As filed with the Securities and Exchange Commission on April 18, 1996
Registration No. 33-26116
811-5710
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. 8 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9 X
(Check appropriate box or boxes.)
LEXINGTON NATURAL RESOURCES TRUST
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Natural Resources Trust
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, New York 10022
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It is proposed that this filing will become effective April 29, 1996
pursuant to Paragraph (b) of Rule 485.
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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, 1995 was filed on February 23, 1996.
<PAGE>
LEXINGTON NATURAL RESOURCES TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
- --------------- ------------------ -----------
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information 3
4. General Description of Registrant 4
5. Management of the Fund 7
6. Capital Stock and Other Securities 10
7. Purchase of Securities Being Offered 8
8. Redemption or Repurchase 8
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON NATURAL RESOURCES TRUST
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 10 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 16
15. Control Persons and Principal Holders 5
of Securities
16. Investment Advisory and Other Services 5
17. Brokerage Allocation and Other Practices 6
18. Capital Stock and Other Securities 10 (Part A)
19. Purchase, Redemption and Pricing of 8 (Part A)
securities being offered
20. Tax Status 8
21. Underwriters 7 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 18
PART C
- ------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
* Not Applicable
<PAGE>
PROSPECTUS
April 29, 1996
Lexington Natural Resources Trust
P.O. Box 1515 / Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
201-845-7300
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Lexington Natural Resources Trust (the "Fund"), is a no load open-end
non-diversified management investment company. The Fund's investment objective
is to seek long-term growth of capital through investment primarily in common
stocks of companies which own, or develop natural resources and other basic
commodities, or supply goods and services to such companies. Current income will
not be a factor. Total return will consist primarily of capital appreciation.
For a description of the types of securities in which the Fund will invest, see
"Investment Objectives and Policies" on page 3.
Shares of the Fund may be purchased only by insurance companies for the
purpose of funding variable annuity contracts and variable life insurance
policies.
This Prospectus concisely sets forth information about the Fund that you
should know before investing. It should be read and retained for future
reference.
A Statement of Additional Information ("SAI") dated April 29, 1996, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The SAI further discusses certain areas in this Prospectus and other
matters which may be of interest to some investors. For a free copy, call the
telephone number above or write to the address listed above.
Lexington Management Corporation (the "Investment Adviser") is the
Investment Adviser of the Fund. Lexington Funds Distributor, Inc. (the
"Distributor") is the Distributor of shares of the Fund. Market Systems Research
Advisors, Inc. (the "Sub-Adviser") is the Sub-Adviser to the Fund.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
The following Per Share and Capital Changes Information for each of the
years in the five year period ended December 31, 1995 has been audited by KPMG
Peat Marwick LLP, Independent Auditors, whose report thereon appears in the
Statement of Additional Information. This information should be read in
conjunction with the financial statements and related notes thereto included in
the Statement of Additional Information. The Fund's annual report, which
contains additional performance information, is available upon request and
without charge.
<TABLE>
<CAPTION>
Selected per share data for a share outstanding throughout the period:
Period from
August 1, 1989
(Commencement of
Year Ended December 31, Operations) to
--------------------------------------------------- December 31,
1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $ 9.71 $10.30 $ 9.30 $9.01 $9.50 $11.49 $10.00
Income (loss) from investment
operations:
Net investment income (loss) ... 0.06 0.04 - - 0.02 (0.01) 0.01
Net realized and unrealized gain
(loss) on investments .......... 1.58 (0.59) 1.01 0.29 (0.49) (1.70) 1.48
Total income (loss) from
investment operations .......... 1.64 (0.55) 1.01 0.29 (0.47) (1.71) 1.49
Less distributions:
Dividends from net
investment income ............ (0.05) (0.04) (0.01) - (0.02) - -
Dividends from capital gains ..... - - - - - (0.28) -
Net asset value, end of period ... $11.30 $ 9.71 $10.30 $9.30 $9.01 $ 9.50 $11.49
Total return ..................... 16.87% (5.38%) 10.90% 3.22% (4.95%) (14.85%) 40.98%*
Ratio to average net assets:
Expenses, before
reimbursement .................. 1.47% 1.55% 2.26% 2.31% 2.97% 4.55% 19.76%*
Expenses, net of reimbursement ... 1.47% 1.55% 2.26% 2.31% 1.60% 1.54% 0.39%*
Net investment income (loss),
before reimbursement ........... 0.56% 0.49% 0.08% 0.02% (1.10%) (3.06%) (19.16%)*
Net investment income (loss) ..... 0.56% 0.49% 0.08% 0.02% 0.27% (0.05%) 0.22%*
Portfolio turnover ............... 149.18% 87.40% 114.44% 65.50% 100.94% 50.43% 0.00%*
Net assets, end of period (000's
omitted) ....................... $16,955 $13,627 $5,325 $1,926 $1,393 $ 916 $ 280
<FN>
- -----------
*Annualized
</FN>
</TABLE>
2
<PAGE>
DESCRIPTION OF THE FUND
Lexington Natural Resources Trust is a no-load open-end non-diversified
management investment company organized as a business trust under the laws of
Massachusetts. The Fund is intended to be the funding vehicle for variable
annuity contracts and variable life insurance policies to be offered by the
separate accounts of certain life insurance companies ("participating insurance
companies"). The Fund currently does not foresee any disadvantages to the
holders of variable annuity contracts and variable life insurance policies
arising from the fact that the interests of the holders of such contracts and
policies may differ. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise and to determine what action, if any, should be taken in response thereto.
If a conflict were to occur, an insurance company separate account might be
required to withdraw its investments in the Fund and the Fund might be forced to
sell securities at disadvantageous prices. The variable annuity contracts and
variable life insurance policies are described in the separate prospectuses
issued by the Participating Insurance Companies. The Fund assumes no
responsibility for such prospectuses.
Individual variable annuity contract holders and variable life insurance
policy holders are not "shareholders" of the Fund. The Participating Insurance
Companies and their separate accounts are the shareholders or investors,
although such companies may pass through voting rights to their variable annuity
contract or variable life insurance policy. Shares of the Fund are not offered
directly to the general public.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to seek long-term growth of capital
through investment primarily in common stocks of companies that own or develop
natural resources and other basic commodities, or supply goods and services to
such companies. Current income will not be a factor. Total return will consist
primarily of capital appreciation.
Management attempts to achieve the investment objective of the Fund by
seeking to identify securities of companies that, in its opinion, are
undervalued relative to the value of natural resource holdings of such companies
in light of current and anticipated economic or financial conditions. Natural
resource assets are materials derived from natural sources which have economic
value. The Fund will consider a company to have substantial natural resource
assets when, in management's opinion, the company's holdings of the assets are
of such magnitude, when compared to the capitalization, revenues or operating
profits of the company, that changes in the economic value of the assets will
affect the market price of the equity securities of such company. Generally, a
company has substantial natural resource assets when at least 50% of the
non-current assets, capitalization, gross revenues or operating profits of the
company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Examples
of natural resource assets include: companies that specialize in energy sources
(e.g., coal, geothermal power, natural gas and oil), environmental technology
(e.g., pollution control and waste recycling), forest products, agricultural
products, chemical products, ferrous and non-ferrous metals (e.g., iron,
aluminum and copper), strategic metals (e.g., uranium and titanium), precious
metals (e.g., gold, silver and platinum), and other basic commodities. The Fund
presently does not intend to invest directly in natural resource assets or
related contracts. The Fund may invest up to 25% of its total assets in
securities principally traded in markets outside the United States.
Management of the Fund believes that, based upon past performance, the
securities of specific companies that hold different types of substantial
natural resource assets may move relatively independently of one another during
different stages of inflationary cycles due to different degrees of demand for,
or market values of, their respective natural resource holdings during
particular portions of such inflationary cycles. The Fund's fully-managed
investment approach enables it to switch its emphasis among various industry
groups depending upon management's outlook with respect to prevailing trends and
developments. The investment objective and policies of the Fund described in the
first two paragraphs of this section are fundamental policies of the Fund and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended.
Except for defensive or liquidity purposes, at least 65% of the total assets
of the Fund will be invested in companies with substantial natural resource
assets. The remaining assets to the extent not invested in the common stocks of
natural resource
3
<PAGE>
companies may be invested in companies other than the natural resource companies
and in debt securities of natural resource companies as well as other companies.
At any time management deems it advisable for temporary defensive or liquidity
purposes, the Fund may hold all its assets in cash or cash equivalents and
invest in, or hold unlimited amounts of, debt obligations of the United States
government or its political subdivisions, and money market instruments including
repurchase agreements with maturities of seven days or less and Certificates of
Deposit.
The Fund's investment portfolio may include repurchase agreements with banks
and dealers in U.S. Government securities. A repurchase agreement involves the
purchase by the Fund of an investment contract from a bank or a dealer in U.S.
Government securities which contract is secured by debt securities whose value
is equal to or greater than the value of the repurchase agreement including the
agreed upon interest. The agreement provides that the institution will
repurchase the underlying securities at an agreed upon time and price. The total
amount received on repurchase would exceed the price paid by the Fund,
reflecting an agreed upon rate of interest for the period from the date of the
repurchase agreement to the settlement date, and would not be related to the
interest rate on the underlying securities. The difference between the total
amount to be received upon the repurchase of the securities and the price paid
by the Fund upon their acquisition is accrued daily as interest. If the
institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Fund may be delayed or limited and the Fund may incur additional costs. In such
case the Fund will be subject to risks associated with changes in the market
value of collateral securities. The Fund intends to limit repurchase agreements
to transactions with institutions believed by the Investment Adviser and
Sub-Adviser to present minimal credit risk.
Although the Fund's Board of Trustees present policy prohibits investments
in speculative securities trading at extremely low prices and in relatively
illiquid markets, investments in such securities can be made when and if the
Board determines such investments to be in the best interests of the Fund and
its shareholders. The policies set forth in this paragraph are subject to change
by the Board of Trustees of the Fund, in its sole discretion (see "Special
Considerations and Risks" and "Dividend, Distribution and Reinvestment Policy").
The Fund anticipates that its annual portfolio turnover rate will generally
not exceed 150%. A 100% turnover rate would occur if all of the Fund's portfolio
investments were sold and either repurchased or replaced within one year. High
turnover may result in increased transaction costs to the Fund; however, the
rate of turnover will not be a limiting factor when the Fund deems it desirable
to purchase or sell portfolio investments. For the fiscal year ended December
31, 1995, the portfolio turnover rate was 149.18%.
Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the best net price available and in the most
effective manner possible. The Fund's brokerage allocation policy may permit the
Fund to pay a broker-dealer which furnishes research services a higher
commission than that which might be charged by another broker-dealer which does
not furnish research services, provided that such commission is deemed
reasonable in relation to the value of the services provided by such
broker-dealer. For a complete discussion of portfolio transactions and brokerage
allocation, see "Portfolio Transactions and Brokerage Commissions" in the
Statement of Additional Information.
SPECIAL CONSIDERATION AND RISKS
Because the Fund will invest a substantial portion of its portfolio in the
securities of companies with natural resources assets, the Fund should be
considered as a vehicle for diversification and not as a balanced investment
program. In addition, investments in foreign securities may involve risks and
considerations not present in domestic investments.
Investments in Foreign Securities
A portion of the Fund's security investments will be in the securities of
foreign issuers. Investments in foreign securities may involve risks greater
than those attendant to investments in securities of U.S. issuers. Publicly
available information concerning issuers located outside the U.S. may not be
comparable in scope or depth of analysis to that generally available for
publicly held U.S. corporations. Accounting and auditing practices and financial
reporting requirements vary significantly from country to country and generally
are not comparable to those applicable to publicly held U.S. corporations.
Government supervision and regulation of
4
<PAGE>
foreign securities exchanges and markets, securities listed on such exchanges or
traded in such markets and brokers, dealers, banks and other financial
institutions who trade the securities in which the Fund may invest is generally
less extensive than in the U.S., and trading customs and practices may differ
substantially from those prevailing in the U.S. The Fund may trade in certain
foreign securities markets which are less developed than comparable U.S.
markets, which may result in reduced liquidity of securities traded in such
markets. Investments in foreign securities are also subject to currency
fluctuations. For example, when the Fund's assets are invested primarily in
securities denominated in foreign currencies, an investor can expect that the
Fund's net asset value per share will tend to increase when the value of U.S.
dollars is decreasing as against such currencies. Conversely, a tendency toward
decline in net asset value can be expected when the value of U.S. dollars is
increasing as against such currencies. Changes in net asset value per share as a
result of foreign exchange rate fluctuations will be determined by the
composition of the Fund's portfolio at any given time. Further, it is not
possible to avoid altogether the risks of expropriation, burdensome or
confiscatory taxation, moratoriums, exchange and investment controls or
political or diplomatic events which might adversely affect the Fund's
investments in foreign securities or restrict the Fund's ability to dispose of
such investments.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of investment restrictions which may not be
changed without shareholder approval. These are set forth under "Investment
Restrictions" in the Statement of Additional Information. Some of these
restrictions provide that the Fund shall not:
*Invest more than 5% of its total assets in the securities of any one issuer
with respect to 50% of its total assets (except securities issued or guaranteed
by the U.S. Government, or its agencies and instrumentalities);
*Purchase any securities if such purchase would cause the Fund to own at the
time of purchase more than 10% of the outstanding voting securities of one
issuer;
*Borrow money; except that the Fund may borrow from a bank as a temporary
measure for extraordinary purposes or to meet redemptions in amounts not
exceeding 10% (taken at market value) of its total assets and pledge its assets
to secure such borrowings. The Fund may not purchase additional securities when
money borrowed exceeds 5% of the Fund's total assets;
*Purchase any security restricted as to disposition under Federal securities
laws or securities that are not readily marketable or purchase any securities if
such a purchase would cause the Fund to own at the time of such purchase,
illiquid-securities, including repurchase agreements with an agreed upon
repurchase date in excess of seven days from the date of acquisition by the
Fund, having aggregate market value in excess of 10% of the value of the Fund's
total assets.
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the direction of its
Board of Trustees. There are currently seven Trustees (of whom four are
non-affiliated persons) who meet four times each year. The Statement of
Additional Information contains additional information regarding the Trustees
and officers of the Fund.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663, is the investment adviser to the Fund, and, as
such, advises and makes recommendations to the Fund with respect to its
investments and investment policies. Lexington Funds Distributor, Inc. is a
registered broker-dealer and is the distributor of shares of the Fund.
The Investment Adviser has entered into a sub-advisory management contract
with Market Systems Research Advisors, Inc., 80 Maiden Lane, New York, New York
10038, a registered investment adviser, under which the Sub-Adviser will provide
the Fund with certain investment management and administrative services. The
Sub-Adviser serves as investment adviser to private and institutional accounts.
5
<PAGE>
The Investment Adviser is paid an investment advisory fee at the annual rate
of 1.00% of the net assets of the Fund which is higher than that paid by most
other investment companies. This fee is computed on the basis of the Fund's
average daily net assets and is payable on the last business day of each month.
For the year ended December 31, 1995, the Investment Adviser received $148,634
in investment advisory fees from the Fund and paid the Sub-Adviser $74,304.
From time to time, the Investment Adviser may pay amounts from its past
profits to participating insurance companies or insurance companies or other
financial institutions that provide administrative services for the Fund or that
provide to contract holders other services relating to the Fund. These services
may include, among other things, sub-accounting services, answering inquiries of
contract holders regarding the Fund, transmitting, on behalf of the Fund, proxy
statements, annual reports, updated prospectus and other communications to
contract holders regarding the Fund, and such other related services as the Fund
or a contract holder may request. The Investment Adviser will not pay more than
0.25% of the average daily net assets of the Fund represented by shares of the
Fund held in the separate account of any participating insurance company.
Payment of such amounts by the Investment Adviser will not increase the fees
paid by the Fund or its shareholders.
The Investment Adviser serves as investment adviser to other investment
companies and private institutional investment accounts. Included among these
clients are persons and organizations which own significant amounts of capital
stock of the Investment Adviser's parent. The clients pay fees which the
Investment Adviser considers comparable to the fee levels for similarly served
clients.
The Investment Adviser also acts as administrator to the Fund and performs
certain administrative and internal accounting services, including but not
limited to, maintaining general ledger accounts, regulatory compliance,
preparation of financial information for semiannual and annual reports,
preparing registration statements, calculating net asset values, shareholder
communications and supervision of the custodian, transfer agent and provides
facilities for such services. The Fund shall reimburse the Aministrator for its
actual cost in providing such services, facilities and expenses.
The Investment Adviser and the Distributor 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. Lexington Global Asset
Managers, Inc., holds a controlling interest in the Sub-Adviser. 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. See "Investment Adviser and Distributor" in the
Statement of Additional Information.
PORTFOLIO MANAGERS
The Fund is managed by an investment management team. Frank A. Peluso,
Robert M. DeMichele and Robert W. Radsch are the lead managers.
Frank A. Peluso is a Portfolio Manager of the Fund. He has 33 years
investment experience. Mr. Peluso is President and Chief Executive Officer of
Market Systems Research Advisors, Inc. (MSR), the sub-adviser to the Fund. Mr.
Peluso utilizes a proprietary analytical system to identify securities with
performance potential which he believes to be exceptional. In addition, Mr.
Peluso's proprietary data is used by professional money managers, insurance
companies, brokerage firms, banks, mutual fund companies and pension funds.
Mr. Peluso is a graduate of Princeton University and has completed a year of
post-graduate study at Columbia University.
Robert M. DeMichele is Chairman and Chief Executive Officer of Lexington
Management Corporation. He is also the Chairman of the Investment Strategy
Group. In addition, he is President of Lexington Global Asset Managers, Inc.,
LMC's parent company. He holds similar offices in other companies owned by
Lexington Global Asset Managers, Inc., as well as, the Lexington Funds.
Prior to joining LMC in 1981, Mr. DeMichele was a Vice President at A.G.
Becker, Inc. the securities division of Warburg, Paribus, Becker, an
international investment banking firm. From 1973 to 1981, Mr. DeMichele held
several positions, the most recent managing A.G. Becker's Funds Evaluation and
Consulting Group for both the East and West coasts.
Mr. DeMichele is a graduate of Union College with a B.A. Degree in Economics
and an M.B.A. in Finance from Cornell University.
6
<PAGE>
Robert W. Radsch, CFA, is a Portfolio Manager of the Fund and is a Vice
President of Lexington Management Corporation. 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.
HOW TO PURCHASE AND REDEEM SHARES
With the exception of shares held in connection with initial capital of the
Fund, shares of the Fund are currently available for purchase solely by
participating insurance companies for the purpose of funding variable annuity
contracts and variable life insurance policies. Shares of the Fund are purchased
and redeemed at net asset value next calculated after a purchase or redemption
order is received by the Fund in good order. There are no minimum investment
requirements. Payment for shares redeemed will be made as soon as possible, but
in any event within three business days after the order for redemption is
received by the Fund. However, payment may be postponed under unusual
circumstances, such as when normal trading is not taking place on the New York
Stock Exchange.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is computed as of the close of
trading on each day the New York Stock Exchange is open, by dividing the value
of the Fund's securities plus any cash and other assets (including accrued
dividends and interest) less all liabilities (including accrued expenses) by the
number of shares outstanding, the result being adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange is valued at
its last sale price prior to the time when assets are valued on the principal
exchange on which the security is traded. If no sale is reported at that time,
the mean between the current bid and asked price will be used. All other
securities for which the over-the-counter market quotations are readily
available are valued at the mean between the last current bid and asked price.
Short-term securities having maturity of 60 days or less are valued at cost when
it is determined by the Fund's Board of Trustees that amortized cost reflects
the fair value of such securities. Securities for which market quotations are
not readily available and other assets are valued at fair value as determined by
the management and approved in good faith by the Board of Trustees.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the New York Stock Exchange (the "Exchange"). Foreign currency exchange
rates are also generally determined prior to the close of the Exchange.
Occasionally, events affecting the value of such securities and such exchange
rates may occur between the times at which they are determined and the close of
the Exchange, which will not be reflected in the computation of net asset value.
If during such periods, events occur which materially affect the value of such
securities, the securities will be valued at their fair market value as
determined by the investment adviser and approved in good faith by the Trustees.
In order to determine net asset value per share, the aggregate value of
portfolio securities is added to the value of the Fund's other assets, such as
cash and receivables; the total of the assets thus obtained, less liabilities,
is then divided by the number of shares outstanding.
PERFORMANCE CALCULATION
Advertisements and communications with shareholders and others may cite the
Fund's performance calculated on a total return basis. All such advertisements
and communications will portray the value of an assumed initial investment of
$1,000 at the end of one, five and ten year periods. These values will be
calculated by multiplying the compounded average annual total return for each
time period by the amount of the assumed initial investment and will reflect all
recurring charges against Fund income.
Advertisements and communications may compare the Fund's performance to
major market indices. Quotations of historical total returns are not indicative
of future dividend income or total return, but are an indication of the return
to shareholders only for the
7
<PAGE>
limited historical period used. The Fund's total return will depend on the
particular investments in its portfolio, its total operating expenses and other
conditions. For further information, including the formula and an example of the
total return calculation, see the Statement of Additional Information.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to declare or distribute a dividend from its net investment
income and/or net capital gain income to shareholders annually or more
frequently if necessary in order to comply with distribution requirements of the
Code to avoid the imposition of regular Federal income tax, and if applicable, a
4% excise tax.
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund. Dividend and capital gain distributions are generally not currently
taxable to owners of variable contracts.
TAX MATTERS
The Fund. The Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), concerning the diversification of assets,
distribution of income, and sources of income. When the Fund qualifies as a
regulated investment company and all of its taxable income is distributed in
accordance with the timing requirements imposed by the Code, the Fund will not
be subject to federal income tax. If, however, for any taxable year the Fund
does not qualify as a regulated investment company, then all of its income will
be subject to tax at regular corporate rates (without any deduction for
distributions to the separate accounts of the Participating Insurance Companies
(the "Accounts")), and the receipt of such distributions will be taxable to the
extent that the Fund has current and accumulated earnings and profits.
Fund distributions. Distributions by the Fund are taxable, if at all, to the
Accounts, and not to variable annuity contract holders or variable life
insurance policy holders. An Account will include distributions in its taxable
income in the year in which they are received (whether paid in cash or
reinvested).
Share redemptions. Redemptions of the shares held by the Accounts generally
will not result in gain or loss for the Accounts and will not result in gain or
loss for the variable annuity contract holders or variable life insurance policy
holders.
Summary. The foregoing discussion of federal income tax consequences is
based on tax laws and regulations in effect on the date of this Prospectus, and
is subject to change by legislative or administrative action. The foregoing
discussion also assumes that the Accounts are the owners of the shares and that
the policies or contracts qualify as life insurance policies or annuities,
respectively, under the Code. If the foregoing requirements are not met then the
variable annuity contract holders or variable life insurance policy holders will
be treated as recognizing income (from distributions or otherwise) related to
the ownership of Fund shares. The foregoing discussion is for general
information only; a more detailed discussion of federal income tax
considerations is contained in the Statement of Additional Information. Variable
annuity contract holders or variable life insurance policy holders must consult
the prospectuses of their respective contracts or policies for information
concerning the federal income tax consequences of owning such contracts or
policies.
GENERAL INFORMATION
The Fund was organized as a Massachusetts business trust on October 7, 1988
under the name Lexington Gold Trust. At a meeting held on September 30, 1991,
the shareholders of the Fund approved a change in the Fund's fundamental
investment objective and policies. In connection with the change of investment
objective and policies, the Fund also changed its name to "Lexington Natural
Resources Trust." The capitalization of the Fund consists solely of an unlimited
number of shares of beneficial interest, no par value. When issued, shares of
the Fund are fully paid, non-assessable and freely transferable.
Unlike the stockholder of a corporation, shareholders could under certain
circumstances be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees, or officers of the Fund for
8
<PAGE>
acts or obligations of the Fund, which are binding only on the assets and
property of the Fund. The Declaration of Trust provides for indemnification out
of Fund property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations and thus should
be considered remote.
Voting Rights
Shareholders of the Fund are given certain voting rights. Each share of the
Fund will be given one vote, unless a different allocation of voting rights is
required under applicable law for a mutual fund that is an investment medium for
variable life insurance or annuity contracts. Participating insurance companies
provide variable annuity Contract Holders and Participants the right to direct
the voting of Fund shares at shareholder meetings to the extent required by law.
See the Separate Account Prospectus for the Variable Contract for more
information regarding the pass-through of these voting rights.
Massachusetts business trust law does not require the Fund to hold annual
shareholder meetings, although special meetings may be called for the Fund, for
purposes such as electing or removing Trustees, changing fundamental policies or
approving an investment management contract. A shareholders' meeting will be
held after the Fund begins operations for the purpose of electing the initial
Board of Trustees. In addition, the Fund will be required to hold a meeting to
elect Trustees to fill any existing vacancies on the Board if, at any time,
fewer than a majority of the Trustees have been elected by the shareholders of
the Fund. In addition, the holders of not less than two-thirds of the
outstanding shares or other voting interests of the Fund may remove a person
serving as Trustee either by declaration in writing or at a meeting called for
such purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as trustee, if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of other
voting interests of the Fund. The Fund is required to assist in shareholders'
communications. In accordance with current laws, an insurance company issuing a
variable life insurance or annuity contract that participates in the Fund will
request voting instructions from Contract Holders and will vote shares or other
voting interests in the Separate Account in proportion to the voting
instructions received.
Counsel and Independent Auditors
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel will pass upon legal
matters for the Fund in connection with the shares offered by this Prospectus.
KPMG Peat Marwick LLP, New York, New York has been selected as independent
auditors for the Fund for the fiscal year ending December 31, 1996.
Custodians, Transfer Agent and Dividend Disbursing Agent
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York,
10036 has been retained to act as the Custodian for the Fund's investments and
assets. In addition, Chase Manhattan Bank, N.A. may appoint foreign banks and
securities depositories to act as sub-custodians for the Fund's portfolio
securities subject to their qualification as eligible foreign custodians under
the rules adopted by the SEC. State Street Bank & 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.
9
<PAGE>
(Left Column)
Investment Adviser
- -----------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Sub-Adviser
- -----------------------------------------------------------------
MARKET SYSTEMS RESEARCH ADVISORS, INC.
80 Maiden Lane
New York, N.Y. 10038
Distributor
- -----------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Transfer Agent
- -----------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
Table of Contents Page
- -----------------------------------------------------------------
Financial Highlights .......................................... 2
Description of the Fund ....................................... 3
Investment Objectives and Policies ............................ 3
Special Considerations and Risks .............................. 4
Investment Restrictions ....................................... 5
Management of the Fund ........................................ 5
Investment Adviser, Sub-Adviser, Distributor and Administrator. 5
Portfolio Managers ............................................ 6
How to Purchase and Redeem Shares ............................. 7
Determination of Net Asset Value .............................. 7
Performance Calculation ....................................... 7
Dividend, Distribution and Reinvestment Policy ................ 8
Tax Matters ................................................... 8
General Information ........................................... 8
(Right Column)
-----------------
L E X I N G T O N
-----------------
----------------------
LEXINGTON
NATURAL
RESOURCES
TRUST
(filled box)
(filled box)International
diversification
(filled box)Free telephone
exchange privilege
(filled box)No sales charge
(filled box)No redemption fee
(filled box)
The Lexington Group
of
No-Load
Investment Companies
----------------------
P R O S P E C T U S
APRIL 29, 1996
==============
<PAGE>
LEXINGTON NATURAL RESOURCES TRUST
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Natural
Resources Trust (the "Fund"), dated April 29, 1996, 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 number:
201-845-7300
TABLE OF CONTENTS
Page
General Information and History ............................................. 2
Investment Objectives and Policies .......................................... 2
Investment Restrictions ..................................................... 2
Investment Adviser, Sub-Adviser, Distributor and Administrator .............. 3
Portfolio Transactions and Brokerage Commissions ............................ 4
Performance Calculation ..................................................... 5
Dividend, Distribution and Reinvestment Policy .............................. 6
Tax Matters ................................................................. 6
Custodians, Transfer Agent and Dividend Disbursing Agent .................... 6
Management of the Fund ...................................................... 7
Other Information ........................................................... 8
Financial Statements ........................................................ 9
1
<PAGE>
GENERAL INFORMATION AND HISTORY
The Fund was formerly named "Lexington Gold Trust". At a meeting held on
September 30, 1991, the shareholders of the Fund approved a change in the Fund's
fundamental investment objective and policies. In connection with the change of
investment objective and policies, the Fund also changed its name to "Lexington
Natural Resources Trust."
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to seek long-term growth of capital
through investment primarily in common stocks of companies which own, or develop
natural resources and other basic commodities, or supply goods and services to
such companies. Current income will not be a factor. Total return will consist
primarily of capital appreciation.
Management attempts to achieve the investment objective of the Fund by
seeking to identify securities of companies that, in its opinion, are
undervalued relative to the value of natural resource holdings of such companies
in light of current and anticipated economic or financial conditions. Natural
resource assets are materials derived from natural sources which have economic
value. The Fund will consider a company to have substantial natural resource
assets when, in management's opinion, the company's holdings of the assets are
of such magnitude, when compared to the capitalization, revenues or operating
profits of the company, that changes in the economic value of the assets will
affect the market price of the equity securities of such company. Generally, a
company has substantial natural resource assets when at least 50% of the
non-current assets, capitalization, gross revenues or operating profits of the
company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Examples
of natural resource assets include: companies that specialize in energy sources
(e.g. coal, geothermal power, natural gas and oil), environmental technology
(e.g. pollution control and waste recycling), forest products, agricultural
products, chemical products, ferrous and nonferrous metals (e.g. iron, aluminum
and copper), strategic metals (e.g. uranium and titanium), precious metals (e.g.
gold, silver and platinum), and other basic commodities. The Fund presently does
not intend to invest directly in natural resource assets or related contracts.
The Fund may invest up to 25% of its total assets in securities principally
traded in markets outside the United States.
Management of the Fund believes that, based upon past performance, the
securities of specific companies that hold different types of substantial
natural resource assets may move relatively independently of one another during
different stages of inflationary cycles due to different degrees of demand for,
or market values of, their respective natural resource holdings during
particular portions of such inflationary cycles. The Fund's fully managed
investment approach enables it to switch its emphasis among various industry
groups depending upon management's outlook with respect to prevailing trends and
developments. The investment objective and policies of the Fund described in the
first two paragraphs of this section are fundamental policies of the Fund and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as described under "Investment Policy," and
the following investment restrictions are matters of fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholder's meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. The Fund is a non-diversified management
investment company and
1. with respect to 50% of its assets, the Fund will not at the time of
purchase invest more than 5% of its total assets, at market value, in the
securities of one issuer (except the securities of the United States
Government);
2. with respect to the other 50% of its assets, the Fund will not invest at
the time of purchase more than 25% of the market value of its total assets in
any single issuer.
These two restrictions, hypothetically, could give rise to a portfolio with
as few as fourteen issues.
In addition, the Fund will not:
1. Purchase more than 10% of the voting securities or more than 10% of any
class of securities of any issuer. (For this purpose all outstanding debt
securities of an issuer are considered as one class, and all preferred stocks of
an issuer are considered as one class.)
2. Purchase any security restricted as to disposition under Federal
Securities laws or securities that are not readily marketable or purchase any
securities if such a purchase would cause the Fund to own at the time of
2
<PAGE>
such purchase, illiquid securities, including repurchase agreements with an
agreed upon repurchase date in excess of seven days from the date of acquisition
by the Fund, having aggregate market value in excess of 10% of the value of the
Fund's total assets.
3. Make short sales of securities or purchase any securities on margin,
except for such short term credits as are necessary for the clearance of
transactions.
4. Write, purchase or sell puts, calls or combinations thereof. However,
the Fund may invest up to 15% of the value of its assets in warrants. The holder
of a warrant has the right to purchase a given number of shares of a particular
company at a specified price until expiration. Such investments generally can
provide a greater potential for profit - or loss - than investment of an
equivalent amount in the underlying common stock. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities. If the
holder does not sell the warrant, he risks the loss of his entire investment if
the market price of the underlying stock does not, before the expiration date,
exceed the exercise price of the warrant plus the cost thereof. It should be
understood that investment in warrants is a speculative activity. Warrants pay
no dividends and confer no rights (other than the right to purchase the
underlying stock) with respect to the assets of the corporation issuing them. In
addition, the sale of warrants held more than one year generally results in a
long term capital gain or loss to the holder, and the sale of warrants held for
less than such period generally results in a short term capital gain or loss.
The holding period for securities acquired upon exercise of warrants, however,
begins on the day after the date of exercise, regardless of how long the warrant
was held. This restriction on the purchase of warrants does not apply to
warrants attached to, or otherwise included in, a unit with other securities.
5. Invest in any commodities or commodities futures contracts, including
futures contracts relating to gold.
6. Invest in real estate.
7. Invest more than 5% of the value of its total assets in securities of
issuers which, with their predecessors, have a record of less than three years
continuous operation.
8. Purchase or retain the securities of any issuer if the officers or
Trustees of the Fund, or its Investment Adviser, or Sub-Adviser who own
individually more than 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer.
9. Lend money or securities, provided that the making of time or demand
deposits with domestic banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short term obligations
in accordance with the Fund's objective and policies, are not prohibited.
10. Borrow money, except for temporary emergency purposes, and in no event
more than 5% of its net assets at value or cost, whichever is less; or pledge
its gold or portfolio securities or receivables or transfer or assign or
otherwise encumber them in an amount exceeding 10% of the value of its total
assets.
11. Underwrite securities issued by others.
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
13. Invest for the purpose of exercising control or management of another
company.
14. Participate on a joint or a joint and several basis in any trading
account in securities.
The percentage restrictions referred to above are to be adhered to at the
time of investment, and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from a change in values or net
assets.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation ("LMC"), P.O. Box 1515/Park 80 West Plaza
Two, Saddle Brook, New Jersey 07663, is the investment adviser to the Fund, and,
as such, advises and makes recommendations to the Fund with respect to its
investments and investment policies.
LMC has entered into a sub-advisory management contract with Market Systems
Research Advisors, Inc. ("MSR"), 80 Maiden Lane, New York, New York 10038, a
registered investment advisor, under which the MSR will provide the Fund with
certain investment management and administrative services.
Under the terms of the investment management agreement, LMC also pays the
Fund's expenses for office rent, utilities, telephone, furniture and supplies
utilized for the Fund's principal office and the salaries and payroll expense of
3
<PAGE>
officers and Trustees of the Fund who are employees of LMC or its affiliates in
carrying out its duties under the investment management agreement. The Fund pays
all its other expenses, including custodian and transfer agent fees, legal and
registration fees, audit fees, printing of prospectuses, shareholder reports and
communications required for regulatory purposes or for distribution to existing
shareholders, computation of net asset value, mailing of shareholder reports and
communications, portfolio brokerage, taxes and independent Trustees' fees.
LMC shall reimburse the Fund in any fiscal year for the amount by which the
Fund's aggregate expenses exceed the most restrictive expense limits imposed by
any statute or regulatory authority of any jurisdiction in which shares of the
Fund are offered for sale during such year. Brokerage fees and commissions,
taxes, interest and extraordinary expenses are not deemed to be expenses of the
Fund for such reimbursement.
LMC's services are provided and its investment advisory fee is paid pursuant
to an investment management agreement, dated August 20, 1991 which will
automatically terminate if assigned and which may be terminated by either party
upon 60 days' notice. The terms of the agreement and any renewal thereof must be
approved annually by a majority
of the Fund's Board of 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. For the year
ended December 31, 1995 LMC received $148,634 in investment advisory fees from
the Fund and paid MSR $74,304.
LMC serves as investment adviser to other investment companies and private
and institutional investment accounts. Included among these clients are persons
and organizations which own significant amounts of capital stock of LMC's
parent. These clients pay fees which LMC considers comparable to the fee levels
for similarly served clients. LMC's accounts are managed independently with
reference to the applicable investment objectives and current security holdings
but on occasion more than one fund or counsel account may seek to engage in
transactions in the same security at the same time. To the extent practicable,
such transactions will be effected on a pro-rata basis in proportion to the
respective amounts of securities to be bought and sold for a fund, and the
allocated transactions will be averaged as to price. While this procedure may
adversely affect the price or volume of a given Fund transaction, LMC believes
that the ability of the Fund to participate in combined transactions may
generally produce better execution overall.
MSR, the Sub-Adviser serves as investment adviser to private and
institutional accounts.
LMC also acts as administrator to the Fund pursuant to an Administration
Services Agreement dated February 28, 1995 and performs certain administrative
and internal accounting services, including but not limited to, maintaining
general ledger accounts, regulatory compliance, preparation of financial
information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
Lexington Funds Distributor, Inc. ("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 of Trustees who
are not "interested persons."
LMC and LFD are wholly owned subsidiaries of Lexington Global Asset
Managers, Inc., a publicly traded corporation. Lexington Global Asset Managers,
Inc., holds a controlling interest in MSR. 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.,
Of the Trustees, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Lavery, Petruski and Mmes.
Carnicelli, Carr, Curcio, Gilfillan and Mosca (see "Management of the Fund"),
may also be deemed affiliates of LMC by virtue of being officers, trustees or
employees thereof.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
As a general matter, purchases and sales of portfolio securities by the Fund
are placed by LMC or MSR with brokers and dealers who in its opinion will
provide the Fund with the best combination of price (inclusive of brokerage
commissions) and execution for its orders. However, pursuant to the Fund's
investment management agreement, management consideration may be given in the
selection of broker-dealers to research provided and payment may be made at a
fee higher than that charged by another broker-dealer which does not furnish
research services or which furnishes research services deemed to be of lesser
value, so long as the criteria of Section 28(e) of the Securities Exchange Act
of 1934, as amended are met. Section 28(e) was adopted in 1975 and specifies
that a person with investment discretion shall not be "deemed to have acted
unlawfully or to have breached a fiduciary duty" solely because such person has
caused the account to pay a higher commission than the lowest available under
certain circumstances, provided that the person so exercising investment
discretion makes a good faith determination that the commissions
4
<PAGE>
paid are "reasonable in relation to the value of the brokerage and research
services provided . . . viewed in terms of either that particular transaction or
his overall responsibilities with respect to the accounts as to which he
exercises investment discretion."
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for execution services alone. Nor generally can the value
of research services to the Fund be measured. Research services furnished might
be useful and of value to LMC or MSR and its affiliates, in serving other
clients as well as the Fund. On the other hand, any research services obtained
by LMC or MSR or its affiliates from the placement of portfolio brokerage of
other clients might be useful and of value to LMC or MSR in carrying out its
obligations to the Fund.
As a general matter, it is the Fund's policy to execute in the U.S. all
transactions with respect to securities traded in the U.S. except when better
price and execution can, in the judgment of management of the Fund, be obtained
elsewhere. Over-the-counter purchases and sales are normally made with principal
market makers, except where, in the opinion of management, the best executions
are available elsewhere.
In addition, the Fund may from time to time allocate brokerage commissions
to firms which furnish research and statistical information to LMC or MSR or
which render to the Fund services which LMC or MSR is not required to provide.
The supplementary research supplied by such firms is useful in varying degrees
and is of indeterminable value. No formula has been established for the
allocation of business to such brokers. For the fiscal year ended December 31,
1993, the portfolio turnover rate for the Fund was 114.44% and the Fund paid
$25,556 in brokerage commissions. For the fiscal year ended December 31, 1994,
the portfolio turnover rate for the Fund was 87.40%, and the Fund paid $66,168
in brokerage commissions. For the fiscal year ended December 31, 1995 the
portfolio turnover rate for the fund was 149.18%, and the fund paid $100,622 in
brokerage commissions.
Advisory fees paid to LMC and expense reimbursements paid to the Fund are as
follows:
Period Advisory Fee Sub Advisory Fee Expense Reimbursement
------ ------------ ---------------- ---------------------
1/1/93 to 12/31/93 30,699 $15,350 $0
1/1/94 to 12/31/94 107,760 53,880 0
1/1/95 to 12/31/95 148,634 74,304 0
PERFORMANCE CALCULATION
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, rules promulgated by the Securities and Exchange
Commission ("SEC"), a fund's advertising performance must include total return
quotations calculated according to the following formula:
P(1 + T)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 period, at the
end of such period (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
1,5 and 10 year periods of the Fund's existence or such shorter period dating
from the effectiveness of the Fund's Registration Statement. In calculating the
ending redeemable value, the maximum sales load is deducted from the initial
$1,000 payment and all dividends and distributions by the Fund are assumed to
have been reinvested at net asset value as described in the Prospectus on the
reinvestment dates during the period. 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 the Fund's total return, the
Fund calculates its aggregate total return for
5
<PAGE>
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 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 advertising than the
information prescribed under Item 21 of Form N-1A.
The Fund's performance may be compared in advertising to the performance of
other mutual funds in general, or of particular types of mutual funds,
especially those with similar objectives. Such performance data may be prepared
by Lipper Analytical Services, Inc. and other independent services which monitor
the performance of mutual funds. The Fund may also advertise mutual fund
performance rankings which have been assigned to it by such monitoring services.
Pursuant to the SEC calculation, the Fund's average total rate of return for
the one and five year and since commencement (8/1/89) period ended December 31,
1995 was 16.87%, 3.77% and 2.66%.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to declare or distribute a dividend from its net capital
gain income to shareholders annually or more frequently if necessary in order to
comply with distribution requirements of the Internal Revenue Code of 1986, as
amended ("Code"), and to avoid the imposition of regular Federal income tax, and
if applicable, a 4% excise tax.
Any dividends and distribution payments will be reinvested at net asset
value, in additional full and fractional shares of the Fund.
TAX MATTERS
The following is only a summary of certain additional tax considerations
that are not described in the Prospectus and generally affect each Fund and its
shareholders. 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.
Qualifications as a Regulated Investment Company
The Fund intends to qualify to be treated as a "regulated investment
company" ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"). If so qualified, the Fund will not be subject to federal income tax on
its investment company taxable income and net capital gains to the extent that
such investment company taxable income and net capital gains are distributed in
each taxable year to the separate accounts of the Participating Insurance
Companies. In addition, if the Fund distributes annually to the separate
accounts its ordinary income and capital gain net income, in the manner
prescribed in the Code, it will also not be subject to the 4% federal excise tax
otherwise applicable to the undistributed income or gain of a RIC. Distributions
of net investment income and net short-term capital gains will be treated as
ordinary income and distributions of net long-term capital gains will be treated
as long-term capital gain in the hands of the Participating Insurance Companies.
Under current tax law, capital gains or dividends from the Fund are not
currently taxable when left to accumulate within a variable annuity or variable
life insurance contract.
Section 817(h) of the Code requires that investments of a segregated asset
account of an insurance company be "adequately diversified," in accordance with
Treasury Regulations promulgated thereunder, in order for the holders of the
variable annuity contracts or variable life insurance policies investing in the
account to receive the tax-deferred or tax-free treatment generally afforded
holders of annuities or life insurance policies under the Code. The Department
of the Treasury has issued Regulations under section 817(h) which, among other
things, provide the manner in which a segregated asset account will treat
investments in a RIC for purposes of the applicable diversification
requirements. Under the Regulations, if a RIC satisfies certain conditions, that
RIC will not be treated as a single investment for these purposes, but rather
the segregated asset account will be treated as owning its proportionate share
of each of the assets of the RIC. The Fund plans to satisfy these conditions at
all times so that each segregated asset account of a Participating Insurance
Company investing in the Fund will be treated as adequately diversified under
the Code and Regulations.
For information concerning the federal income tax consequences to the
holders of variable annuity contracts and variable rate insurance policies, such
holders should consult the prospectuses used in connection with the issuance of
their particular contracts or policies.
CUSTODIANS, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the Custodian for the Fund. In addition, the
Fund and Chase Manhattan Bank, N.A., may appoint foreign banks and
6
<PAGE>
foreign securities depositories which qualify as eligible foreign sub-custodians
under rules adopted by the Securities and Exchange Commission. State Street Bank
and Trust Company, N.A., 225 Franklin Street, Boston, Massachusetts 02110 has
been retained to act as the Transfer Agent and Dividend Disbursing Agent for the
Fund.
The custodians and transfer agent have no part in determining the
investment policies of the Fund or in determining which portfolio securities are
to be purchased or sold by the Fund or in the declaration of dividends and
distributions.
MANAGEMENT OF THE FUND
The Fund's Trustees and executive officers and their principal occupations
and former affiliations are:
*+ROBERT M. DeMICHELE, Chairman and President. P.O. Box 1515, Saddle Brook, N.J.
07663. Chief Executive Officer and Chairman, Lexington Management Corporation;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.;
President and Director, Lexington Global Asset Managers, Inc., Director,
Unione Italiana Reinsurance; Vice Chairman of the Board of Trustees, Union
College; Director, Navigator's Group, Inc.; Chairman, Lexington Capital
Management; Chairman, LCM Financial Services, Inc.; Director, Vanguard
Cellular Systems, Inc.; Chairman, Market Systems Research, Inc. and Market
Systems Research Advisors, Inc. (registered investment advisers); Trustee,
Smith Richardson Foundation.
*+BEVERLEY C. DUER, P.E., Trustee. 340 East 72nd Street, New York, N.Y. Private
Investor. Formerly Manager, Operations Research Department, CPC International
Inc.
*+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; prior to March 1987, Vice
President-Institutional Sales, L.F. Rothschild, Unterberg, Towbin.
*+LAWRENCE KANTOR, Vice President and Trustee. P.O. Box 1515, Saddle Brook, N.J.
07663. Managing Director, Executive Vice President and Director, Lexington
Management Corporation; Executive Vice President and Director, Lexington Funds
Distributor, Inc.; Executive Vice President and General Manager-Mutual Funds,
Lexington Global Asset Managers, Inc.,
*+DONALD B. MILLER, Trustee. 10725 Quail Covey Drive, Boynton Beach, Florida
33436. Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds; Director, Maguire
Group of Connecticut; prior to January 1989, President, Director and C.E.O.,
Media General Broadcast Services.
*+JOHN G. PRESTON, Trustee. 3 Woodfield Road, Wellesley, Massachusetts.
Associate Professor of Finance, Boston College, Boston, Massachusetts.
*+PHILIP C. SMITH, Trustee. 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor. Director, Southwest Investors Income Fund, Inc., Government
Income Fund, Inc., U.S. Trend Fund, Inc., Investors Cash Reserve and Plimony
Fund, Inc. (registered investment companies).
*+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.
*+RICHARD M. HISEY, Vice President and Treasurer. P.O. Box 1515, Saddle Brook,
N.J. 07663. Managing Director, Chief Financial Officer and Director, Lexington
Management Corporation; Chief Financial Officer, Vice President and Director,
Lexington Funds Distributor, Inc; Chief Financial Officer, Market Systems
Research Advisers, Inc.; Executive Vice President and Chief Financial Officer,
Lexington Global Asset Managers, Inc.
*+RICHARD J. LAVERY, CLU, ChFC, Vice President. P. O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.
*+JANICE A. CARNICELLI, Vice President. P. O. Box 1515, Saddle Brook, N.J.
07663.
*+CHRISTIE CARR, Assistant Treasurer, P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.
*+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer, P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November 1993, Supervisor Investment Accounting, Alliance Capital
Management, Inc.
*+SHERI MOSCA, Assistant Treasurer. P. O. Box 1515, Saddle Brook, N.J. 07663.
7
<PAGE>
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to May 1994, Supervising Senior Accountant, NY Life Securities. Prior to
December 1990, Senior Accountant, Dreyfus Corporation.
*+PETER CORNIOTES, Assistant Secretary. P. O. Box 1515, Saddle Brook, N.J.
07663. Assistant Vice President and Assistant Secretary, Lexington Management
Corporation. Assistant Secretary, Lexington Funds Distributor, Inc.
*+ENRIQUE 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" as defined in the Investment
Company Act of 1940, as amended.
+Messrs. Corniotes, DeMichele, Duer, Hisey, Faust, Kantor, Lavery, Luehs,
Miller, Petruski, Preston, and Smith and Mmes. Carnicelli, Carr, Curcio,
Evans, Gilfillan and Mosca hold similar offices with some or all of the other
registered investment companies advised and/or distributed by Lexington
Management Corporation or Lexington Funds Distributor, Inc. or Market Systems
Research Advisers, Inc.
The Board of Trustees met 5 times during the twelve months ended December
31, 1995, and each of the Trustees attended at least 75% of those meetings.
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, 1995 to December 31, 1995 for each Trustee:
- --------------------------------------------------------------------------------
Aggregate Total Compensation Number of
Name of Director Compensation from From Fund and Directorships in
Fund Fund Complex Fund Complex
- --------------------------------------------------------------------------------
Robert M. DeMichele 0 0 15
- --------------------------------------------------------------------------------
Beverely C. Duer $1056 $22,616 15
- --------------------------------------------------------------------------------
Barbara R. Evans 0 0 14
- --------------------------------------------------------------------------------
Lawrence Kantor 0 0 14
- --------------------------------------------------------------------------------
Donald B. Miller $1056 $22,616 14
- --------------------------------------------------------------------------------
John G. Preston $1056 $22,616 14
- --------------------------------------------------------------------------------
Philip C. Smith $1056 $22,616 14
- --------------------------------------------------------------------------------
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
8
<PAGE>
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, 1995, the estimated credited years
of service for Messrs. Duer, Miller, Preston, Smith and Sunderland are 18, 22,
18, 26 and 36, respectively.
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
OTHER INFORMATION
As of March 8, 1996, Lexington Management Corporation, P. O. Box 1515/Park
80 West Plaza Two, Saddle Brook, New Jersey 07663 owned beneficially 10,418
shares of the Fund (0.6% of the Fund's outstanding shares). The balance of the
outstanding shares of the Fund (99.4%) are owned by Aetna Life Insurance and
Annuity Company and Kemper Investors Life Insurance Company and allocated to a
separate account used for funding variable annuity contracts.
9
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Lexington Natural Resources Trust:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Natural
Resources Trust as of December 31, 1995, the related statements 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 Trust'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, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Natural Resources Trust as of December 31, 1995, and 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
January 29, 1996
10
<PAGE>
(LEFT COLUMN)
Lexington Natural Resources Trust
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995
Number of
Shares Security Value
- ----------------------------------------------------------------------
COMMON STOCKS: 96.3%
AGRICULTURE: 4.4%
7,700 Dekalb Genetics Corporation ......... $ 347,463
7,100 Pioneer Hi-Bred International, Inc. . 394,938
----------
742,401
----------
CHEMICAL PRODUCTS: 15.5%
8,100 Avery-Dennison Corporation .......... 406,012
4,900 Great Lakes Chemical Corporation .... 352,800
6,800 Hercules, Inc. ...................... 383,350
9,000 IMC Global, Inc. .................... 367,875
3,500 Monsanto Company .................... 428,750
5,200 Olin Corporation .................... 386,100
8,000 Union Carbide Corporation ........... 300,000
----------
2,624,887
----------
ENERGY SOURCES: 41.0%
6,800 Anadarko Petroleum Corporation ...... 368,050
4,000 Atlantic Richfield Company .......... 443,000
3,600 British Petroleum Company Plc ....... 367,650
8,100 Burlington Resources, Inc. .......... 317,925
9,400 Coastal Corporation ................. 350,150
13,600 Devon Energy Corporation ............ 346,800
5,300 Exxon Corporation ................... 424,663
29,500 Horsham Corporation ................. 398,250
3,800 Mobil Corporation ................... 425,600
14,400 Noble Affiliates, Inc. .............. 430,200
12,000 Panhandle Eastern Corporation ....... 334,500
2,500 Royal Dutch Petroleum Company ....... 352,812
7,000 Schlumberger, Ltd. .................. 484,750
5,100 Texaco, Inc. ........................ 400,350
14,000 Tidewater, Inc. ..................... 441,000
9,200 Tosco Corporation ................... 350,750
15,000 Valero Energy Corporation ........... 367,500
8,100 Williams Companies, Inc. ............ 355,388
----------
6,959,338
----------
ENVIRONMENTAL TECHNOLOGY: 17.3%
17,200 Davis Water and Waste
Industries, Inc. ................. 249,400
17,000 IMCO Recycling, Inc. ................ 416,500
10,000 Ionics, Inc. ........................ 435,000
8 800 Millipore Corporation ............... 361,900
15,200 Pall Corporation .................... 408,500
18,500 Sevenson Environmental
Services, Inc. ................... 335,312
11,000 Thermo Instrument Systems, Inc.1 .... 371,250
11,600 WMX Technologies, Inc. .............. 346,550
----------
2,924,412
----------
(RIGHT COLUMN)
Number of
Shares
or Principal
Amounts Security (Note 1) Value
- --------------------------------------------------------------------------
FERROUS METALS: 5.4%
10,000 Alcan Aluminum, Ltd. ................ $ 311,250
4,700 Phelps Dodge Corporation ............ 292,575
12,000 Western Mining Holdings (ADR) ....... 313,500
-----------
917,325
-----------
FOREST PRODUCTS: 3.4%
10,000 Lydall, Inc.1 ....................... 227,500
7,100 Pentair, Inc. ....................... 355,000
-----------
582,500
-----------
PRECIOUS METALS: 9.3%
14,900 Barrick Gold Corporation ............ 392,987
16,500 Freeport McMoran Copper &
Gold "A" ......................... 462,000
7,200 Newmont Gold Company ................ 315,000
9,000 Newmont Mining Corporation .......... 407,250
-----------
1,577,237
-----------
TOTAL COMMON STOCKS
(cost $14,667,664) ................ 16,328,100
-----------
SHORT-TERM INVESTMENTS: 1.2%
$100,000 U.S. Treasury Bill
5.29%, due 02/08/96 ............... 99,442
100,000 U.S. Treasury Bill
5.295%, due 05/09/96 .............. 98,102
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $197,544) ................... 197,544
-----------
TOTAL INVESTMENTS: 97.5%
(cost $14,865,208+) ............... 16,525,644
Other assets in excess of liabilities:
2.5% .............................. 429,603
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $11.30 per share
on 1,500,607 shares outstanding) .. $16,955,247
===========
1Non-income producing security.
ADR-American Depository Receipt.
+Aggregate cost for federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
11
<PAGE>
Lexington Natural Resources Trust
Statement of Assets and Liabilities
December 31, 1995
Assets
Investments, at value (cost $14,865,208) (Note 1) ............. $16,525,644
Cash .......................................................... 468,743
Receivable for shares sold .................................... 5,888
Interest and dividends receivable ............................. 21,400
-----------
Total Assets .................................. 17,021,675
-----------
Liabilities
Due to Lexington Management Corporation (Note 2) .............. 13,096
Payable for shares redeemed ................................... 28,806
Accrued expenses .............................................. 24,526
-----------
Total Liabilities ............................. 66,428
-----------
Net Assets (equivalent to $11.30 per share on
1,500,607 shares outstanding) (Note 3) ................... $16,955,247
===========
Net Assets consist of:
Paid-in capital-unlimited authorized shares of beneficial
interest at no par value (Note 1) ........................ $15,403,143
Undistributed net investment income (Note 1) .................. 11,627
Accumulated net realized loss on investments (Notes 1 and 6) .. (119,959)
Net unrealized appreciation of investments (Note 4) ........... 1,660,436
-----------
Net Assets ..................................... $16,955,247
===========
The Notes to Financial Statements are an integral part of this statement.
12
<PAGE>
Lexington Natural Resources Trust
Statement of Operations
Year ended December 31, 1995 (unaudited)
Investment Income
Interest Income .................................... $ 27,664
Dividend income .................................... 279,062
---------
306,726
Less: Foreign tax expense .......................... 5,921
---------
Total investment income ....................... $ 300,805
Expenses
Investment advisory fee (Note 2) ................. 148,634
Accounting expense (Note 2) ...................... 3,600
Custodian fees ................................... 6,915
Printing and mailing ............................. 24,626
Directors' fees .................................. 6,462
Professional fees ................................ 13,730
Registration fees ................................ 2,001
Computer processing fees ......................... 7,575
Other expenses ................................... 4,410
---------
Total expenses ................................. 217,953
----------
Net investment income 82,852
Realized and Unrealized Gain on Investments (Note 4)
Net realized gain on
investments .................................... 513,678
Net change in unrealized appreciation on
investments .................................... 1,735,936
----------
Net realized and unrealized gain on investments 2,249,614
----------
Increase in Net Assets Resulting from Operations ... $2,332,466
==========
The Notes to Financial Statements are an integral part of this statement.
13
<PAGE>
Lexington Natural Resources Trust
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
1995 1994
----------- -----------
Net investment income ............................. $ 82,852 $ 52,351
Net realized gain (loss) from investment
transactions .................................. 513,678 (490,471)
Increase (decrease) in unrealized
appreciation of investments ................... 1,735,936 (339,043)
----------- -----------
Net increase (decrease) in net
assets resulting from operations .... 2,332,466 (777,163)
Distributions to shareholders from net
investment income ............................. (71,225) (50,415)
Increase in net assets from capital
share transactions (Note 3) ................... 1,067,096 9,129,763
----------- -----------
Net increase in net assets ............ 3,328,337 8,302,185
Net Assets:
Beginning of period ............................. 13,626,910 5,324,725
----------- -----------
End of period (including undistributed
net investment income of $11,627 and
distributions in excess of net investment
income of $2,513, respectively.) .............. $16,955,247 $13,626,910
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
14
<PAGE>
Lexington Natural Resources Trust
Notes to Financial Statements
December 31, 1995 and 1994
Note 1 - Significant Accounting Policies
Lexington Natural Resources Trust (the "Trust") is an open-end diversified
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek long-term growth of capital
through investment primarily in common stock of companies which own, or develop
natural resources and other basic commodities, or supply goods and services to
such companies. With the exception of shares held in connection with initial
capital of the Trust, shares of the Trust are currently being offered only to
participating insurance companies for allocation to certain of their separate
accounts established for the purpose of funding variable annuity contracts
issued by the participating insurance companies. The following is a summary of
significant accounting policies followed by the Trust 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. Investments in securities traded on a national securities
exchange are valued at the last sale price on such exchange as of the close of
business. Securities traded on the over-the-counter market are valued at the
mean between the last reported bid and asked price. Short-term securities are
stated at amortized cost, which appoximates market value. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is accrued as earned.
Distributions: In accordance with Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain and
Return of Capital Distributions by Investment Companies, as of December 31,
1995, $2,513 and $9,485 were reclassified from additional paid-in capital to
undistributed net investment income and accumulated net realized loss on
investments.
Federal Income Taxes: It is the Trust's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
Note 2 - Investment Advisory Fee and Other Transactions with Affiliate
The Trust pays an investment advisory fee to Lexington Management
Corporation ("LMC") at the annual rate of 1% of the Trust's average daily net
assets. LMC has entered into a sub-advisory management contract with Market
Systems Research Advisors, Inc. ("MSR"), a registered investment advisor, under
which MSR will provide the Trust with certain investment management and
administrative services. Pursuant to the terms of the sub-advisory contract
between LMC and MSR, LMC pays MSR a monthly sub-advisory fee of .50% the Trust's
average daily net assets. LMC shall reimburse the Trust in any fiscal year for
the amount by which the Trust's aggregate expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed the most restrictive
expense limits imposed by any state or regulatory authority of any jurisdiction
in which shares of the Trust are offered for sale during any such year. No
reimbursement was required for the year ended December 31, 1995.
The Trust also reimburses LMC for certain expenses, including accounting
costs, which are incurred by the Trust, but paid by LMC.
15
<PAGE>
Lexington Natural Resources Trust
Notes to Financial Statements
December 31, 1995 and 1994 (continued)
Note 3 - Capital Stock
Transactions in capital stock were as follows:
Year ended Year ended
December 31, 1995 December 31, 1994
-------------------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .................. 559,893 $5,848,911 1,309,826 $13,428,318
Shares issued on reinvestment
of distributions from net
investment income .......... 6,325 71,225 5,203 50,415
-------- ---------- --------- -----------
566,218 5,920,136 1,315,029 13,478,733
Shares redeemed .............. (468,861) (4,853,040) (428,676) (4,348,970)
-------- ---------- --------- -----------
Net increase ................. 97,357 $1,067,096 886,353 $ 9,129,763
======== ========== ========= ===========
Note 4 - Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments for the year
ended December 31, 1995, excluding short-term securities, were $22,867,932 and
$21,434,861, respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax cost amounted to
$1,801,223 and aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value amounted to $140,787.
Note 5 - Investment and Concentration Risks
The Fund can make significant investments in foreign securities and has a
policy of investing in the securities of companies that own or develop natural
resources and other basic commodities, or supply goods and services to such
companies. There are certain risks involved in investing in foreign securities
or concentrating in specific industries such as natural resources that are in
addition to the usual risks inherent in domestic investments. These risks
include those resulting from future adverse political and economic developments,
as well as the possible imposition of foreign exchange or other foreign
governmental restrictions or laws.
Note 6 - Federal Income Taxes-Capital Loss Carryforwards
Capital loss carryforwards available for Federal income tax purposes as of
December 31, 1995 are approximately $119,959 expiring in 2002.
To the extent any future capital gains are offset by these losses, such
gains would not be distributed to shareholders.
Treasury regulations were issued in early 1990 which provide that capital
losses incurred after October 31 of a trust's taxable year can be deemed to have
occurred on the first day of the following taxable year (i.e., January 1). The
regulations indicate that a fund may elect to retroactively apply these rules
for purposes of computing taxable income. Accordingly, the capital loss
carryforwards for Lexington Natural Resources Trust have been adjusted to
reflect prior years' post-October losses in the next fiscal year.
16
<PAGE>
Lexington Natural Resources Trust
Financial Highlights
Selected per share data for a share outstanding throughout the period:
Year ended December 31,
--------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------
Net asset value, beginning
of period .............. $ 9.71 $10.30 $ 9.30 $9.01 $9.50
------ ------ ------ ----- -----
Income (loss) from
investment operations:
Net investment income . 0.06 0.04 - - 0.02
Net realized and
unrealized gain (loss)
on investments ...... 1.58 (0.59) 1.01 0.29 (0.49)
------ ------ ------ ----- -----
Total income (loss) from
investment operations ... 1.64 (0.55) 1.01 0.29 (0.47)
------ ------ ------ ----- -----
Less distributions:
Dividends from net
investment income .... (0.05) (0.04) (0.01) - (0.02)
------ ------ ------ ----- -----
Net asset value, end
of period ............... $11.30 $ 9.71 $10.30 $9.30 $9.01
====== ====== ====== ===== =====
Total return ............. 16.87% (5.38%) 10.90% 3.22% (4.95%)
Ratios to average net assets:
Expenses, before
reimbursement ........ 1.47% 1.55% 2.26% 2.31% 2.97%
Expenses, net of
reimbursement ........ 1.47% 1.55% 2.26% 2.31% 1.60%
Net investment income
(loss), before
reimbursement ......... 0.56% 0.49% 0.08% 0.02% (1.10%)
Net investment income .. 0.56% 0.49% 0.08% 0.02% 0.27%
Portfolio turnover ..... 149.18% 87.40% 114.44% 65.50% 100.94%
Net assets at end
of period (000's
omitted) ............ $16,955 $13,627 $5,325 $1,926 $1,393
17
<PAGE>
PART C. OTHER INFORMATION
- ------- -----------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1995 was filed
electronically on February 21, 1996 (as form type N-30D). Financial
statements from this 1995 Annual Report have been included in the Statement
of Additional Information.
Page in the Statement
(a) Financial statements: of Additional Information
--------------------- -------------------------
Report of Independent Auditors 9
dated January 30, 1995
Statement of Net Assets (Including 10
the Portfolio of Investments) at
December 31, 1995 (1)
Statement of Assets and Liabilities 11
at December 31, 1995
Statement of Operations for the year 12
ended December 31, 1995 (2)
Statements of Changes in Net Assets for 13
the years ended December 31, 1994
and 1995
Notes to Financial Statements 14
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 12/14/88 -
Incorporated by reference
2. By-Laws - Filed 12/14/88 - Incorporated by reference
3. Not Applicable
4. Stock Certificate Specimen - Filed 8/28/91 -
Incorporated by reference
5. Investment Advisory Agreement between Registrant
and Lexington Management Corporation - Filed Electronically
5a. Sub-Advisory Investment Management Agreement between
Registrant & Market Systems Research Advisors, Inc. Filed Electronically
6. Distribution Agreement between Registrant
and Lexington Funds Distributor, Inc. -
Filed 8/28/91 - Incorporated by reference
7. Not Applicable
8a. Form of Custodian Agreement between
Registrant and Chase Manhattan Bank, N.A. -
Filed electronically on 4/28/95 -
Incorporated by reference
8b. Transfer Agency Agreements between Registrant
and State Street Bank and Trust Company - Filed Electronically
9. Form of Administrative Services Agreement between
Registrant and Lexington Management Corporation -
Filed electronically on 4/28/95 -
Incorporated by reference
10. Opinion of Counsel as to Legality of Securities being
registered - Filed 12/14/88 - Incorporated by reference
11. Consents
(a) Consent of Counsel Filed Electronically
(b) Consent of Independent Auditors Filed Electronically
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Performance Calculation - Filed 3/1/90 -
Incorporated by reference
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each
such person indicate (1) if a company, the state or other sovereign power
under the laws of which it is organized, (2) the percentage of voting
securities owned or other basis of control by the person, if any,
immediately controlling it.
None.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record
holders of each class of securities of the Registrant.
The following information is given as of March 1, 1996:
Title of Class Number of Record Holders
-------------- ------------------------
Shares of beneficial interest 12
(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.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment adviser of the Registrant, and
each director, officer or partner of any such investment adviser, is or has
been, at any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or
trustee.
See Prospectus Part A and Statement of Additional Information Part B
("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington 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.
<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 Secretary
Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer, Vice President &
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 Natural Resources Trust, 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, City Center Square, 1100 Main, Kansas City, Missouri 64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B of this
Form (because the contract was not believed to be material to a purchaser
of securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid
and by whom for the last three fiscal years.
None.
Item 32. Undertakings -
------------
The Registrant, Lexington Natural Resources Trust undertakes to
furnish a copy of the Fund's latest annual report, upon request
and without charge, to every person to whom a prospectus is
delivered.
<PAGE>
Registration No. 33-26116
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON NATURAL RESOURCES TRUST<PAGE>
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to this
filing:
Investment Advisory Agreement with Lexington Management Corporation
Sub-Advisory Agreement between Lexington Management Corporation and
Market Systems Research Advisors, Inc.
Transfer Agency Agreement with State Street Bank and Trust Company
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Consent of independent auditors for the inclusion of their report herein
Article 6 Financial Data Schedule
Cover
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940 the Registrant certifies that it meets
all of the requirements for effectiveness of this amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this amendment to be signed on its behalf by the
Undersigned, thereunto duly authorized, in the City of Saddle Brook and
State of New Jersey, on the 17th day of April, 1996.
LEXINGTON NATURAL RESOURCES TRUST
/s/ Robert M. DeMichele
________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert M. DeMichele
__________________________ Chairman of the Board April 17, 1996
Robert M. DeMichele Principal Executive
Officer
/s/ Richard M. Hisey
__________________________ Principal Financial April 17, 1996
Richard M. Hisey and Accounting Officer
/s/ Lisa Curcio
__________________________ Principal Compliance April 17, 1996
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director April 17, 1996
__________________________
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 17, 1996
__________________________
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 17, 1996
__________________________
Lawrence Kantor
*Donald B. Miller Director April 17, 1996
__________________________
Donald B. Miller
*John G. Preston Director April 17, 1996
__________________________
John G. Preston
*Margaret W. Russell Director April 17, 1996
__________________________
Margaret W. Russell
*Philip C. Smith Director April 17, 1996
__________________________
Philip C. Smith
*Francis A. Sunderland Director April 17, 1996
__________________________
Francis A. Sunderland
/s/ Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 20th day of August, 1991 by and between
LEXINGTON NATURAL RESOURCES TRUST, a Massachusetts business trust having
its principal place of business at Park 80 West, Plaza Two, Saddle Brook,
New Jersey (the "Company") and LEXINGTON MANAGEMENT CORPORATION, a Delaware
corporation having its principal place of business at Park 80 West, Plaza
Two, Saddle Brook, New Jersey (the "Manager"), with respect to the
following recital of fact:
R E C I T A L
The Company and the Manager desire to enter into an agreement to
provide for the management of the Company's assets on the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Management. The Manager shall act as investment manager for
the Company and shall, in such capacity, supervise the investment and
reinvestment of the Cash, securities or other properties comprising the
Company's assets subject at all times to the policies and control of the
Company's Board of Trustees. The Manager shall give the Company the
benefit of its best judgment, efforts and facilities in rendering its
services as investment manager.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Manager shall:
(a) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the economy
generally or the portfolio of the Company, and whether concerning the
natural resources market, the individual companies whose securities
are included in the Company's portfolio or the industries in which
they engage, or with respect to securities which the Manager
considers desirable for inclusion in the Company's portfolio; and
(b) determine what industries and companies shall be
represented in the Company's portfolio and regularly report them to
the Company's Board of Trustees; and
(c) formulate and implement programs for the purchases and
sales of the securities of such companies and regularly report
thereon to the Company's Board of Trustees; and
(d) provide the services of its personnel to the Company; and
(e) take, on behalf of the Company, all actions which appear
to the Company necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including the
placing of orders for the purchase and sale of portfolio securities.
3. Sub-Advisory Investment Management Agreement. Notwithstanding
anything herein to the contrary, this Agreement shall not be effective
until the Advisor and the Sub-Advisor deliver to the Trust a duly executed
copy of the Sub-Advisory Investment Management Agreement pursuant to which
the Sub-Advisor will provide to the Trust certain investment advisory and
related services.
4. Broker-Dealer Relationships. The Manager is responsible for
decisions to buy and sell securities for the Company, security broker-
dealer selection, and negotiation of its brokerage commission rates. The
Manager is further authorized to allocate the orders placed by it on behalf
of the Company to such brokers and dealers who also provide research or
statistical material, or other services to the Company or the Manager.
Such allocation shall be in such amounts and proportions as the Manager
shall determine and the Manager will report on said allocations regularly
to the Board of Trustees of the Company indicating the brokers to whom such
allocations have been made and the basis therefor.
5. Control by Board of Trustees. Any investment program
undertaken by the Manager pursuant to this Agreement, as well as any other
activities undertaken by the Manager on behalf of the Company pursuant
thereto, shall at all times be subject to any directives of the Board of
Trustees of the Company.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this agreement, the Manager shall at all times conform
to:
(a) all applicable provisions of the Investment Company Act
of 1940 (the "Act") and any rules and regulations adopted thereunder
as amended; and
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and the Investment Company Act of
1940, as amended; and
(c) the provisions of the Declaration of Trust of the
Company; and
(d) the provisions of the By-Laws of the Company; and
(e) any other applicable provisions of state and federal law.
7. Expenses. The expenses connected with the Company shall be
allocable between the Company and the Manager as follows:
(a) the Manager shall maintain, at its expense and without
cost to the Advisor or the Trust, a trading function in order to
carry out its obligations under paragraph 4 hereof to place orders
for the purchase and sale of portfolio securities for the Trust.
(b) the Manager shall pay the Company's expenses for office
rent, utilities, telephone, furniture and supplies utilized at the
Company's principal office; and
(c) the Manager shall pay salaries and payroll expenses of
persons serving as officers or trustees of the Company who are also
employees of the Manager or any of its affiliates; and
(d) the Manager shall be responsible for, at the Trust s
expense, the registration and maintenance of registration of the
Trust and its shares with the various states Blue Sky Authorities.
(e) all expenses incurred in the operation of the Company
and the offering of its shares shall be borne by the Company unless
specifically otherwise provided in subparts (a) and (d) of this
Paragraph 7, or Paragraph 5 of the Sub-Advisory Investment Management
Agreement.
8. Compensation. The Company shall pay the Manager in full
compensation for services rendered hereunder an annual investment advisory
fee, payable monthly equal to 1% of the Fund's average daily net assets.
9. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Company, 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 Company's securities are offered as
determined in the manner described above as of the close of business on
each business day during such fiscal year, the aggregate of all such
investment management fees shall be reduced by the amount of such excess.
The amount of any such reduction to be borne by the Manager shall be
deducted from the monthly investment advisory fee otherwise payable to the
Manager during such fiscal year; and if such amount should exceed such
monthly fee, the Manager agrees to repay to the Company 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 this Agreement.
10. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall remain in force and
effect for two years and shall thereafter continue in force and effect from
year to year provided that such continuance is specifically approved at
least annually:
(a) (I) by the Company's Board of Trustees or (ii) by the
vote of a majority of the Fund's outstanding voting securities (as
defined in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the trustees who
are not parties of this Agreement or interested persons of a party
to the Agreement (other than as Company trustees), by votes cast in
person at a meeting specifically called for such purposes.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Company's Board of
Trustees or by vote of a majority of the Company s outstanding voting
securities or by the Manager, on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(42) of the Investment Company Act of 1940.
12. Non-Exclusivity. The services of the Manager to the Company
are not to be deemed to be exclusive, and the Manager shall be free to
render investment management and corporate administrative or other services
to others (including other investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby. It is understood and agreed that officers and directors of the
Manager may serve as officers or trustees of the Company, and that officers
or trustees of the Company may serve as officers or directors of the
Manager to the extent permitted by law; and that the officers and directors
of the Manager are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving
as partners, officers, directors or trustees of any other firm or
corporation, including other investment companies.
13. Liability of Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Manager or any of its
officers, directors or employees, it shall not be subject to liability to
the Company or to any shareholder of the Company for any act or omission
in the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security.
14. Filing in Massachusetts. A copy of the Agreement and
Declaration of the Trust of the Company is on file with the Secretary of
the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Company as trustees
and not individually and that the obligations of this instrument are not
binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Company.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of
the Manager shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663, and that of the Company for this purpose shall be Park 80 West,
Plaza Two, Saddle Brook, New Jersey 07663.
16. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Investment Company Act
of 1940, as amended, shall be resolved by reference to such term or
provision of the Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the effect of
a requirement of the Investment Company Act of 1940, as amended, reflected
in any provision of this Agreement is released by rules, regulations or
order of the Securities and Exchange Commission, such provisions shall be
deemed to incorporate the effect of such rule, regulation or order.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
LEXINGTON NATURAL RESOURCES TRUST
Attest: By______________________________________
President
______________________
LEXINGTON MANAGEMENT CORPORATION
Attest: By______________________________________
Executive Vice President
______________________
SUB-ADVISORY INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 20th day of August, 1991 by and between
LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the "Advisor"),
and MARKET SYSTEMS RESEARCH ADVISORS, INC., a Delaware corporation (the
"Sub-Advisor"), with respect to the following recital of fact:
R E C I T A L
WHEREAS, Lexington Natural Resources Trust (the "Trust") is
registered as an open-end, non-diversified management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and
the rules and regulations promulgated thereunder; and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisors Act of 1940, as amended, and engages in the business
of acting as an investment advisor; and
WHEREAS, the Sub-Advisor is registered as an investment advisor under
the Investment Advisors Act of 1940, as amended, and engages in the
business of acting as an investment advisor; and
WHEREAS, the Trust is authorized to issue shares of beneficial
interest; and
WHEREAS, the Trust and the Advisor have entered into an agreement of
even date herewith to provide for management services for the Trust on the
terms and conditions set forth therein (the "Investment Management
Agreement"); and
WHEREAS, the Sub-Advisor proposes to render investment management
services to the Advisor in connection with the Advisor's responsibilities
to the Trust on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Brokerage. The Advisor and Sub-Advisor shall take, on behalf
of the Trust, all actions which appear necessary to carry into effect
purchase and sale programs, including the placing or orders for the
purchase and sale of securities for the Trust.
2. Broker-Dealer Relationships. The Advisor and Sub-Advisor are
responsible for decisions to buy and sell securities for the Trust. The
Advisor and Sub-Advisor are responsible for broker-dealer selection, and
negotiation of brokerage commission rates. The Advisor and Sub-Advisor's
primary consideration in effecting a security transaction will be execution
at the most favorable price. In selecting a broker-dealer to execute each
particular transaction, the Advisor and Sub-Advisor will take the following
into consideration: the best net price available, the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the
Trust on a continuing basis. Accordingly, the price to the Trust in any
transaction may be less favorable than that available from another broker-
dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the
Board of Trustees may determine, the Advisor and Sub-Advisor shall not be
deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Trust
to pay a broker for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor and Sub-Advisor determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Advisor and Sub-Advisor's overall responsibilities with respect to the
Trust and to its other clients as to which it exercises investment
discretion. The Sub-Advisor is further authorized to place and/or to
effect orders on behalf of the Trust or to place and/or to effect orders
with such brokers and dealers who may provide research or statistical
material, or other services to the Trust or to the Sub-Advisor. Such
allocation shall be in such amounts and proportions as the Sub-Advisor
shall determine and the Sub-Advisor will report on said allocations
regularly to the Board of Trustees of the Trust indicating the brokers to
whom such allocations have been made and the basis therefor.
3. Control by Board of Trustees. Any investment program
undertaken by the Sub-Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Sub-Advisor on behalf of the Trust
pursuant thereto, shall at all times be subject to any directives of the
Board of Trustees of the Trust.
4. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Sub-Advisor shall at all times
conform to:
(a) all applicable provisions of the 1940 Act; and
(b) the provisions of the Registration Statement of the Trust
under the Securities Act of 1933 and the 1940 Act; and
(c) the provisions of the Trust's Agreement and Declaration
of Trust; and
(d) the provisions of the By-Laws of the Trust; and
(e) any other applicable provisions of state and federal law.
5. Expenses. The expenses connected with the Trust shall be borne
by the Sub-Advisor as follows:
(a) The Sub-Advisor shall pay the salaries and payroll
expenses of persons serving as officers or Trustees of the Trust who
are also employees of the Sub-Advisor or any of its affiliates.
6. Delegation of Responsibilities. Upon request of the Advisor
and with the approval of the Trust's Board of Trustees the Sub-Advisor may
perform services on behalf of the Trust which are not required by this
Agreement. Such services will be performed on behalf of the Trust and the
Sub-Advisor's cost in rendering such services may be billed monthly to the
trust, subject to examination by the Trust's independent accountants.
Payment or assumption by the Sub-Advisor of any Trust expense that the Sub-
Advisor is not required to pay or assume under this Agreement shall not
relieve the advisor or the Sub-Advisor of any of their obligations to the
Trust or obligate the Sub-Advisor of any of their obligations to the Trust
or obligate the Sub-Advisor to pay or assume any similar Trust expense on
any subsequent occasions.
7. Compensation. For the services to be rendered and the
facilities furnished hereunder, the Advisor shall pay the Sub-Advisor
monthly compensation of the sum of the amount determined by applying the
following annual rate to the Trust's average daily net assets: .50% of the
Trust's average daily assets. Compensation under this agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall
be paid monthly. If this Agreement becomes effective subsequent to the
first day of the month or shall terminate before the last day of the month,
compensation for that part of the month this Agreement is in effect shall
be prorated in a manner consistent with the calculation for the pending
month shall be made as promptly as possible after the end of each month.
8. Non-Exclusivity. The services of the Sub-Advisor to the
Advisor are not to be deemed to be exclusive, and the Sub-Advisor shall be
free to render investment advisory or other services to others (including
other investment companies) and to engage in other activities, so long as
its services under this Agreement are not impaired thereby.
9. Term. This Agreement shall become effective at the close of
business on the date hereof and shall remain in force and effect, subject
to Section 10 hereof for two years from the date hereof.
10. Renewal. Following the expiration of its initial two year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually.
(a) (I) by the Trust's Board of Trustees or (ii) by the vote
of a majority of the Trust's outstanding voting securities (as
defined in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors
who are not parties of this Agreement or interested persons of a
party to the Agreement (other than as a Directors of the Fund), by
votes cast in person at a meeting specifically called for such
purposes.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Trust's Board of
Directors or by vote of a majority of the Trust's outstanding voting
securities or by the Manager, on sixty (60) day's written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(42) of the Investment Company Act of 1940.
12. Liability of the Sub-Advisor. In the absence of willful
misfeasance, bad faith, gross negligence on the part of the Sub-Advisor or
its officers, directors or employees, or reckless disregard by the Sub-
Advisor of its duties under this Agreement, the Sub-Advisor shall not be
liable to the Advisor, the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or sale of any security, provided the Sub-Advisor has acted in good faith.
13. Liabilities of the Trustees and Shareholders. A copy of the
Trust's Agreement and Declaration of Trust is on file with the Secretary
of State of Massachusetts and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this Agreement are not binding
upon any of the Trustees or shareholders individually but are binding only
upon the Trust. It is further understood and agreed that the Sub-Advisor
shall look solely to the Trust's assets and property with respect to the
enforcement of any claim; provided, however, that with respect to claims
for payment of compensation as set forth in Section 7 hereof, the Sub-
Advisor shall look solely to the Advisor.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice to the other party, it is agreed that the address of
the Manager shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey
07663, and that of the Fund for this purpose shall be park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
LEXINGTON MANAGEMENT CORPORATION
Attest: By________________________________________
Executive Vice President
_______________________
MARKET SYSTEMS RESEARCH ADVISORS, INC.
Attest: By_________________________________________
Chairman of the Board
______________________
TRANSFER AGENCY AND SERVICE AGREEMENT
between
LEXINGTON NATURAL RESOURCES TRUST
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Bank
Article 2 Fees and Expenses
Article 3 Representations and Warranties of the Bank
Article 4 Representations and Warranties of the Fund
Article 5 Data Access and Proprietary Information
Article 6 Indemnification
Article 7 Standard of Care
Article 8 Covenants of the Fund and the Bank
Article 9 Termination of Agreement
Article 10 Assignment
Article 11 Amendment
Article 12 Massachusetts Law to Apply
Article 13 Force Majeure
Article 14 Consequential Damages
Article 15 Merger of Agreement
Article 16 Counterparts
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ___ day of ___________, 19__, by and between
Lexington Natural Resources Trust, a business trust, having its principal
office and place of business at Park 80 West Plaza Two, Saddle Brook, New
Jersey 07663, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article l Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in
this Agreement, the Fund hereby employs and appoints the Bank to act as, and
the Bank agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $____ par value, ("Shares"), dividend
disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plans provided to
the shareholders of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund, including without limitation any periodic investment plan or
periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Declaration of Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(viii)Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent, dividend disbursing
agent, custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the
Fund and the Bank per the attached service responsibility schedule. The Bank
may at times perform only a portion of these services and the Fund or its
agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section
2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but
not limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at least
seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in
good standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and perform
this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases,
computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed Customer Data.
The Fund agrees to treat all Proprietary Information as proprietary to the
Bank and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the
rights of the Bank in Proprietary Information at common law,
under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for
the contents of such data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.03 If the transactions available to the Fund include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the
Fund shall indemnify and hold the Bank harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent
or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or
of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a claim for
which the Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party
upon one hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, the Bank reserves the
right to charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither
this Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or failure
to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
Article 16 Counterparts
16.01 This Agreement may be executed by the parties
hereto on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
LEXINGTON NATURAL RESOURCES TRUST
BY:
___________________________________
Vice President
ATTEST:
_________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
____________________________________
Senior Vice President
ATTEST:
___________________________________
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms.
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
LEXINGTON NATURAL RESOURCES TRUST
BY:
__________________________________
Vice President
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
___________________________________
Vice President
ATTEST:
__________________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 15, 1996
Lexington Natural Resources Trust
Park 80 West
Plaza Two
Saddle Brook, N.J. 07663
Gentlemen:
We hereby consent to the reference of this Firm as counsel in the
Registration Statement on Form N-1A of the Lexington Natural Resources Trust.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel
KPMG Peat Marwick LLP
345 Park Avenue Telephone 212 758 9700 Telefax 212 758 9819
New York, NY 10154 Telex 428038
Independent Auditors' Consent
The Board of Trustees and Shareholders
Lexington Natural Resources Trust:
We consent to the use of our report dated January 29, 1996, included in the
Registration Statement on form N-1A and to the references to our firm under the
headings Financial Highlights and Counsel and Independent Auditors in the
Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
April 17, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-
end audited financial statements dated December 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 14,865,208
<INVESTMENTS-AT-VALUE> 16,525,644
<RECEIVABLES> 27,288
<ASSETS-OTHER> 468,743
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,021,675
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 66,428
<TOTAL-LIABILITIES> 66,428
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,403,143
<SHARES-COMMON-STOCK> 1,500,607
<SHARES-COMMON-PRIOR> 1,403,250
<ACCUMULATED-NII-CURRENT> 11,627
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (119,959)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,660,436
<NET-ASSETS> 16,955,247
<DIVIDEND-INCOME> 279,062
<INTEREST-INCOME> 27,664
<OTHER-INCOME> (5,921)
<EXPENSES-NET> 217,953
<NET-INVESTMENT-INCOME> 82,852
<REALIZED-GAINS-CURRENT> 513,678
<APPREC-INCREASE-CURRENT> 1,735,936
<NET-CHANGE-FROM-OPS> 2,332,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71,225
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 560
<NUMBER-OF-SHARES-REDEEMED> 469
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 1,067,096
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (643,122)
<OVERDISTRIB-NII-PRIOR> (2,513)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 148,634
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 217,953
<AVERAGE-NET-ASSETS> 14,860,920
<PER-SHARE-NAV-BEGIN> 9.71
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.58
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.30
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
