,
certificates of deposit, commercial paper, bankers acceptances and all
other evidences of indebtedness and shares, stock, subscription rights,
profit-sharing interests or participations and all other contracts for or
evidences of quality interests) of any Person and to hold cash uninvested.
(c) To acquire (by purchase, subscription or otherwise), to trade
in and deal in, to sell or otherwise dispose of, to enter into repurchase
agreements with respect to, and to lend and to pledge any such securities.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities included in the Trust Property, including the
right to vote thereon and otherwise act with respect thereto and to do all
acts for the preservation, protection, improvement and enhancement in
value of all such securities and to delegate, assign, waive or otherwise
dispose of any of such rights, powers or privileges.
(e) To declare (from interest, dividends or other income received
or accrued, from accruals of original issue or other discounts on
obligations held, from capital or other profits whether realized or
unrealized and from any other lawful sources) dividends and distributions
on the Shares and to credit the same to the account of Shareholders, or at
the election of the Trustees to accrue income to the account of
Shareholders, on such dates (which may be as frequently as every day) as
the Trustees may determine. Such dividends, distributions or accruals
shall be payable in cash, property or Shares at such intervals as the
Trustees may determine at any time in advance of such payment, whether or
not the amount of such dividend, distribution or accrual can at the time
of declaration or accrual be determined or must be calculated subsequent
to declaration or accrual and prior to payment by reference to amounts or
other factors not yet determined at the time of declaration or accrual
(including but not limited to the amount of a dividend or distribution to
be determined by reference to (i) what is sufficient to enable the Trust
to qualify as a regulated investment company under the United States
Internal Revenue Code or to avoid liability for Federal income tax or (ii)
what is necessary to maintain a constant net asset value per share as
contemplated by Section 7.5 hereof).
The power granted by this Subsection (e) shall include, without
limitation, and if otherwise lawful, the power (i) to declare dividends or
distributions or to accrue income to the account of Shareholders by means
of a formula or other similar method of determination whether or not the
amount of such dividend or distribution can be calculated at the time of
such declaration; (ii) to establish record or payment dates for dividends
or distributions on any basis, including the power to establish a number
of record or payment dates subsequent to the declaration of any dividend
or distribution; (iii) to establish the same payment date for any number
of dividends or distributions declared prior to such date; (iv) to provide
for payment of dividends or distributions declared and as yet unpaid, or
unpaid accrued income, to Shareholders redeeming Shares prior to the
payment date otherwise applicable; and (v) to provide in advance for
conditions under which any dividend or distribution may be payable in
Shares to all or less than all of the Shareholders.
(f) To suspend or terminate the maintenance of the net asset value
per share of the Shares at a constant value from time to time and at any
time that the Trustees determine that such maintenance is not in the best
interests of the Trust or the Shareholders.
(g) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale, lease or otherwise) any
property, real or personal, and any interest therein.
(h) To borrow money, and in this connection to issue notes or
other evidences of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting to security interests the Trust Property;
and to lend Trust Property.
(i) To aid by further investment any Person, any obligation of or
interest in which is included in the Trust Property or in the affairs of
which the Trustees have any direct or indirect interest; to do anything
designed to preserve, protect, improve or enhance the value of such
obligation or interest; and to guarantee or become surety on any or all of
the contracts, stocks, bonds, notes, debentures and other obligations of
any such Person.
(j) To promote or aid the incorporation of any organization or
enterprise under the law of any country, state, municipality or other
political subdivision, and to cause the same to be dissolved, wound up,
liquidated, merged or consolidated.
(k) To enter into joint ventures, partnerships and any other
combinations or associations.
(l) To purchase and pay for out of Trust Property insurance
policies insuring the Shareholders, Trustees, officers, employees and
agents of the Trust, the Investment Advisor, the Distributor and selected
dealers or independent contractors of the Trust against all claims and
liabilities of every nature arising by reason of holding or having held
any such position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence and
whether or not the Trust would have the power to indemnify such Person
against such liability.
(m) To establish pension, profit-sharing, share purchase, and
other retirement, incentive and benefit plans for the Trustees, officers,
employees or agents of the Trust.
(n) To the extent permitted by law and determined by the trustees,
to indemnify any Person with whom the Trust has dealings, including,
without limitation, the Shareholders, the Trustees, the officers,
employees and agents of the Trust, the Investment Advisor, the
Distributor, the Transfer Agent, the Custodian and selected dealers.
(o) To incur and pay any charges, taxes and expenses which in the
opinion of the Trustees are necessary or incidental to or proper for
carrying out any of the purposes of this Declaration, and to pay from the
funds of the Trust to themselves as Trustees reasonable compensation and
reimbursement for expenses.
(p) To prosecute or abandon and to compromise, arbitrate or
otherwise adjust claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes.
(q) To foreclose any security interest securing any obligations
owed to the Trust.
(r) To exercise the right to consent, and to enter into releases,
agreements and other instruments.
(s) To employ or contract with such Persons as the Trustees may
deem desirable for the transaction of the business of the Trust.
(t) To determine and change the fiscal year of the Trust and the
method in which its accounts shall be kept.
(u) To adopt a seal for the Trust, but the absence of such seal
shall not impair the validity of any instrument executed on behalf of the
Trust.
(v) In general, to carry on any other business in connection with
or incidental to any of the objects and purposes of the Trust, to do
everything necessary, suitable or proper for the accomplishment of any
purpose or the attainment of any object or the furtherance of any power
herein set forth, either alone or in association with others, and to take
any action incidental or appurtenant to or growing out of or connected
with the business, purposes, objects or powers of the Trustees.
The foregoing clauses shall be construed both as objects and as
powers, and the foregoing enumeration of specific powers shall not be held
to limit or restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited by any law now or hereafter in
effect limiting the investments which may be made or retained by
fiduciaries, but they shall have full power and authority to make any and
all investments within the limitation of this Declaration that they, in
their sole and absolute discretion, shall determine, and without liability
for loss even though such investments do not or may not produce income or
are of a character or in an amount not considered proper for the
investment of trust funds.
Section 2.2. Legal Title. Legal title to all the Trust Property
shall as far as may be practicable be vested in the name of the Trust,
which name shall refer to the Trustees in their capacity as Trustees, and
not individually or personally, and shall not refer to the officers,
agents, employees or Shareholders of the Trust or of the Trustees,
provided that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees
with suitable reference to their trustee status, or in the name of the
Trust, or in a form not indicating any trust, whether in bearer,
unregistered or other negotiable form, or in the name of a custodian or
sub-custodian or a nominee or nominees or otherwise. The right, title and
interest of the Trustees in the Trust Property shall vest automatically in
each Person who may hereafter become a Trustee. Upon the termination of
the term of office of a Trustee, whether upon the due election and
qualification of his successor or upon the occurrence of any of the events
specified in the first sentence of Section 2.7 hereof or otherwise, such
Trustee shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and delivered.
Section 2.3. Number of Trustees; Term of Office. The number of
Trustees shall be ten, which number may be increased and thereafter
decreased from time to time by a written instrument signed by a majority
of the Trustees, provided that the number of Trustees shall not be less
than 3 nor more than 15. The ten initial Trustees named in Section 2.5
hereof and each Trustee elected (whenever such election occurs) shall hold
office until his successor is elected and qualified or until the earlier
occurrence of any of the events specified in the first sentence of
Section 2.7 hereof.
Section 2.4. Qualification of Trustees. Of the total number of
Trustees, unless they continue to be limited to the ten initial Trustees
named in Section 2.5 hereof, at least 40% shall be persons who are not
Interested Persons of the Trust or of the Distributor.
Section 2.5. Election of Trustees. Initially, the Trustees shall
be Robert M. DeMichele, Harry B. Freeman, Jr., William E. S. Griswold,
Jr., Donald B. Miller, Francis Olmsted, Margaret W. Russell, Philip C.
Smith, William Stack, Leon Stern and Francis Sunderland. Thereafter,
except as otherwise provided in Section 2.7 hereof, the Trustees shall be
elected annually at the annual Shareholders meeting. Trustees may
succeed themselves in office. In the event that Trustees are not elected
at an annual Shareholders meeting, then Trustees may be elected at a
special Shareholders meeting. Trustees shall be elected by a plurality
of the votes validly cast. The election of any Trustee (other than an
individual who was serving as a Trustee immediately prior thereto) shall
not become effective, however, until the individual named shall have
accepted in writing such election and agreed in writing to be bound by the
terms of this Declaration. Trustees need not own Shares.
Section 2.6. Resignation and Removal. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an instrument
in writing signed by him and delivered to the Chairman of the Board, or
the Secretary or any Assistant Secretary, and such resignation shall be
effective upon such delivery, or at any later date specified in the
instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than three) with
cause by the affirmative vote of two-thirds of the remaining Trustees.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to
be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding
sentence.
Section 2.7. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, retirement,
resignation or removal (whether pursuant to Section 2.6 hereof or
otherwise), bankruptcy, adjudicated incompetence or other incapacity to
perform the duties of the office of a Trustee. No vacancy shall operate
to annul this Declaration or to revoke any existing agency created
pursuant to the terms of the Declaration. In the case of an existing
vacancy, including a vacancy existing by reason of an increase in the
authorized number of Trustees, the remaining Trustees shall, subject to
the requirements of Section 2.4 hereof, fill such vacancy by the
appointment of such individual as they in their sole and absolute
discretion shall see fit, made by a written instrument signed by a
majority of the Trustees then in office, provided that immediately after
filling any such vacancy (except during the period preceding the initial
annual meeting of Shareholders) at least two-thirds of the Trustees then
holding office shall have been elected to such office by the Shareholders.
In the event that at any time, other than the time preceding the first
annual Shareholders meeting, less than a majority of the Trustees holding
office at that time were elected by the Shareholders, a meeting of the
Shareholders shall be held promptly and in any event within 60 days
(unless the Commission shall by order extend such period) for the purpose
of electing Trustees to fill any existing vacancies. No such appointment
or election shall become effective, however, until the person named shall
have accepted in writing such appointment or election and agreed in
writing to be bound by the terms of this Declaration. Whenever a vacancy
in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.7, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by the Declaration.
Section 2.8. Committees; Delegation. The Trustees shall have the
power to appoint from their own number, and terminate, any one or more
committees consisting of two or more Trustees, including an executive
committee which may exercise some or all of the power and authority of the
Trustees as the Trustees may determine (including but not limited to the
power to determine net asset value and net income), subject to any
limitations contained in the By-Laws, and in general to delegate from time
to time to one or more of their number or to officers, employees or agents
of the Trust such power and authority and the doing of such things and the
execution of such instruments, either in the name of the Trust or the
names of the Trustees or otherwise, as the Trustees may deem expedient,
provided that no committee shall have the power
(a) to change the principal office of the Trust;
(b) to amend the By-Laws;
(c) to issue Shares;
(d) to elect or remove from office any Trustee or the Chairman of
the Board, the President, the Treasurer or the Secretary of the Trust;
(e) to increase or decrease the number of Trustees;
(f) to declare a dividend or other distribution of the Shares;
(g) to authorize the repurchase of Shares; or
(h) to authorize any merger, consolidation or sale, lease or
exchange of all or substantially all of the Trust Property.
Section 2.9. By-Laws. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the
business of the Trust, and may amend or repeal such By-Laws.
Section 2.10. No Bond Required. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 2.11. Reliance on Experts, Etc. Each Trustee, officer,
agent and employee of the Trust shall, in the performance of his duties,
be fully and completely justified and protected in relying in good faith
upon the books of account or other records of the Trust, or upon reports
made to the Trustees (a) by any of the officers or employees of the Trust,
(b) by the Investment Advisor, the Distributor, the Custodian or the
Transfer Agent, or (c) by any accountants, selected dealers or appraisers
or other agents, experts or consultants selected with reasonable care by
the Trustees, regardless of whether such agent, expert or consultant may
also be a Trustee. The Trustees, officers, agents and employees of the
Trust may take advice of counsel with respect to the meaning and operation
of this Declaration, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such
advice. The exercise by the Trustees of their powers and discretion
hereunder and the construction in good faith by the Trustees of the
meaning or effect of any provision of this Declaration shall be binding
upon everyone interested. A Trustee, officer, agent or employee shall be
liable for his own wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office,
and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law.
ARTICLE III
CONTRACTS
Section 3.1. Underwriting Contract. The Trustees may from time to
time enter into an underwriting contract with another Person (the
Distributor ) providing for the sale of Shares, pursuant to which the
Trustees may agree to sell the Shares to the Distributor or appoint the
Distributor their sales agent for the Shares. Such contract may also
provide for the repurchase of Shares by the Distributor as agent of the
Trustees and shall contain such terms and conditions, if any, as may be
prescribed in the By-Laws and such further terms and conditions not
inconsistent with the provisions of this Article III or of the By-Laws as
the Trustees may in their discretion determine.
Section 3.2. Advisory or Management Contract. Subject to approval
by a Majority Shareholder Vote, the Trustees may from time to time enter
into an investment advisory or management contract with another Person
(the Investment Advisor ) pursuant to which the Investment Advisor shall
agree to furnish to the Trustees management, investment advisory,
statistical and research facilities and services, such contract to contain
such other terms and conditions, if any, as may be prescribed in the By-
Laws and such further terms and conditions not inconsistent with the
provisions of this Article III or the By-Laws as the Trustees may in their
discretion determine, including the grant of authority to the Investment
Advisor to determine what securities shall be purchased or sold by the
Trust and what portion of its assets shall be uninvested and to implement
its determinations by making changes in the Trust s investments.
Section 3.3. Affiliations of Trustees or Officers, Etc. The fact
that any Shareholder, Trustee, officer, agent or employee of the Trust is
a shareholder, member, director, officer, partner, trustee, employee,
manager, advisor or distributor of or for any Person or of or for any
parent or affiliate of any Person with which an investment advisory or
management contract, principal underwriter or distributor contract or
custodian, transfer agent, disbursing agent or similar agency contract may
have been or may hereafter be made, or that any such Person, or any parent
or affiliate thereof, is a Shareholder of or has any other interest in the
Trust, or that any such Person also has any one or more similar contracts
with one or more other such Persons, or has other businesses or interests,
shall not affect the validity of any such contract made or that may
hereafter be made with the Trustees or disqualify any Shareholder,
Trustee, officer, agent or employee of the Trust from voting upon or
executing the same or create any liability or accountability to the
Trustees, the Trust or the Shareholders.
ARTICLE IV
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
No Shareholder shall be subject to any personal liability whatsoever in
connection with Trust Property or the acts, obligations or affairs of the
Trust. All Persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Trust for
payment under such credit, contract or claim, and neither the Shareholders
nor the Trustees, nor any of the Trust s officers, employees or agents,
whether past, present or future, shall be personally liable therefor. The
Trustees shall not be responsible or liable in any event for any neglect
or wrongdoing of any officer, employee or agent (including, without
limitation, the Investment Advisor, the Distributor, the Custodian and the
Transfer Agent) of the Trust, nor shall any Trustee be responsible or
liable for the act or omission of any other Trustee. Nothing in this
Declaration shall, however, protect any Trustee, officer, employee or
agent of the Trust against any liability to which such Person would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4.2. Execution of Documents; Notice; Apparent Authority.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or anything whatsoever executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees
or Trustee shall not be personally liable thereon. Every note, bond,
contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall refer to this Declaration and
shall recite that the obligation of such instruments are not binding upon
any of the Trustees, Shareholders or officers, employees and agents of the
Trust individually but are binding only upon the assets and property of
the Trust, but the omission thereof shall not operate to bind any
Trustees, Shareholder or officers, employees and agents of the Trust
individually. No purchaser, lender, Transfer Agent or other Person
dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such officer,
employee or agent or make inquiry concerning or be liable for the
application of money or property paid, loaned or delivered to or on the
order of the Trustees or of such officer, employee or agent.
Section 4.3. Indemnification of Trustees, Officers, Etc. The
Trust shall indemnify each of its Trustees, officers, employees and agents
(including any individual who serves at its request as director, officer,
partner, trustee or the like of another organization in which it has any
interest as a shareholder, creditor or otherwise) against all liabilities
and expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably incurred
by him in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting as Trustee or as an officer, employee or agent of
the Trust or the Trustees, as the case may be, or thereafter, by reason of
his being or having been such a Trustee, officer, employee or agent,
except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust, provided that no
individual shall be indemnified hereunder against any liability to the
Trust or the Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, and provided further that as to any matter disposed
of by settlement or a compromise payment by such Trustee, officer,
employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such compromise is in
the best interests of the Trust and that such Person appears to have acted
in good faith in the reasonable belief that his action was in the best
interests of the Trust and did not engage in wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office. All determinations that the applicable
standards of conduct have been met for indemnification hereunder shall be
made by (a) a majority vote of a quorum consisting of disinterested non-
Party Trustees, or (b) if such a quorum is not obtainable or, even if
obtainable, if a majority vote of such quorum so directs, by independent
legal counsel in a written opinion.
The rights accruing to any Trustee, officer, employee or agent under
these provisions shall not exclude any other right to which he may be
lawfully entitled. The Trustees may make advance payments in connection
with the expense of defending any action with respect to which
indemnification might be sought under this Section 4.3, provided that the
indemnified Trustee, officer, employee or agent shall have given a written
undertaking to reimburse the Trust in the event it is subsequently
determined that he is not entitled to such indemnification and at least
one of the following conditions is met: (1) the indemnitee shall provide
a security for his undertaking, (2) the Trust shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the disinterested non-party trustees of the Trust or an
independent legal counsel in a written opinion, shall determine based on
a review of readily available facts (as opposed to a full trial type
inquiry) that there is reason to believe that the indemnitee ultimately
will be found entitled to indemnification.
Section 4.4. Indemnification of Shareholders. In case any
Shareholder or former Shareholder shall be held to be personally liable
solely by reason of his being or having been a Shareholder and not because
of acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
of the Trust to be held harmless from and indemnified against all loss and
expense, including legal expenses reasonably incurred arising from such
liability. The rights accruing to a Shareholder under this Section 4.4
shall not exclude any other right to which such Shareholder may be
lawfully entitled, nor shall anything contained herein restrict the right
of the Trust to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable shares of
beneficial interest ( Shares ), of one series or more with none having
preference or priority over another, each of which shall represent an
equal proportionate interest in the Trust with each other Share. The
Trustees may from time to time divide or combine the Shares of each class
into a greater or lesser number without thereby changing the proportionate
beneficial interests in the Trust.
The number of shares of beneficial interest authorized hereunder is
unlimited.
Section 5.2. Rights of Shareholders. Shares shall be deemed to be
personal property giving only the rights provided in this Declaration.
Every Shareholder by virtue of having become a Shareholder shall be held
to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The ownership of the Trust property and the right
to conduct any business hereinbefore described are vested exclusively in
the Trustees, and the Shareholders shall have no interest therein other
than the beneficial interest conferred by their Shares, and they shall
have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to
share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the
same nor to entitle the legal representative of such Shareholder to an
accounting or to take any action in any court or otherwise against other
Shareholders or the Trustees or the Trust property, but only to the rights
of such Shareholder hereunder. The shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights.
Section 5.3. Trust Only. The Trust shall be of the type commonly
termed a Massachusetts business trust. It is the intention of the
Trustees to create only the relationship of Trustee and beneficiary
between the Trustees and each Shareholder from time to time. It is not
the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment or any form of
legal relationship other than a trust. Nothing in this Declaration shall
be construed to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
Section 5.4. Issuance of Shares.
Section 5.4.1. General. The Trustees may from time to time without
vote of the Shareholders issue and sell or cause to be issued and sold
Shares, except that only shares previously contracted to be sold may be
issued during any period when the right of redemption is suspended
pursuant to the provisions of Section 6.6 hereof. All such Shares, when
issued in accordance with the terms of this Section 5.4, shall be fully
paid and nonassessable.
Section 5.4.2. Price. No shares shall be issued or sold by the
Trustees for less than an amount which would result in proceeds to the
Trust, before taxes payable by the Trust in connection with such
transaction, of at least the net asset value per share next determined as
set forth in Article VII hereof after receipt of a purchase order for such
Shares. For this purpose, the time of receipt of an order shall be the
time it is first received in proper form at such office or agency as may
be designated for the purpose.
Section 5.4.3. On Merger or Consolidation. In connection with the
acquisition of assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities), businesses or stock of
another Person, the Trustees may issue or cause to be issued Shares and
accept in payment therefor, in lieu of cash, such assets or businesses at
their market value, or such stock at the market value of the assets held
by such other Person, either with or without adjustment for contingent
costs or liabilities, provided that the funds of the Trust are permitted
by law to be invested in such assets, businesses or stock.
Section 5.4.4. Fractional Shares. The Trustees may issue and sell
fractions of Shares, to three decimal places, having pro rata all the
rights of full Shares, including, without limitation, the right to vote
and to receive dividends and distributions.
Section 5.5. Register of Shares. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which
shall contain the names and addresses of the Shareholders and the number
of Shares held by them respectively and a record of all transfers thereof.
Such register shall be conclusive as to who are the holders of the Shares
and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or distribution, nor
to have notice given to him as herein or in the By-Laws provided, until he
has given his address to the Transfer Agent or such other officer or agent
of the Trust as shall keep the said register for entry thereon.
Section 5.6. Transfer of Shares. Shares shall be transferable on
the records of the Trust upon delivery to the Trust or the Transfer Agent
or Agents of appropriate evidence of assignment, transfer, succession or
authority to transfer. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Trustees,
the Transfer Agent, and the officers, employees and agents of the Trust
shall not be entitled or required to treat the assignee or transferee of
any Share as the absolute owner thereof for any purpose, and accordingly
shall not be bound to recognize any legal, equitable or other claim or
interest in such Share on the part of any Person, other than the holder of
record, whether or not any of them shall have express or other notice of
such claim or interest.
Section 5.7. Voting Powers. The Shareholders shall have power to
vote only: (a) for the election of Trustees as provided in Section 2.5
hereof; (b) with respect to any termination of the Trust, as provided in
Section 9.1 hereof; (c) with respect to any amendment of this Declaration
to the extent and as provided in Section 9.2 hereof; (d) with respect to
any merger, consolidation or sale of assets as provided in Section 9.3
hereof; (e) with respect to incorporation of the Trust to the extent and
as provided in Section 9.4 hereof; (f) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders; and (g) with respect to such additional matters relating to
the Trust as may be required by this Declaration or the By-Laws or by
reason of the registration of the Trust or the Shares with the Commission
or any State or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which
Shareholders are entitled to vote and each fractional share shall be
entitled to a proportionate fractional vote. A majority of the Shares
voted shall decide any questions, except when a different vote is
specified by law, any provision of the By-Laws or this Declaration. There
shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders
(including the right to authorize an amendment to this Declaration under
Section 9.2 hereof) and may take any action required by law, the By-Laws
or this Declaration to be taken by Shareholders. The By-Laws may include
further provisions for Shareholder s votes and related matters.
Section 5.8. Meetings of Shareholders. An annual meeting of the
Shareholders shall be held on the date fixed in the By-Laws for the
purpose of reelecting Trustees or electing new Trustees in place of and to
succeed those in office at that time and for such other purposes as may be
specified by the Trustees. If such annual meeting shall not be held as
above provided, a special meeting may be held in lieu thereof at any time
and any business which might have been transacted at such annual meeting
may be transacted at such special meeting and for all purposes hereof such
special meeting shall be deemed to be an annual meeting duly held as
herein provided. Special meetings of the Shareholders may be called at
any time by the Chairman of the Board, the President or any Vice President
of the Trust, or by a majority of the Trustees. A special meeting of
Shareholders may also be called at any time upon the written request of a
holder or the holders of not less than 25% of all of the Shares entitled
to be voted at such meeting, provided that the Shareholder or Shareholders
requesting such meeting shall have paid to the Trust the reasonable
estimated cost of preparing and mailing the notice thereof, which the
Secretary shall determine and specify to such Shareholder or Shareholders.
Section 5.9. Action Without a Meeting. Any account which may be
taken by Shareholders may be taken without a meeting if such proportion of
Shareholders as is required to vote for approval of the matter by law, the
Declaration or the By-Laws consents to the action in writing and the
written consents are filed with the records of Shareholders meetings.
Such consents shall be treated for all purposes as a vote taken at a
shareholders meeting.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. The Trustees shall redeem
Shares, subject to the conditions and at the price determined as herein
set forth, upon proper application of the record holder thereof at such
office or agency as may be designated from time to time for that purpose
by the Trustees. The Trustees shall have power to determine from time to
time the form and the other accompanying documents which shall be
necessary to constitute a proper application for redemption.
Section 6.2. Price. Such shares shall be redeemed for an amount
not exceeding the net asset value of such Shares next determined as set
forth in Article VII hereof after receipt of a proper application for
redemption.
Section 6.3. Payment. Payment for such Shares shall be made to
the Shareholder of record within 7 days after the date upon which proper
application is received, subject to the Trustees or their designated agent
being satisfied that the purchase price of such Shares has been collected
and to the provisions of Section 6.4 hereof. Such payment shall be made
in cash or other assets of the Trust or both, as the Trustees shall
prescribe. For the purposes of such payment for Shares redeemed, the
value of assets delivered shall be determined as set forth in Article VII
hereof as of the same time as of which the per share net asset value of
such Shares is determined.
Section 6.4. Effect of Suspension of Right of Redemption. If,
pursuant to Section 6.6 hereof, the Trustees shall declare a suspension of
the right of redemption, the rights of shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for
by the Trust shall be suspended until the time specified in Section 6.6.
Any record holder who shall have his redemption right so suspended may,
during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored. The redemption price of Shares
for which redemption applications have not been revoked shall not exceed
the net asset value of such Shares next determined as set forth in Article
VII hereof after the termination of such suspension, and payment shall be
made within 7 days after the date upon which the application was made plus
the period after such application during which the determination of net
value asset was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase
Shares directly, or through the Distributor or another agent designated
for the purpose, by agreement with the owner thereof at a price not
exceeding the net asset value per share next determined as set forth in
Article VII hereof after the time when the contract of purchase is made.
Section 6.6. Suspension of Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of
payment or redemption for the whole or any part of any period (a) during
which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, (b) during which trading on the New York Stock
Exchange is restricted, (c) during which an emergency exists as a result
of which disposal by the Trustees of securities owned by them is not
reasonably practicable or it is not reasonably practicable for the
Trustees fairly to determine the value of the net assets of the Trust, or
(d) during which the Commission may for the protection of security holders
of the Trust by order permit suspension of the right of redemption or
postponement of the date of payment or redemption. Such suspension shall
take effect at such time as the Trustees shall specify, which shall not be
later than the close of business on the business day next following the
declaration, and thereafter there shall be no determination of net asset
value until the Trustees shall declare the suspension at an end, except
that the suspension shall terminate in any event on the first day on which
(i) the condition giving rise to the suspension shall have ceased to exist
and (ii) no other condition exists under which suspension is authorized
under this Section 6.6. Each declaration by the Trustees pursuant to this
Section 6.6 shall be consistent with such applicable rules and
regulations, if any, relating to the subject matter thereof as shall have
been promulgated by the Commission or any other governmental body having
jurisdiction over the Trust and as shall be in effect at the time. To the
extent not inconsistent with such rules and regulations, the determination
of the Trustees shall be conclusive.
Section 6.7. Involuntary Redemption of Shares; Disclosure of
Holding. (a) If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of shares or other
securities of the Trust has or may become concentrated in any person to an
extent which would disqualify the Trust as a regulated investment company
under the United States Internal Revenue Code, then the Trustees shall
have the power by lot or other means deemed equitable by them.
(i) to call for redemption a number, or principal amount, of Shares
sufficient in the opinion of the Trustees to maintain or bring the
direct or indirect ownership of Shares into conformity with the
requirements for such qualification and
(ii) to refuse to transfer or issue Shares to any Person whose
acquisition of the Shares in question would in the opinion of the
Trustees result in such disqualification.
Any redemption pursuant to this Section 6.7(a) shall be effected at a
redemption price determined in accordance with Section 6.2 hereof.
(b) The holders of Shares shall upon request disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares as the Trustees deem necessary to comply with the
provisions of the United States Internal Revenue Code, or to comply with
the requirements of any other taxing authority.
(c) The Trustees shall have the power to redeem Shares in any
account at a redemption price determined in accordance with Section 6.2
hereof if at any time the value of the total investment in such account is
less than $500, in which event Shareholders shall be notified that the
value of their account is less than $500 and allowed 30 days to purchase
additional Shares before their Shares are redeemed.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE; DISTRIBUTIONS
Section 7.1. By Whom Determined. The Trustees shall have the
power and duty to determine from time to time the net asset value per
share of the Shares. They may appoint one or more Persons to assist them
in the determination of the value of securities in the Trust s portfolio
and to make the actual calculations pursuant to their directions. Any
determination made pursuant to this Article VII shall be binding on all
parties concerned.
Section 7.2. When Determined. The net asset value shall be
determined at such times as the Trustees shall prescribe in accordance
with the applicable provisions of the 1940 Act and the regulations from
time to time in effect thereunder. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
Section 7.3. Computation of Per Share Net Asset Value.
Section 7.3.1. Net Asset Value Per Share. The net asset value of
each Share as of any particular time shall be the quotient obtained by
dividing the value of the net assets of the Trust (determined in
accordance with Section 7.3.2) by the total number of outstanding Shares.
Section 7.3.2. Value of the Net Assets of the Trust. The value of
the net assets of the Trust as of any particular time shall be the value
of the Trust s assets less its liabilities, determined and computed as
follows:
(1) Trust s Assets. The Trust s assets shall be deemed to
include: (A) all cash on hand or on deposit, including any interest
accrued thereon, (B) all bills and demand notes and accounts receivable,
(C) all securities owned or contracted for by the Trustees, (D) all stock
and cash dividends and cash distributions payable to but not yet received
by the Trustees (when the valuation of the underlying security is being
determined ex-dividend), (E) all interest accrued on any interest-bearing
securities owned by the Trustees (except accrued interest included in the
valuation of the underlying security) and (F) all other property of every
kind and nature, including prepaid expenses.
(2) Valuation of Assets. The value of such assets is to be
determined as follows:
(i) Cash and Prepaid Expenses. The value of any cash on
hand and of any prepaid expenses shall be deemed to be their full
amount.
(ii) Other Current Assets. The value of any accounts
receivable and cash dividends and interest declared or accrued as
aforesaid and not yet received shall be deemed to be the full amount
thereof, unless the Trustees shall determine that any such item is
not worth its full amount. In such case the value of the item shall
be deemed to be its reasonable value, as determined by the Trustees.
(iii) Securities and Other Property. A security for which
market quotations are readily available which is not subject to
restrictions against sale and has a remaining maturity of more than
60 days from the date of valuation shall be valued on the basis of
such quotations. Any security which has a remaining maturity of 60
days or less shall be valued by the amortized cost method; if such
security was acquired with a remaining maturity of more than 60
days, the cost thereof for purposes of such valuation shall be
deemed to be the value on the sixty-first day prior to maturity.
Any security for which market quotations are not readily available
and any other property the valuation of which is not provided for
above, shall be valued at its fair market value as determined in
such manner as the Trustees shall from time to time prescribe by
resolution. For the purposes of this Article VII, market quotations
shall not be deemed to be readily available if in the judgement of
the Trustees such quotations, if any, do not afford a fair and
adequate basis for valuing holdings of securities of a size normally
held by the Trust, whether due to the infrequency or size of the
transactions represented by such quotations or otherwise.
(iv) Money Market Instruments. In the cases of (A)
obligations issued or guaranteed as to principal or interest by the
United States Government, or any agency or authority controlled or
supervised by and acting as an instrumentality of the U.S.
Government pursuant to authority granted by Congress, (B)
obligations (including certificates of deposit and bankers
acceptance) of U.S. banks and savings and loans associations which
at the date of the investment have capital, surplus and undivided
profits (as of the date of their most recent published financial
statements) in excess of $100,000,000, including obligations of
foreign branches of United States banks and United States branches
or agencies of foreign banks if such banks meet the stated
qualifications, (C) commercial paper issued by corporations,
maturing within one year from the day of purchase and rated Prime-2
or better by Moody s Investors Service, Inc. or A-2 or better by
Standard and Poor s Corporation, or issued by corporations having
unsecured debt outstanding which is rated at least Aa by Moody s or
AA by Standard & Poor s, and (D) corporate obligations maturing in
one year or less which at the date of investment are rated A or
higher by Standard & Poor s or A or higher by Moody s, and (E)
repurchase agreements with respect to any of the foregoing
obligations, such instruments may, at the option of the Trustees, be
valued by the amortized cost method in lieu of the valuation method
specified in the foregoing clause (iii), provided that the use of
the amortized cost method in accordance with this clause (iv) shall
be in accordance with the applicable provisions of the 1940 Act and
the regulations thereunder and any exemptive order (including any
conditions to the grant of any exemptive order) of the Commission.
(3) Liabilities. The Trust s liabilities shall not be deemed to
include any Shares and surplus, but they shall be deemed to include: (A)
all bills and accounts payable, (B) all administrative expenses accrued
and unpaid, (C) all contractual obligations for the payment of money or
property, including the amount of any declared but unpaid dividends upon
Shares and the amount of all income accrued but not paid to Shareholders,
(D) all reserves authorized or approved by the Trustees for taxes or
contingencies and (E) all other liabilities of whatsoever kind and nature
except any liabilities represented by Shares and surplus.
Section 7.4. Interim Determinations. Any determination of net
asset value other than as of the close of trading on the New York Stock
Exchange may be made either by appraisal or by calculation or estimate.
Any such calculation or estimate shall be based on changes in the market
value of representative or selected securities or on changes in recognized
market averages since the last closing appraisal and made in a manner
which in the opinion of the Trustees will fairly reflect the changes in
the net asset value.
Section 7.5. Outstanding Shares. For the purposes of this
Article VII, outstanding Shares shall mean those Shares shown from time to
time on the books of the Trust or the Transfer Agent as then issued and
outstanding, adjusted as follows:
(a) Shares sold shall be deemed to be outstanding Shares
from the time when the sale is reported to the Trustees or their
agents for determining net asset value, but not before (i) an
unconditional purchase order therefor has been received by the
Trustees (directly or indirectly or through one of their agents) or
by the Principal Underwriter of the Shares and the sale price in
currency has been determined and (ii) receipt by the Trustees
(directly or through one of their agents) of federal funds in the
amount of the sale price; and such sale price (net of commission, if
any, and any stamp or other tax payable by the Trust in connection
with the issue and sale of the Shares sold) shall be thereupon
deemed to be an asset of the Trust.
(b) Shares distributed pursuant to Section 7.7 shall be
deemed to be outstanding as of the time that shareholders who shall
receive the distribution are determined.
(c) Shares for which a proper application for redemption has
been made or which are subject to repurchase by the Trustees shall
be deemed to be outstanding Shares up to and including the time as
of which the redemption or repurchase price is determined. After
such time, they shall be deemed to be no longer outstanding Shares
and the redemption or purchase price until paid shall be deemed to
be a liability of the Trust.
Section 7.6. Distributions to Shareholders. Without limiting the
powers of the Trustees under Subsection (e) of Section 2.1. of Article II
hereof, the Trustees may at any time and from time to time, as they may
determine, allocate or distribute to Shareholders such income and capital
gains, accrued or realized, as the Trustees may determine, after providing
for actual, accrued or estimated expenses and liabilities (including such
reserves as the Trustees may establish) determined in accordance with
generally accepted accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which
terms as capital and their determination shall be binding upon the
Shareholders. Such distributions shall be made in cash, property or
Shares or any combination thereof as determined by the Trustees. Any such
distribution paid in Shares shall be paid at the net asset value thereof
as determined pursuant to this Article VII. The Trustees may adopt and
offer to Shareholders such dividend reinvestment plans, cash dividend
payout plans or related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the Trust,
the above provisions shall be interpreted to give the Trustees the power
in their discretion to allocate or distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively,
additional amounts sufficient to enable the Trust to avoid or reduce
liability for taxes.
Section 7.7. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for the determination of the per share net asset value of Shares as
may be permitted by, or as they may deem necessary or desirable to enable
the Trust to comply with, any provision of the 1940 Act, any rule or
regulation thereunder (including any rule or regulation adopted pursuant
to Section 22 of the 1940 Act by the Commission or any securities
association or exchange registered under the Securities Exchange Act of
1934, as amended) or any order of exception issued by the Commission, all
as in effect now or as hereafter amended or modified.
ARTICLE VIII
CUSTODIAN
Section 8.1. Appointment and Duties. Subject to the 1940 Act and
such rules, regulations and orders as the Commission may adopt, the
Trustees shall employ a bank or trust company having a capital, surplus
and undivided profits of at least $2,000,000 as custodian with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the Trust:
(a) to hold the securities owned by the Trust and deliver
the same upon written order;
(b) to receive and receipt for any moneys due to the Trust
and deposit the same in its own banking department or elsewhere as
the Trustees may direct; and
(c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize such custodian as its agent (x) to
keep the books and accounts of the Trust and furnish clerical and
accounting services and (y) to compute the net income and the value of the
net assets of the Trust.
The acts and services of the custodian shall be performed upon such
basis of compensation as may be agreed upon by the Trustees and the
custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as
specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital, surplus and undivided profits of at least
$2,000,000.
Section 8.2. Action Upon Termination of Custodian Agreement. Upon
termination of a custodian agreement or inability of any custodian to
continue to serve, the Trustees shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who
has the required qualifications and is willing to serve, the Trustees
shall call as promptly as possible a special Shareholders meeting to
determine whether the Trust shall function without a custodian or shall be
liquidated. If so directed by vote of the holders of a majority of the
Shares outstanding and entitled to vote, the custodian shall deliver and
pay over all Trust Property held by it as specified in such vote.
Section 8.3. Central Certificate System, Etc. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees
may direct the custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange
Act of 1934, or such other person as may be permitted by the Commission,
or otherwise in accordance with the 1940 Act, pursuant to which system all
securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only upon
the order of the Trust.
Section 8.4. Acceptance of Receipts in Lieu of Certificates.
Subject to such rules, regulations and orders as the Commission may adopt,
the Trustees may direct the custodian to accept written receipts or other
evidences indicating purchases of securities held in book-entry form in
the Federal Reserve System in accordance with regulations promulgated by
the Board of Governors of the Federal Reserve System and the local Federal
Reserve Banks in lieu of receipt of certificates representing such
securities.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1. Duration and Termination. (a) Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated by the affirmative vote of at least 66 2/3% of the
Shares outstanding or, when authorized by a Majority Shareholder Vote, by
an instrument in writing signed by a majority of the Trustees. Upon the
termination of the Trust
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound
up, including the power to fulfill or discharge the contracts of the
Trust, collect its assets, sell, convey, assign, exchange, transfer
or otherwise dispose of all or any part of the remaining Trust
Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business, provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property that requires Shareholder approval under Section 9.3 hereof
shall receive the approval so required.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection,
the Trustees may distribute the remaining Trust Property, in cash or
in kind or partly each, among the Shareholders according to their
respective rights.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the
rights and interests of all Shareholders shall thereupon cease.
Section 9.2. Amendment Procedure.
(a) This Declaration may be amended from time to time by an
instrument in writing signed by a majority of the Trustees when
authorized by a majority Shareholder Vote, provided that any
amendment having the purpose of changing the name of the Trust shall
not require authorization by the Shareholders. Nothing contained in
this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(b) A certificate signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted as
aforesaid, or a copy of this Declaration as amended, executed by a
majority of the Trustees, shall by conclusive evidence of such
amendment when lodged among the records of the Trust.
(c) Notwithstanding any other provision hereof, until such
time as a Registration Statement under the Securities Act of 1933,
as amended, covering the first public offering of securities of the
Trust shall become effective, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees or by an instrument signed by a majority of the Trustees.
Section 9.3. Merger, Consolidation and Sale of Assets. The Trust
may merge or consolidate with any other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all
of the Trust Property, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any
Shareholders meeting called for the purpose by a Majority Shareholder
Vote.
Section 9.4. Incorporation. With the approval of a Majority
Shareholder Vote, the Trustees may cause to be organized or assist in
organizing under the laws of any jurisdiction a corporation or
corporations or any other trust, partnership, association or other
organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any
interest, and may sell, convey and transfer the Trust Property to any such
corporation, trust, partnership, association or other organization in
exchange for the shares or securities thereof or otherwise, and may lend
money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
other organization on any corporation, partnership, trust, association or
other organization in which the Trust holds or is about to acquire shares
or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or
more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring less than all or
substantially all of the Trust Property to such organization or entities.
ARTICLE X
REPORT TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders
a written financial report of the transactions of the Trust, including
financial statements which shall at least annually be accompanied by a
report thereon of independent public accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto
shall be filed with the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of the Commonwealth
of Massachusetts and may also be filed or recorded in such other places as
the Trustees deem appropriate. Unless any such amendment sets forth some
later time for the effectiveness of such amendment, such amendment shall
be effective upon its filing with the Secretary of the Commonwealth of
Massachusetts. A restated Declaration, integrating into a single
instrument all of the provisions of this Declaration which are then in
effect and operative, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the Secretary of the Commonwealth
of Massachusetts, be conclusive evidence of all amendments contained
therein and may hereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
Section 11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with
reference to the laws thereof, and the rights of all parties and the
validity and construction of every provision hereof shall be subject to
and construed according to the laws of said State.
Section 11.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such
original counterpart.
Section 11.4. Reliance by Third Parties. Any certificate executed
by an individual who, according to the records of the Trust, appears to be
a Trustee hereunder, certifying to: (a) the number or identity of Trustees
or Shareholders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-
Laws adopted by or the identity of any officers elected by the Trustees or
(f) the existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their
successors.
Section 11.5. Provisions in Conflict With Law Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with requirements of the 1940 Act, would be
inconsistent with any of the conditions necessary for qualification of the
Trust as a regulated investment company under the United States Internal
Revenue Code or is inconsistent with other applicable laws and
regulations, such provision shall be deemed never to have constituted a
part of this Declaration, provided that such determination shall not
affect any of the remaining provisions of this Declaration or render
invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in
any manner affect such provision in any other jurisdiction or any other
provision of this Declaration in any jurisdiction.
Section 11.6. Section Headings; Interpretation. Section headings
in this Declaration are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof. References in this
Declaration to this Declaration shall be deemed to refer to this
Declaration as from time to time amended, and all expressions such as
hereof, herein and hereunder shall be deemed to refer to this
Declaration and not exclusively to the article or section in which such
words appear. The words he, his and him shall be deemed to include
the feminine and neuter, as well as the masculine, gender.
BY-LAWS
OF
LEXINGTON RAMIREZ GLOBAL INCOME FUND
(formerly "LEXINGTON TAX EXEMPT BOND TRUST"; name change
effective November 30, 1994)
ARTICLE I
Definitions
The terms "Affiliated Person", "Commission", "Declaration",
"Interested Person", "Investment Adviser", "Majority Shareholder Vote",
"1940 Act", "Principal Underwriter", "Shareholder", "Shares", "Trust",
"Trust Property", and "Trustees" have the meanings given them in the
Declaration of Trust (the "Declaration") of Lexington Tax Exempt Bond
Trust dated February 25, 1986 as amended from time to time.
ARTICLE II
Offices and Seal
Section 2.1. Principal Office. The principal office of the Trust
shall be located in the city of Saddle Brook, in the State of New Jersey.
Section 2.2. Other Offices. The Trust may establish and maintain
such other offices and places of business within or without the State of
New Jersey as the Trustees may from time to time determine.
Section 2.3. Seal. The seal of the Trust shall be circular in
form and shall bear the name of the Trust, the year of its organization,
and the words "Common Seal" and "A Massachusetts Voluntary Association".
The form of the seal shall be subject to alteration by the Trustees and
the seal may be used by causing it or a facsimile to be impressed or
affixed or printed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the seal of the Trust to any document
requiring the same but, unless otherwise required by the Trustees, the
seal shall not be necessary to be placed on, and its absence shall not
impair the validity, of any document, instrument or other paper executed
and delivered by or on behalf of the Trust.
ARTICLE III
Shareholders
Section 3.1. Annual Meetings. Meetings of the shareholders of the
Trust will not be held unless it is required by the Investment Company Act
of 1940, as amended, to take action on (1) the election of Trustees, (2)
approval of the investment advisory agreement, (3) ratification of the
selection of independent public accountants, or (4) approval of a
distribution agreement. Such actions shall be submitted to the
shareholders at such meeting and a special meeting called for any of the
foregoing purposes shall be deemed the annual meeting for that year.
Special meetings of the shareholders may be called at any time by the
Chairman of the Board, the President or any Vice President of the Trust,
or by a majority of the Trustees. A special meeting of the shareholders
may also be called at any time upon the written request of a holder or the
holders of not less than 25% of all the Shares entitled to be voted at
such meeting shall have paid to the Trust the reasonably estimated cost of
preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Shareholder or Shareholders.
Section 3.2. Place of Meeting. All Shareholders' meetings shall
be held at such place within or without the State of New Jersey as the
Trustees shall designate.
Section 3.3. Notice of Meetings. Notice of all Shareholders'
meetings, stating the time, place and purpose of the meeting, shall be
given by the Secretary or an Assistant Secretary of the Trust by mail to
each Shareholder entitled to notice of and to vote at such meeting at his
address as recorded on the register of the Trust mailed at least 10 days
and not more than 90 days before the meeting. Such notice shall be deemed
to be given when deposited in the United States mail, with postage thereon
prepaid. Any adjourned meeting may be held as adjourned without further
notice. No notice need be given (a) to any Shareholder if a written
waiver of notice, executed before or after the meeting by such Shareholder
or his attorney thereunto duly authorized, is filed with the records of
the meeting, or (b) to any Shareholder who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him.
A waiver of notice need not specify the purposes of the meeting.
Section 3.4. Shareholders Entitled to Vote. If, pursuant to
Section 3.9 hereof, a record date has been fixed for the determination of
Shareholders entitled to notice of and to vote at any Shareholders'
meeting, each Shareholder of the Trust shall be entitled to vote, in
person or by proxy, each Share or fraction thereof standing in his name on
the register of the Trust at the time of determining net asset value on
such record date. If no record date has been fixed for the determination
of Shareholders so entitled, the record date for the determination of
Shareholders entitled to notice of and to vote at a Shareholders' meeting
shall be at the close of business on the day on which notice of the
meeting is mailed or, if notice is waived by all Shareholders, at the
close of business on the tenth day next preceding the day on which the
meeting is held.
Section 3.5. Quorum. The presence at any Shareholder's meeting in
person or by proxy, of Shareholders entitled to cast a majority of the
votes thereat shall be a quorum for the transaction of business.
Section 3.6. Adjournment. The holders of a majority of the Shares
entitled to vote at the meeting and present thereat in person or by proxy,
whether or not constituting a quorum, or, if no Shareholder entitled to
vote is present thereat in person or by proxy, any Trustee or officer
present thereat entitled to preside or act as Secretary of such meeting,
may adjourn the meeting from time to time until a quorum is present. Any
business that might have been transacted at the meeting originally called
may be transacted at any such adjourned meeting at which a quorum is
present.
Section 3.7. Proxies. Shares may be voted in person or by proxy.
When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share unless
at or prior to exercise of the vote the Trustees receive a specific
written notice to the contrary from any one of them, but if more than one
of them shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote cast,
such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
Section 3.8. Inspection of Records. The records of the Trust
shall be open to inspection by Shareholders to the same extent as is
permitted shareholders of a Massachusetts business corporation.
Section 3.9. Record Dates. The Trustees may fix in advance a date
as a record date for the purpose of determining the Shareholders who are
entitled to notice of and to vote at any meeting or any adjournment
thereof, or to express consent in writing without a meeting to any action
of the Trustees, or who shall receive payment of any dividend or of any
other distribution, or for the purpose of any other lawful action,
provided that such record date shall be not more than 60 days before the
date on which the particular action requiring such determination of
Shareholders is to be taken. In such case, subject to the provisions of
Section 3.4, each Shareholder of record on such record date shall be
entitled to notice of, and to vote at, such meeting or adjournment, or to
express such consent, or to receive payment of such dividend or
distribution or to take such other action, as the case may be,
notwithstanding any transfer of Shares on the register of the Trust after
the record date.
ARTICLE IV
Trustees
Section 4.1. Annual and Regular Meetings. The annual meeting of
the Trustees for choosing officers and transacting other proper business
shall be held immediately after the annual Shareholders' meeting at such
place as may be specified in the notice of such meeting of the Trustees.
The Trustees from time to time may provide by resolution for the holding
of regular meetings and fix their time and place within or without the
State of New Jersey.
Section 4.2. Special Meetings. Special meetings of the Trustees
shall be held whenever called by the Chairman of the Board, the President
(or, in the absence or disability of the President, by any Vice
President), the Treasurer, the Secretary or two or more Trustees, at the
time and place within or without the State of New Jersey specified in the
respective notices or waivers of notice of such meetings.
Section 4.3. Notice. Notice of annual, regular and special
meetings, stating the time and place, shall be (a) mailed to each Trustee
at his residence or regular place of business at least five days before
the day on which the meeting is to be held or (b) caused to be delivered
to him personally or to be transmitted to him by telegraph, cable or
wireless at least two days before the day on which the meeting is to be
held. Unless otherwise required by law, such notice need not include a
statement of the business to be transacted at, or the purpose of, the
meeting. No notice of adjournment of a meeting of the Trustees to another
time or place need be given if such time and place are announced at such
meeting.
Section 4.4. Waiver of Notice. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him before
or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A waiver of notice need not
specify the purposes of the meeting.
Section 4.5. Quorum. Adjournment and Voting. At all meetings of
the Trustees, the presence of a majority of the total number of Trustees
authorized, but not less than two, shall constitute a quorum for the
transaction of business. A majority of the Trustees present, whether or
not constituting a quorum, may adjourn the meeting, from time to time.
The action of a majority of the Trustees present at a meeting at which a
quorum is present shall be the action of the Trustees unless the
concurrence of a greater proportion is required for such action by law, by
the Declaration or by these By-Laws.
Section 4.6. Compensation. Each Trustee may receive such
remuneration for his services as shall be fixed from time to time by
resolution of the Trustees.
Section 4.7. Liability. Any Trustee shall not be personally
liable to the Trust or its shareholders for monetary damages for breach of
fiduciary duty as a Trustee notwithstanding any provision of law imposing
such liability except for liability (i) for any breach of the Trustees'
duty of loyalty to the Trust or shareholders, (ii) for acts or omissions
not in good faith which involve intentional misconduct or a knowing
violation of law, (iii) under 61 or 62 of Chapter 156B of the
Massachusetts General Laws, and (iv) for any transaction from which the
Trustee derived an improper personal benefit.
ARTICLE V
Executive Committee and Other Committees
Section 5.1. How Constituted. The Trustees may, by resolution,
designate one or more committees, including an Executive Committee and an
Audit Committee, each consisting of at least two Trustees. The Trustees
may, by resolution, designate one or more alternate members of any
committee to serve in the absence of any member or other alternate member
of such committee. Each member and alternate member of a committee shall
be a Trustee and shall hold office at the pleasure of the Trustees. The
Chairman of the Board shall be a member of the Executive Committee.
Section 5.2. Powers of the Executive Committee. Unless otherwise
provided by resolution of the Trustees, the Executive Committee shall have
and may exercise all of the power and authority of the Trustees, provided
that the power and authority of the Executive Committee shall be subject
to the limitations contained in the Declaration.
Section 5.3. Other Committees of Trustees. To the extent provided
by resolution of the Trustees, other committees shall have and may
exercise any of the power and authority that may lawfully be granted to
the Executive Committee.
Section 5.4. Proceedings, Quorum and Manner of Acting. In the
absence of appropriate resolution of the Trustees, each committee may
adopt such rules and regulations governing its proceedings, quorum and
manner of acting as it shall deem proper and desirable, provided that the
quorum shall not be less than two Trustees. In the absence of any member
or alternate member of any such committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in the place of such absent member or alternate member.
Members and alternate members of a committee may participate in a meeting
of such committee by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these
means shall constitute presence in person at the meeting.
Section 5.5. Other Committees. The Trustees may appoint other
committees, each consisting of one or more persons who need not be
Trustees. Each such committee shall have such powers and perform such
duties as may be assigned to it from time to time by the Trustees, but
shall not exercise any power which may lawfully be exercised only by the
Trustees or a committee thereof.
ARTICLE VI
Officers
Section 6.1. General. The officers of the Trust shall be a
President, a Secretary, a Treasurer and may include one or more Vice
Presidents, or one or more Assistant Vice Presidents, one or more
Assistant Secretaries, or one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of
Section 6.10 of this Article VI.
Section 6.2. Election, Term of Office and Qualifications. The
officers of the Trust (except those appointed pursuant to Section 6.10)
shall be elected by the Trustees at their first meeting and thereafter at
the annual meeting of the Trustees. If any officer of officers are not
elected at any such meeting, such officer or officers may be elected at
any subsequent regular or special meeting of the Trustees. Except as
provided in Sections 6.3 and 6.4 of this Article VI, each officer elected
by the Trustees shall hold office until the next meeting of the Trustees
following an annual Shareholders' meeting and until his successor shall
have been chosen and qualified.
The Chairman of the Board shall be selected from among the Trustees
of the Trust. Any Trustee or officer may but need not be a Shareholder of
the Trust.
Section 6.3. Resignations and Removals. Any officer may resign
his office at any time by delivering a written resignation to the
Trustees, the President, the Secretary or any Assistant Secretary. Unless
otherwise specified therein, such resignation shall take effect upon
delivery. Any officer may be removed from office with or without cause by
the vote of a majority of the Trustees at any regular meeting or any
special meeting. Except to the extent expressly provided in a written
agreement with the Trust, no officer resigning and no officer removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such
removal.
Section 6.4. Vacancies and Newly Created Offices. If any vacancy
shall occur in any office by reason of death, resignation, removal,
disqualification or other cause, or if any new office shall be created,
such vacancies or newly created offices may be filled by the Trustees at
any regular or special meeting or, in the case of any office created
pursuant to Section 6.11 of this Article VI, by any officer upon whom such
power shall have been conferred by the Trustees.
Section 6.5. Chairman of the Board. The Chairman of the Board
shall preside at all Shareholders' meetings and at all meetings of the
Trustees and shall be ex officio a member of all committees of the
Trustees, except the Audit Committee.
Section 6.6. President. The President shall be the chief
executive officer of the Trust and, at the request of or in the absence or
disability of the Chairman of the Board, he shall preside at all
Shareholders' meetings and at all meetings of the Trustees. Subject to
the supervision of the Trustees, he shall have general charge of the
business of the Trust, the Trust Property and the officers, employees and
agents of the Trust. He shall have such other powers and perform such
other duties as may be assigned to him from time to time by the Trustees.
Section 6.7. Vice President and Assistant Vice Presidents. The
Trustees may, from time to time, designate and elect one or more Vice
Presidents who shall have powers and perform such duties as from time to
time may be assigned to them by the Trustees or the President. At the
request or in the absence or disability of the President, the Vice
President (or, if there are two or more Vice Presidents, then the senior
in length of time in office of the Vice Presidents present and able to
act) may perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon
the President.
Any Assistant Vice President may perform such duties of the Vice
President as the Vice President or the Trustees may assign and in the
absence of the Vice President, he may perform all the duties of the Vice
President.
Section 6.8. Treasurer and Assistant Treasurers. The Treasurer
shall be the principal financial officer and Financial accounting officer
of the Trust and shall have general charge of the finances and books of
account of the Trust. Except as otherwise provided by the Trustees, he
shall have general supervision of the funds and property of the Trust and
of the performance by the Custodian appointed pursuant to Section 7.1
hereof of its duties with respect thereto. The Treasurer shall render a
statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and he shall in general perform all
the duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Trustees.
Any Assistant Treasurer may perform such duties of the Treasurer as
the Treasurer or the Trustees may assign, and, in the absence of the
Treasurer, he may perform all the duties of the Treasurer.
Section 6.9. Secretary and Assistant Secretaries. The Secretary
shall attend to the giving and serving of all notices of the Trust and
shall record all proceedings of the meetings of the Shareholders and
Trustees in one or more books to be kept for that purpose. He shall keep
in safe custody the seal of the Trust, and shall have charge of the
records of the Trust, including the register of shares and such other
books and papers as the Trustees may direct and such books, reports,
certificates and other documents required by law to be kept, all of which
shall at all reasonable times be open to inspection by any Trustee. He
shall perform such other duties as appertain to his office or as may be
required by the Trustees.
Any Assistant Secretary may perform such duties of the Secretary as
the Secretary or the Trustees may assign, and, in the absence of the
Secretary, he may perform all the duties of the Secretary.
Section 6.10. Subordinate Officers. The Trustees from time to time
may appoint such other subordinate officers or agents as they may deem
advisable, each of whom shall have such title, hold office for such
period, have such authority and perform such duties as the Trustees may
determine. The Trustees from time to time may delegate to one or more
officers or agent the power to appoint any such subordinate officers or
agents and to prescribe their respective rights, terms of office,
authorities and duties.
Section 6.11. Remuneration. The officers of the Trust shall serve
without compensation.
Section 6.12. Surety Bonds. The Trustees shall require any officer
or agent of the Trust to execute a bond (including, without limitation,
any bond required by the 1940 Act and the rules and regulations of the
Commission) to the Trustees in such sum and with such surety or sureties
as the Trustees may determine, conditioned upon the faithful performance
of his duties to the Trust, including responsibility for negligence and
for the accounting of any of the Trust Property that may come into his
hands. In any such case, a new bond of like character shall be given at
least every six years, so that the date of the new bond shall not be more
than six years subsequent to the date of the bond immediately preceding.
ARTICLE VII
Execution of Instruments, Voting of Securities
Section 7.1. Execution of Instruments. All deeds, documents,
transfers, contracts, agreements, requisitions or orders, promissory
notes, assignments, endorsements, checks and drafts for the payment of
money by the Trust, and other instruments requiring execution either in
the name of the Trust or the names of the Trustees or otherwise may be
signed by the President, a Vice President, an Assistant Vice President, or
the Secretary or Assistant Secretary and by the Treasurer or an Assistant
Treasurer, or as the Trustees may otherwise, from time to time, authorize,
provided that instructions in connection with the execution of portfolio
securities transactions may be signed by one such officer. Any such
authorization may be general or confined to specific instances.
Section 7.2. Voting of Securities. Unless otherwise ordered by
the Trustees, the President or any Vice President or Assistant Vice
President shall have full power and authority on behalf of the Trustees to
attend and to act and to vote, or in the name of the Trustees to execute
proxies to vote, at any meeting of stockholders of any company in which
the Trust may hold stock. At any such meeting such officer shall possess
and may exercise (in person or by proxy) any and all rights, powers and
privileges incident to the ownership of such stock. The Trustees may by
resolution from time to time confer like powers upon any other person or
persons.
ARTICLE VIII
Fiscal Year, Accountants
Section 8.1. Fiscal Year. The fiscal year of the Trust shall end
on the last day of December of each year.
Section 8.2. Accountants.
(a) The Trustees shall employ an independent public accountant or
firm of independent public accountants as their accountant to examine the
accounts of the Trust and to sign and certify at least annually financial
statements filed by the Trust. The accountant's certificates and reports
shall be addressed both to the Trustees and to the Shareholders.
(b) A majority of the Trustees who are not Interested Persons of
the Trust shall select the accountant at any meeting held before the first
annual Shareholders' meeting, and thereafter shall select the accountant
annually by votes, cast in person, at a meeting held within 90 days before
or after the beginning of the fiscal year of the Trust or before the
annual Stockholders' meeting in that year. Such selection shall be
submitted for ratification or rejection at the next succeeding annual
Shareholders' meeting. If such meeting shall reject such selection, the
accountant shall be selected by a Majority Shareholder Vote, either at the
meeting at which the rejection occurred or at a subsequent Shareholders'
meeting called for the purpose.
(c) Any vacancy occurring between annual meetings, due to the
death or resignation of the accountant, may be filled at a meeting called
for the purpose by the vote, cast in person, of a majority of those
Trustees who are not Interested Persons of the Trust.
ARTICLE IX
Amendments
Section 9.1. General. These By-Laws may be amended or repealed,
in whole or in part, by a majority of the Trustees then in office at any
meeting of the Trustees, or by one or more writings signed by such a
majority.
DISTRIBUTION AGREEMENT
between
LEXINGTON TAX EXEMPT BOND TRUST
(Name change to Lexington Ramirez Global
Income Fund effective November 30, 1994)
and
LEXINGTON FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT made this 21st day of August, 1990 by and between
LEXINGTON TAX EXEMPT BOND TRUST, a Massachusetts business trust
(hereinafter referred to as the "Fund"), and LEXINGTON FUNDS DISTRIBUTOR,
INC., a Delaware Corporation (hereinafter referred to as the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
FIRST: The Fund hereby appoints the Distributor as its exclusive
underwriter to promote the sale and to arrange for the sale of shares of
common stock of the Fund in jurisdictions wherein shares may legally be
offered for sale.
The Fund agrees to sell and deliver its unissued shares, as from time
to time shall be effectively registered under the Securities Act of 1933,
upon the terms hereinafter set forth.
SECOND: The Fund hereby authorizes the Distributor, subject to law
and the Articles of Incorporation of the Fund, to accept, for the account
of the Fund, orders for the purchase of its shares, satisfactory to the
Distributor, as of the time of receipt of such orders or as otherwise
described in the then current prospectus of the Fund.
THIRD: The public offering price of such shares shall be based on
the net asset value per share (as determined by the Fund) of the
outstanding shares of the Fund. The net asset value shall be regularly
determined on every business day as of the time of closing of the New York
Stock Exchange. It is expected that the New York Stock Exchange will be
closed on Saturdays and Sundays and on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas. The public offering price shall become effective as set
forth from time to time in the Fund's current prospectus; such net asset
value shall also be regularly determined, and the public offering price
based thereon shall become effective, as of such other times for the
regular determination of net asset value as may be required or permitted
by rules of the National Association of Securities Dealers, Inc. or of the
Securities and Exchange Commission. The Fund shall furnish the
Distributor, with all possible promptness, a statement of each computation
of net asset value, and of the details entering into such computation.
The Distributor may, and when requested by the Fund shall, suspend
its efforts to effectuate sales of the shares of common stock at any time
when in the opinion of the Distributor or of the Fund no sales should be
made because of market or other economic considerations or abnormal
circumstances of any kind.
The Fund may withdraw the offering of its common stock (i) at any
time with the consent of the Distributor, or (ii) without such consent when
so required by the provisions of any statute or of any order, rule or
regulation of any governmental body or securities exchange having
jurisdiction. It is mutually understood and agreed that the Distributor
does not undertake to sell all or any specific portion of the shares of
common stock of the Fund.
FOURTH: The Distributor agrees that it will use its best efforts
with reasonable promptness to promote and sell shares of the Fund; but so
long as it does so, nothing herein contained shall prevent the Distributor
from entering into similar arrangements with other funds and to engage in
other activities. The Fund reserves the right to issue shares in
connection with any merger or consolidation of the Fund with any other
investment company or any personal holding company or in connection with
offers of exchange exempted from Section 11(a) of the Investment Company
Act of 1940.
FIFTH: Upon a receipt by the Fund at its principal place of business
or other place designated by the Fund of an order from the Distributor,
together with delivery instructions, the Fund shall, as promptly as
practicable, cause the shareholder's account or certificates for the shares
called for in such order to be credited or delivered in such amount and in
such names as shall be specified by the Distributor, against payment
therefor in such manner as may be acceptable to the Fund.
SIXTH: All sales literature and advertisements used by the
Distributor in connection with sales of the shares of the Fund shall be
subject to the approval of the Fund. The Fund authorizes the Distributor
in connection with the sale or arranging for the sales of its shares to
give only such information and to make only such statements or
representations as are contained in the current prospectus and statement
of additional information or in sales literature or advertisements approved
by the Fund or in such financial statements and reports as are furnished
to the Distributor pursuant to this Agreement. The Fund shall not be
responsible in any way for any information, statements or representatives
given or made by the Distributor or its representatives or agents other
than such information, statements or representations contained in the then
current prospectus and statement of additional information or other
financial statements of the Fund.
SEVENTH: The Distributor as agent of the Fund is authorized, subject
to the direction of the Fund, to accept shares for redemption at their net
asset value, determined as prescribed in the then current prospectus of the
Fund. The Fund shall reimburse the Distributor monthly for its out-of-pocket
expenses reasonably incurred for carrying out the foregoing authorization,
but the Distributor shall not be entitled to any commissions or other
compensation in respect to such redemptions.
EIGHTH: The Fund shall bear:
(A) the expenses of qualification of the shares for sale in
connection with such public offerings in such states as shall be selected
by the Distributor and of continuing the qualification continued; and
(B) all legal expenses in connection with the foregoing.
NINTH: The Distributor shall bear:
(A) the expenses of printing and distributing prospectuses and
statements of additional information (other than those prospectuses and
statements of additional information required by applicable laws and
regulations to be distributed to the Fund's shareholders by the Fund) and
any other promotional or sales literature which are used by the Distributor
or furnished by the Distributor to purchasers or dealers in connection with
the Distributor's activities pursuant to this Agreement;
(B) expenses of any advertising used by the Distributor in connection
with such public offering; and
(C) all legal expenses in connection with the foregoing.
TENTH: The Distributor will accept orders for shares of the Fund
only to the extent of purchase orders actually received and not in excess
of such orders, and it will not avail itself of any opportunity of making
a profit by expediting or withholding orders.
ELEVENTH: The Fund shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy
of all financial statements, and a signed copy of each report, prepared by
independent public accountants, and with such reasonable number of printed
copies of each semi-annual and annual report of the Fund as the Distributor
may request, and shall cooperate fully in the efforts of the Distributor
to sell and arrange for the sale of its shares and in the performance by
the Distributor of all its duties under the Agreement.
TWELFTH: The Fund agrees to register, from time to time as
necessary, additional shares with the Securities and Exchange Commission,
state and other regulatory bodies and to pay the related filing fees
therefor and to file such amendments, reports and other documents as may
be necessary in order that there may be no untrue statement of a material
fact in the Registration Statement or prospectus or necessary in order that
there may be no omission to state a material fact therein necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As used in this Agreement, the term
"Registration Statement" shall mean from time to time the Registration
Statement most recently filed by the Fund with the Securities and Exchange
Commission and effective under the Securities Act of 1933, as amended, as
such Registration Statement is amended at such time, and the terms
"Prospectus" shall mean for the purposes of this Agreement from time to
time the form of prospectus and statement of additional information
authorized by the Fund for use by Distributor and by dealers.
THIRTEENTH:
(A) The Fund and Distributor shall each comply with all applicable
provisions of the Investment Company Act of 1940, the Securities Act of
1933, and the rules and regulations of the National Association of
Securities Dealers, Inc. and of all other Federal and State laws, rules and
regulations governing the issuance and sale of shares of the Fund.
(B) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Distributor, the Fund agrees to indemnify the Distributor and
any controlling person of the Distributor against any and all claims,
demands, liabilities and expenses including reasonable costs of any alleged
litigation which the Distributor may incur under the Securities Act of
1933, or common law on otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in any registration
statement, statement of additional information or prospectus of the Fund,
or any omission to state a material fact therein, the omission of which
makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with written
information furnished to the Fund in connection with written information
furnished to the Fund in connection therewith by or on behalf of the
Distributor. The Distributor agrees to indemnify the Fund against any and
all claims, demands, liabilities and expenses which the Fund may incur
arising out of or based upon any act or deed of sales representatives of
the Distributor which is outside the scope of their authority under this
Agreement.
(C) The Distributor agrees to indemnify the Fund against any and all
claims, demands, liabilities and expenses which the Fund may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of material fact contained in any
registration statement, statement of additional information or prospectus
of the Fund, relating to the Fund, or any omission to state a material fact
therein if such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Fund in connection
therewith by or on behalf of the Distributor.
FOURTEENTH: Nothing herein contained shall require the Fund to take
any action contrary to any provision of its Declaration of Trust or to any
applicable statute or regulation.
FIFTEENTH: This Agreement has been approved by the Trustees of the
Fund and shall become effective at the close of business on the date
hereof. This Agreement shall continue in force and effect for successive
annual periods, provided that such continuance is specifically approved at
least annually (a) (i) by the Board of Trustees of the Fund, or (ii) by
vote of a majority of the Fund's outstanding voting securities (as defined
in Section 2 (a) (42) of the Investment Company Act of 1940), and (b) by
vote of majority of the Fund's Trustees who are not interested persons (as
defined in Section 2 (a) (19) of the Investment Company Act of 1940) of the
Distributor by votes cast in person at a meeting called for such purposes.
SIXTEENTH: The Distributor, as the owner of the registered service
mark "Lexington" (registration number 836-088), hereby sublicenses and
authorizes the Fund to include the word "Lexington" as part of its
corporate name, subject, however, to revocation by the Distributor in the
event that the Fund ceases to engage the Distributor or affiliates of the
Distributor as investment advisor or distributor. The Fund agrees upon
demand of the Distributor to change its corporate name to delete the word
"Lexington" therefrom.
SEVENTEENTH:
(A) This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Board of Trustees of the Fund or
by vote of a majority of the outstanding voting securities of the Fund, or
by the Distributor, on sixty (60) days written notice of the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
EIGHTEENTH: Any notice 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
notices. Until further notice to the other party, it is agreed that the
address of the Fund shall be Park 80 West, Plaza Two, Saddle Brook, New
Jersey and Distributor shall be Park 80 West, Plaza Two, Saddle Brook,
New Jersey.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
LEXINGTON TAX EXEMPT BOND TRUST
Attest: By
_________________________
_______________________
LEXINGTON FUNDS DISTRIBUTOR, INC.
Attest: By
_________________________
_______________________
Kramer, Levin, Naftalis & 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
February 26, 1997
Lexington Ramirez Global Income Fund
Park 80 West Plaza Two
Saddle Brook, New Jersey 07662
Re: Lexington Ramirez Global Income Fund
Park 80 West Plaza Two
Saddle Brook, New Jersey 07662
Gentlemen:
We hereby consent to the reference to our firm as counsel in the
Post-Effective Amendment to the Registration Statement on Form N-1A.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Consent
To the Board of Trustees and Shareholders
Lexington Ramirez Global Income Fund
We consent to the use of our report dated February 14, 1997 included in
the Registration Statement on Form N-1A and to the references to our firm
under the headings "Financial Highlights" and "Auditors" in the Prospectus
and "Shareholder Reports" in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 28, 1997
LEXINGTON RAMIREZ GLOBAL INCOME FUND
DISTRIBUTION PLAN
Distribution Plan (the "Plan") of Lexington Ramirez Global Income Fund,
a Massachusetts Business Trust (the "Fund"), an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), adopted pursuant to Section 12(b) of the act and Rule
12b-1 promulgated thereunder ("Rule 12b-1").
1. Principal Underwriter and Investment Adviser. Lexington Funds
Distributor, Inc., a Delaware corporation ("the Distributor"), acts as the
principal underwriter of the Fund's shares pursuant to a Distribution
Agreement. Lexington Management Corporation, a Delaware corporation (the
"Adviser"), acts as the Fund's investment adviser pursuant to an Investment
Advisory Agreement.
2. Distribution Payments. (a) The Fund either directly or through
the Adviser, may make payments periodically (i) to the Distributor or to any
broker-dealer (a "Broker") who is registered under the Securities Exchange
Act of 1934 and a member in good standing of the National Association of
Securities Dealers, Inc. and who has entered into a selected dealer
agreement with the Distributor, (ii) to other persons or organizations
("Servicing Agents") who have entered into shareholder processing and
service agreements with the Adviser or with the Distributor, with respect
to Fund shares owned by shareholders for which such Broker is the dealer or
holder of record or such servicing agent has a servicing relationship, or
(iii) for expenses associated with distribution of Fund shares, including
the compensation of the sales personnel of the Distributor; payments of no
more than an effective annual rate of 0.25%, or such lesser amounts as the
Distributor determines appropriate.
(b) The schedule of such fees and the basis upon which such
fees will be paid shall be determined from time to time by the Distributor
and the Adviser, subject to approval by the Trustees of the Fund.
(c) Payments may also be made for any advertising and
promotional expenses relating to selling efforts, including but not limited
to the incremental costs of printing, prospectuses, statements of additional
information, annual reports and other periodic reports for distribution to
persons who are not shareholders of the Fund; the costs of preparing and
distributing any other supplemental sales literature; costs of radio,
television, newspaper and other advertising: telecommunications expenses,
including the cost of telephones telephone lines and other communications
equipment, incurred by or for the Distributor in carrying out its
obligations under the Distribution Agreement;
(d) The aggregate amount of all payments by the Fund in any fiscal
year, to Brokers, Servicing Agents and for advertising and promotional
expenses pursuant to paragraph (a), (b), (c) of this Section 2 shall not
exceed 0.25% of the average daily net asset value of the Fund on an annual
basis for such fiscal year. The Plan will only make payments for expenses
actually incurred by the Distributor. The amount of expenses incurred by the
Distributor in any twelve-month period may exceed the rate of reimbursement
set forth in the Plan. The unreimbursement amounts may be recovered by the
Distributor through future payments under the Plan. If the Plan is terminated
in accordance with its terms, the obligations of the Fund to make payments to
the Distributor pursuant to the Plan will cease and the Fund will not be
required to make any payments past the date the Plan terminates.
3. Reports. Quarterly, in each year that this Plan remains in
effect, the Fund's Treasurer shall prepare and furnish to the Trustees of
the Fund a written report, complying with the requirements of Rule 12b-1,
setting forth the amounts expended by the Fund under the Plan and purposes
for which such expenditures were made.
4. Approval of Plan. This Plan shall become effective upon
approval of the Plan, the form is Selected Dealer agreement and the form of
Shareholder Service Agreement, by the majority votes of both (a) the Fund's
Trustees and the Qualified Trustees (as defined in Section 6), cast in
person at a meeting called for the purpose of voting on the Plan and (b) the
outstanding voting securities of the Fund, as defined in Section 2(a)(42)
of the Act.
5. Term. This Plan shall remain in effect for one year from its
adoption date and may be continued thereafter if this Plan and all related
agreements are approved at least annually by a majority vote of the
Trustees of the Fund, including a majority of the Qualified Trustees cast
in person at a meeting called for the purpose of voting on such Plan and
agreements. This Plan may not be amended in order to increase materially
the amount to be spent for distribution assistance without shareholder
approval in accordance with Section 4 hereof. All material amendments to
this Plan must be approved by a vote of the Trustees of the Fund, and of
the Qualified Trustees (as hereinafter defined), cast in person at a
meeting called for the purpose of voting thereon.
6. Termination. This Plan may be terminated at any time by a
majority vote of the Trustees who are not interested persons (as defined
in Section 2(a)(19) of the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related
to the Plan (the "Qualified Trustees") or by vote of a majority of the
outstanding voting securities of the Fund, as defined in Section 2(a)(42)
of the Act.
7. Nomination of "Non-Interested" Trustees. While this Plan shall
be in effect, the selection and nomination of the "non-interested" Trustees
of the Fund shall be committed to the discretion of the non-interested
Trustees then in office.
8. Miscellaneous. (a) Any termination or non-continuance of (i)
a Selected Dealer Agreement between the Distributor and a particular broker
or (ii) a Shareholder Service agreement between the adviser or the Fund and
a particular person or organization, shall have no effect on any similar
agreements between brokers or other persons and the Fund, the Adviser or the
Distributor pursuant to this Plan.
(b) The Distributor, the Adviser, or the Fund shall not be
under any obligation because of this Plan to execute any Selected Dealer
Agreement with any broker or any Shareholder Service Agreement with any
person or organization.
(c) All Agreements with any person or organization relating to
the implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Section 6 hereof.
Dated: November 30, 1994
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-end
audited financial statements dated December 31, 1996 and is qualified in its
entirety be reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27,688,189
<INVESTMENTS-AT-VALUE> 28,387,825
<RECEIVABLES> 1,036,847
<ASSETS-OTHER> 92,238
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,516,910
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 407,090
<TOTAL-LIABILITIES> 407,090
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,286,038
<SHARES-COMMON-STOCK> 2,594,444
<SHARES-COMMON-PRIOR> 1,139,533
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (86,311)
<ACCUMULATED-NET-GAINS> 192,017
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 718,076
<NET-ASSETS> 29,109,820
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,106,538
<OTHER-INCOME> (25,200)
<EXPENSES-NET> 264,673
<NET-INVESTMENT-INCOME> 1,816,665
<REALIZED-GAINS-CURRENT> 193,850
<APPREC-INCREASE-CURRENT> 222,285
<NET-CHANGE-FROM-OPS> 2,232,800
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,529,914)
<DISTRIBUTIONS-OF-GAINS> (92,247)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,090,482
<NUMBER-OF-SHARES-REDEEMED> (755,281)
<SHARES-REINVESTED> 119,710
<NET-CHANGE-IN-ASSETS> 16,244,449
<ACCUMULATED-NII-PRIOR> 16,186
<ACCUMULATED-GAINS-PRIOR> (288,636)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 175,988
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 410,657
<AVERAGE-NET-ASSETS> 17,598,793
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> 1.01
<PER-SHARE-GAIN-APPREC> .36
<PER-SHARE-DIVIDEND> (.86)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.22
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
