<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under Rule 14a-12
Lexington Emerging Markets Fund, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
---------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRELIMINARY PROXY MATERIALS FOR THE INFORMATION OF THE SECURITIES AND
EXCHANGE COMMISSION.
LEXINGTON EMERGING MARKETS FUND, INC.
LEXINGTON NATURAL RESOURCES TRUST
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
(800) 526-0056
June __, 2000
Dear Shareholder:
You are invited to attend a Special Meeting of Shareholders (the "Meeting")
of the Lexington Emerging Markets Fund, Inc. and Lexington Natural Resources
Trust (each a "Fund" or collectively the "Funds") to be held on July 21, 2000,
at the offices of the Funds located at Park 80 West, Plaza Two, Saddle Brook,
New Jersey 07663.
The Meeting has been called by your Board of Directors/Trustees because
two transactions have been proposed which, if completed, would substantially
affect your Fund. These transactions require your careful consideration and
their completion require your vote on the proposals outlined below.
The first transaction is the proposed acquisition of Lexington Global Asset
Managers, Inc., the parent of your Fund's current investment adviser, Lexington
Management Corporation, by ReliaStar Financial Corp. Upon the completion of this
transaction, Pilgrim Investments, Inc., which is an indirect, wholly-owned
subsidiary of ReliaStar Financial Corp., would become the investment adviser to
the Funds, subject to your approval at this Meeting. It is proposed that Pilgrim
Investments, Inc. would be paid the same advisory fees as are currently paid by
the Funds to Lexington Management Corporation. Should it become the investment
adviser to the Funds, Pilgrim Investments, Inc. expects that many of the
portfolio managers who currently manage the Funds will remain the portfolio
managers of those Funds and that the current sub-adviser to Lexington Natural
Resoures Trust will continue to be sub-adviser to that Fund. In addition, upon
the completion of the acquisition, your Fund would become part of the Pilgrim
mutual fund complex, which currently consists of 36 different investment
portfolios. As a shareholder of a Fund, you will be able to continue to purchase
shares of any other Lexington Fund without paying any sales charge, even though
it is expected that a sales load will be added to those Funds for new investors.
You would also be permitted to exchange into or purchase shares of any fund in
the Pilgrim mutual fund complex without paying any sales charge, even though all
of those funds, except the money market funds, are sold with a sales load. If
you approve the proposals discussed in the proxy statement, the acquisition of
Lexington Global Asset Managers, Inc. by ReliaStar Financial Corp. is expected
to be computed on or about July 26, 2000.
Second, after Lexington Global Asset Managers, Inc. and ReliaStar Financial
Corp. entered into their agreement, ING Groep N.V. entered into an agreement
with ReliaStar Financial Corp. to acquire ReliaStar Financial Corp. Should you
approve Pilgrim Investments, Inc. becoming the investment adviser to the Funds
upon the completion of the Lexington/ReliaStar transaction, it is expected that
Pilgrim Investments, Inc. would remain the investment adviser to the Funds upon
the completion of this second ReliaStar/ING transaction, and your status as a
Fund shareholder within the Pilgrim mutual fund complex would not change. The
investment advisory fees paid to Pilgrim Investments, Inc. would not change. In
addition, you would continue to have all the same privileges to purchase and
exchange shares of mutual funds within that complex. The continuation of Pilgrim
Investments, Inc. as the investment adviser, however, requires that you take
certain additional actions, which are more fully described in the proxy
statement. The acquisition of ReliaStar Financial Corp. by ING Groep N.V. is
expected to be completed in September 2000.
At the Meeting you will be asked to consider and approve the following
proposals:
. A proposal to elect thirteen (13) members to the Board of Directors or
Board of Trustees, as the case may be, to hold office until the election
and qualification of their successors;
. Two proposals to approve new Investment Management Agreements between each
Fund and Pilgrim Investments, Inc.;
. Two proposals to approve new Sub-Adviser Agreements between Pilgrim
Investments, Inc. and Market Systems Research Advisors, Inc. for Lexington
Natural Resources Trust;
. A proposal to ratify the selection of KPMG LLP as each Fund's independent
public accountants for the fiscal year ending December 31, 2000;
. A proposal to approve Amended and Restated Articles of Incorporation for
Lexington Emerging Markets Fund, Inc., a Maryland corporation, which
would make the Articles of Incorporation for all the Lexington Funds that
are Maryland corporations consistent with each other and would permit each
Fund to offer its shares in multiple series and classes;
. A proposal to approve an Amended and Restated Declaration of Trust for
Lexington Natural Resources Trust, a Massachusetts business trust, which
would make the Declarations of Trust for all the Lexington Funds that are
Massachusetts business trusts consistent with each other and would permit
each Fund to offer its shares in multiple series and classes;
. To transact such other business as may properly come before the meeting.
These proposals are very important to the completion of both of the
acquisitions described above. Each proposal is discussed in detail in the proxy
statement. All of these proposals have been approved by your Board of
Directors/Trustees. The Directors/Trustees recommend that each proposal be
approved by shareholders. We are asking you to consider them carefully and
express your vote on the enclosed proxy card or at the Meeting.
<PAGE>
The Boards of Directors/Trustees have fixed the close of business on May
23, 2000 as the record date (the "Record Date") for determining the shareholders
who are entitled to receive notice of the Meeting and to vote their shares at
the Meeting or any adjournment(s) or postponement(s) thereof. You are entitled
to cast one vote for each full share and a fractional vote for each fractional
share that you own on the Record Date.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID
RETURN ENVELOPE ENCLOSED IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER
PROXY SOLICITATION, AND TO ENSURE THAT A QUORUM WILL BE PRESENT AT THE MEETING
AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND IN YOUR
BEST INTEREST TO SIGN YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT
ANY TIME PRIOR TO ITS USE.
The Board of Directors/Trustees of each Fund has given careful
consideration to these proposals, and each has concluded that they are in the
best interests of each Fund and its shareholders. WE URGE YOU TO APPROVE ALL OF
THE PROPOSALS.
Sincerely,
Robert M. DeMichele
President
<PAGE>
PRELIMINARY PROXY MATERIALS FOR THE INFORMATION OF THE SECURITIES AND
EXCHANGE COMMISSION.
LEXINGTON EMERGING MARKETS FUND, INC.
LEXINGTON NATURAL RESOURCES TRUST
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
(800) 526-0056
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
July 21, 2000
Lexington Emerging Markets Fund, Inc. and Lexington Natural Resources Trust
(each a "Fund" or collectively the "Funds") will host a Special Meeting of
Shareholders (the "Meeting") on July 21, 2000 at 9:00 a.m. Eastern time at the
offices of the Funds located at Park 80 West, Plaza Two, Saddle Brook, New
Jersey, 07663. This will be a joint meeting for the shareholders of each Fund
and of twelve other Lexington Funds.
At the Meeting, shareholders will be asked to consider and approve the
following:
1. A proposal to elect thirteen (13) Directors or Trustees, as the case may
be, to hold office until the election and qualification of their
successors;
2. A proposal to approve a new Investment Management Agreement between each
Fund and Pilgrim Investments, Inc. ("Pilgrim"), an indirect, wholly-owned
subsidiary of ReliaStar Financial Corp. ("ReliaStar"), to take effect upon
the completion of the proposed acquisition of Lexington Global Asset
Managers, Inc. by ReliaStar. The new Investment Management Agreement would
have the same fees as the current Investment Management Agreement;
3. A proposal to approve a new Investment Management Agreement between each
Fund and Pilgrim to take effect upon the completion of the proposed
acquisition of ReliaStar by ING Groep N.V. ("ING"). The new Investment
Management Agreement would have the same fees as the current Investment
Management Agreement;
4. Lexington Natural Resources Trust only:
a. A proposal to approve a new Sub-Adviser Agreement between Pilgrim and
Market Systems Research Advisors, Inc. for Lexington Natural Resources
Trust, with no effective change in the fees from the current Sub-Adviser
Agreement, to take effect upon the completion of the proposed acquisition
of Lexington Global Asset Managers, Inc. by ReliaStar;
b. A proposal to approve a new Sub-Adviser Agreement between Pilgrim and
Market Systems Research Advisors, Inc. for Lexington Natural Resources
Trust, with no effective change in the fees from the current Sub-Adviser
Agreement, to take effect upon the completion of the proposed acquisition
of ReliaStar by ING;
<PAGE>
5. A proposal to ratify the selection of KPMG LLP as each Fund's independent
public accountants for the fiscal year ending December 31, 2000;
6. A proposal to approve Amended and Restated Articles of Incorporation for
Lexington Emerging Markets Fund, Inc., a Maryland corporation;
7. A proposal to approve an Amended and Restated Declaration of Trust for
Lexington Natural Resources Trust, a Massachusetts business trust;
8. Any other business properly brought before the meeting.
The Boards of Directors/Trustees have fixed the close of business on May
23, 2000 as the record date (the "Record Date") for determining the shareholders
who are entitled to notice of the Meeting and to vote their shares at the
Meeting or any adjournment(s) or postponement(s) thereof. Shareholders are
entitled to cast one vote for each full share and a fractional vote for each
fractional share they own on the Record Date. Please read the full text of the
proxy statement for a complete understanding of the proposals.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PAID
RETURN ENVELOPE ENCLOSED IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER
PROXY SOLICITATION, AND TO ENSURE THAT A QUORUM WILL BE PRESENT AT THE MEETING
AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND IN YOUR
BEST INTEREST TO SIGN YOUR PROXY CARD AND RETURN IT. THE PROXY IS REVOCABLE AT
ANY TIME PRIOR TO ITS USE.
Dated: June __, 2000
By Order of the Boards of Directors/Trustees,
Lisa Curcio
Secretary
P.O. Box 1515, Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
-ii-
<PAGE>
PRELIMINARY PROXY MATERIALS FOR THE INFORMATION OF THE SECURITIES AND
EXCHANGE COMMISSION.
LEXINGTON EMERGING MARKETS FUND, INC.
LEXINGTON NATURAL RESOURCES TRUST
P.O. Box 1515
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
(800) 526-0056
PROXY STATEMENT
Dated June __, 2000
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
July 21, 2000
GENERAL INFORMATION:
The Directors of the Lexington Emerging Markets Fund, Inc., a Maryland
corporation, and the Trustees of the Lexington Natural Resources Trust, a
Massachusetts business trust (each a "Fund" or collectively the "Funds"), are
soliciting your proxy for use at a Special Meeting of Shareholders (the
"Meeting") to approve proposals that have already been approved by the Board of
Directors/Trustees, as the case may be, of each Fund. The shareholders of each
Fund will vote separately on each proposal presented at the Meeting. For your
convenience, we have divided this proxy statement into four parts:
Part 1-- An Overview
Part 2-- The Proposals
Part 3-- More on Proxy Voting
Part 4-- Additional Information
Your vote is important! You should read the entire proxy statement before
voting. If you have any questions, please call the Funds at 1-800-526-0056. Even
if you sign and return the accompanying proxy, you may revoke it by giving
written notice of such revocation to the Secretary of the Fund prior to the
Meeting or by delivering a subsequently dated proxy or by attending and voting
at the Meeting in person. Management expects to solicit proxies principally by
mail, but Management, or agents appointed by Management, may also solicit
proxies by telephone, telegraph or personal interview. The costs of solicitation
will be borne by Lexington Management Corporation.
We began mailing this proxy statement, Notice of Special Meeting and Proxy
Card to shareholders on or about June __, 2000.
The Funds are required by federal law to file reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). The
SEC maintains a Web site that contains information about the Funds
(www.sec.gov). Any such proxy material, reports and other information can be
inspected and copied at the public reference facilities of the SEC, 450 Fifth
Street, N.W., Washington, DC 20549 and at the SEC's New York Regional
<PAGE>
Office, Seven World Trade Center, New York, NY 10048. Copies of such materials
can be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services of the SEC at 450 Fifth Street, N.W., Washington, DC 20549,
at prescribed rates.
The Funds' most recent annual and semi-annual reports to shareholders are
available at no cost. To request a report, please call the Funds toll-free at 1-
800-526-0056 or write to the Funds at P.O. Box 1515, Park 80 West, Plaza Two,
Saddle Brook, New Jersey 07663.
PART 1 - AN OVERVIEW
This proxy statement is furnished in connection with the solicitation of
proxies by the Boards of Directors/Trustees of the Funds for use at the Meeting
to be held on July 21, 2000 at 9:00 a.m. Eastern time at the offices of the
Funds located at Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663.
The Boards of Directors/Trustees have fixed the close of business on May
23, 2000 as the record date (the "Record Date") for determining the shareholders
who are entitled to notice of the Meeting and to vote their shares at the
Meeting or any adjournment(s) or postponement(s) thereof. Shareholders are
entitled to cast one vote for each full share and a fractional vote for each
fractional share they own on the Record Date.
Two events have occurred that require the calling of this Meeting. These
events directly affect the investment advisory agreements the Funds have with
Lexington Management Corporation ("LMC") and the sub-advisory agreements LMC has
with various sub-advisers.
On February 29, 2000, Lexington Global Asset Managers, Inc. ("LGAM"), the
parent to each Fund's current investment adviser, LMC entered into an agreement
with ReliaStar Financial Corp. ("ReliaStar") whereby ReliaStar would acquire
LGAM (the "Lexington Acquisition"). ReliaStar is a Minneapolis-based publicly
held life insurance holding company whose subsidiaries offer individuals and
institutions life insurance and annuities, employee benefit products and
services, life and health reinsurance, retirement plans, mutual funds, and bank
and trust products. As of December 31, 1999, ReliaStar had approximately $25
billion in assets. Upon the completion of the Lexington Acquisition, it is
proposed that Pilgrim Investments Inc. ("Pilgrim"), become the investment
adviser for the Funds. Pilgrim is a wholly-owned subsidiary of Pilgrim Capital
Corporation. Pilgrim Capital Corporation is a wholly-owned subsidiary of
ReliaStar. Organized in 1994, Pilgrim is a registered investment adviser. As of
April 30, 2000, Pilgrim managed 36 open-end funds, one closed-end fund, and
other institutional accounts, with combined assets of approximately $16.2
billion.
On May 1, 2000, ING Groep N.V. ("ING") entered into an agreement with
ReliaStar for ING to acquire ReliaStar (the "ReliaStar Acquisition"). ING is a
global financial institution active in the field of insurance, banking, and
asset management in more than 60 countries, with almost 90,000 employees. As of
December 31, 1999, ING had total assets of approximately $___, with
approximately $___ under management. ING has informed the Funds that, if
shareholders approve the investment management agreements with Pilgrim to go
into effect upon the completion of the Lexington Acquisition, ING intends
Pilgrim to continue as the investment adviser to the Funds, subject to
shareholder approval.
It is anticipated that the Lexington Acquisition will close shortly after
the Meeting. The Lexington Acquisition is subject to the satisfaction of certain
conditions including, but not limited to, the approval of new investment
advisory contracts with Pilgrim by (i) Lexington Funds holding 90% of the net
assets held by all of the Lexington Funds and (ii) all Lexington Funds except
Lexington Global Corporate Leaders Fund, Inc., Lexington Global Technology Fund,
Inc, Lexington Goldfund, Inc., Lexington Silver Fund, Inc. and Lexington Small
Cap Asia Growth Fund, Inc. Accordingly, completion of the Lexington Acquisition
requires the following:
-2-
<PAGE>
1. Approval by the Board of Directors or Board of Trustees, as the case
may be, of each Fund of a new investment management agreement with Pilgrim; and
2. Approval by the shareholders of each Fund of a new investment
management agreement with Pilgrim.
ReliaStar has advised the Boards of Directors/Trustees of the Funds that,
upon the closing of the Lexington Acquisition, it desires to have the Funds
overseen by new Boards of Directors/Trustees. In addition, Pilgrim plans to
recommend the newly-elected Directors/Trustees, if elected by shareholders, that
the other Lexington Funds issue shares in multiple classes. Accordingly, the
Boards of Directors/Trustees of the Funds, based on ReliaStar's and Pilgrim's
recommendations and representations, recommend that all the Funds operate under
same form of Articles of Incorporation or Declaration of Trust, as the case may
be, which, among other things, would allow the Funds to issue multiple series
and classes of shares if it should be desirable to do so in the future. The
Directors/Trustees believe that it is in the best interest of the Funds to make
these changes at this time even though there currently is no plan to issue
shares of the Funds in multiple classes.
Under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
closing of the ReliaStar Acquisition, which is expected to occur in September
2000, after the completion of the Lexington Acquisition, would cause the new
investment management agreements between the Funds and Pilgrim, should
shareholders approve them, to terminate. In order to avoid an additional
shareholder meeting to approve new investment management agreements, which would
be identical to those the Directors/Trustees are recommending be approved by you
to go in effect upon the completion of the Lexington Acquisition, the
Directors/Trustees are proposing that you consider and approve those new
agreements at this Meeting, to go into effect upon the completion of the
ReliaStar Acquisition. We have been advised that ING, subject to the closing of
the Lexington Acquisition, intends to continue to have the investment advisory
functions for the Funds performed by Pilgrim, including those portfolio managers
who are expected to manage the Funds after the Lexington Acquisition.
The Directors/Trustees who are not "affiliated persons" of LMC or Pilgrim
met on April 11, April 17 and April 18, 2000, to consider the Lexington
Acquisition, the requests by ReliaStar and the recommendations they would make
to the shareholders. On April 18, 2000, the full Boards met and took certain
actions in connection with the proposed Lexington Acquisition. The
Directors/Trustees recommended that those actions requiring shareholder
approval be presented to shareholders. Pilgrim Capital Corporation has indicated
that it will recommend that the newly constituted Boards of Directors/Trustees
of the Funds, should they be elected by shareholders, ratify all actions taken
by the current Directors/Trustees at their meetings on April 18, 2000, in
connection with their consideration of the Lexington Acquisition.
The Directors/Trustees who are not "affiliated persons" of LMC or Pilgrim
met again on May 22 and May 23, 2000 to consider the ReliaStar Acquisition. On
May 23, 2000, the full Boards met and took certain actions in connection with
the proposed ReliaStar Acquisition. The Directors/Trustees recommended
that those actions requiring shareholder approval be presented to
shareholders. Pilgrim Capital Corporation has indicated that it also will
recommend that the newly constituted Boards of Directors/Trustees of the Funds,
should they be elected by shareholders, ratify all actions taken by the current
Directors/Trustees at their meetings on May 23, 2000, in connection with their
consideration of the ReliaStar Acquisition.
The Directors/Trustees met again on June 7, 2000, to give final
consideration to both The Lexington Acquisition and the ReliaStar Acquisition.
The Directors/Trustees reviewed various additional materials and information, as
well as all of the representations and assurances provided by ReliaStar, Pilgrim
and ING. In addition, the Directors/Trustees were advised that Stratos Advisors,
Inc. would not continue as the sub-adviser to Lexington Emerging Markets Fund,
Inc. after the closing of the ReliaStar Acquisition. To ensure continuity of
management, the Directors/Trustees further determined that it was in the best
interest of shareholders to terminate the current sub-adviser agreement between
LMC and Stratos Advisors, Inc. As a result, effective June 7, 2000, Messrs.
Richard T. Saler and Philip A. Schwartz will constitute the portfolio management
team that will manage Lexington Emerging Markets Fund, Inc. Additional
information regarding Messrs. Saler and Schwartz can be found under Proposal 2
of the proxy statement.
After considering all matters related to the acquisitions and their impact
on the Funds, the Boards of Directors/Trustees have called these Meetings where
shareholders will be asked to consider and approve the following proposals:
-3-
<PAGE>
1. To elect thirteen (13) Directors or Trustees, as the case may be, to hold
office until the election and qualification of their successors;
2. To approve a new Investment Management Agreement between each Fund and
Pilgrim Investments, Inc. ("Pilgrim"), an indirect, wholly-owned subsidiary
of ReliaStar Financial Corp. ("ReliaStar"), to take effect upon the
completion of the proposed acquisition of Lexington Global Asset Managers,
Inc. by ReliaStar. The new Investment Management Agreement would have the
same fees as the current Investment Management Agreement;
3. To approve a new Investment Management Agreement between each Fund and
Pilgrim to take effect upon the completion of the proposed acquisition of
ReliaStar by ING Groep N.V. ("ING"). The new Investment Management
Agreement would have the same fees as the current Investment Management
Agreement;
4. Lexington Natural Resources Trust only:
a. To approve a new Sub-Adviser Agreement between Pilgrim and Market Systems
Research Advisors, Inc. for Lexington Natural Resources Trust, with no
effective change in the fees from the current Sub-Adviser Agreement, to
take effect upon the completion of the proposed acquisition of Lexington
Global Asset Managers, Inc. by ReliaStar;
b. To approve a new Sub-Adviser Agreement between Pilgrim Investments, Inc.
and Market Systems Research Advisors, Inc. for Lexington Natural Resources
Trust, with no effective change in the fees from the current Sub-Adviser
Agreement, to take effect upon the completion of the proposed acquisition
of ReliaStar by ING;
5. To ratify the selection of KPMG LLP as each Fund's independent public
accountants for the fiscal year ending December 31, 2000;
6. To approve Amended and Restated Articles of Incorporation for Lexington
Emerging Markets Fund, Inc., a Maryland corporation;
7. To approve an Amended and Restated Declaration of Trust for Lexington
Natural Resources Trust, a Massachusetts business trust;
8. Any other business properly brought before the Meeting.
The following table summarizes which shareholders will vote on each
proposal:
<TABLE>
<CAPTION>
Fund Name Proposal
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4a 4b 5 6 7 8
----------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. . . . . . X .
----------------------------------------------------------------------------------------------
Lexington Natural Resources Trust . . . . . . X . .
----------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
PART 2 - THE PROPOSALS
PROPOSAL 1
THE ELECTION OF DIRECTORS/TRUSTEES
----------------------------------
A. General Information:
The Directors/Trustees of the Funds who are not "interested persons" of the
Funds, LMC or Pilgrim nominated the thirteen individuals listed below (the
"Nominees") to serve as Directors or Trustees, as the case may be, of the Funds
upon the completion of the Lexington Acquisition and until the next meeting of
shareholders at which Directors and Trustees are elected and their successors
have been duly elected and qualified. The Nominees, none of whom are currently
serving on the Boards of Directors/Trustees of the Funds, have been nominated to
replace the current Boards of Directors/Trustees of the Funds immediately upon
the completion of the Lexington Acquisition. All Nominees have consented to be
named in this proxy statement and have agreed to serve if elected.
The Nominees are being nominated in connection with the Lexington
Acquisition). In evaluating the Nominees, the Directors/Trustees met in person
with all of them except Messrs. Doherty, Patton and Turner, who were unable to
attend. The Directors/Trustees took into account the background and experience
of the Nominees, including their familiarity with the issues relating to these
types of funds and investments, as well as their careers in business, finance,
marketing and other areas. In selecting the Nominees, the Boards considered the
fact that each is a director, trustee or advisory board member of each of the
investment companies advised by Pilgrim. Based on their discussions with the
Nominees present, the Directors/Trustees believe that the Nominees and the
Nominees who were not present would serve the Funds well in the future if
elected by shareholders.
IF YOU GRANT AUTHORITY ON THE ACCOMPANYING PROXY CARD TO VOTE IN THE
ELECTION OF THE THIRTEEN DIRECTORS/TRUSTEES, THE PERSONS NAMED AS PROXIES WILL
VOTE FOR THE ELECTION OF THE NOMINEES NAMED BELOW TO THE BOARD OF
DIRECTORS/TRUSTEES OF EACH FUND FOR A TERM OF OFFICE COMMENCING WITH THE
COMPLETION OF THE LEXINGTON ACQUISITION AND CONTINUING UNTIL THE NEXT MEETING OF
SHAREHOLDERS AT WHICH DIRECTORS/TRUSTEES ARE ELECTED AND THEIR SUCCESSORS HAVE
BEEN ELECTED AND QUALIFIED.
If any of the Nominees is unable to serve for any reason, the persons named
as proxies will vote for such other Nominee or Nominees selected by the Boards
of Directors/Trustees, or the Boards may reduce the number of Directors or
Trustees as provided in each Fund's by-laws. Any other Nominee or Nominees who
would not be an "interested person" of a Fund, any manager, or any sub-adviser,
as defined by the 1940 Act (the "Independent Directors/Trustees"), will be
selected by the Independent Directors/Trustees currently serving on the Board of
Directors/Trustees. The Funds know of no reason why any of the Nominees listed
below would be unable to serve if elected.
-5-
<PAGE>
B. Nominees For Election To The Boards Of Directors/Trustees:
The Nominees for election to the Boards of Directors/Trustee are:
. Mary A. Baldwin, Ph.D . Jock Patton
. Al Burton . David W.C. Putnam
. Paul S. Doherty . John R. Smith
. Robert B. Goode . Robert W. Stallings
. Alan L. Gosule . John G. Turner
. Mark Lipson . David W. Wallace
. Walter H. May
The following tables summarize information about the Nominees, the
positions they will hold with each Fund, and their principal occupations. The
address of each Nominee is 40 N. Central Avenue, Suite 1200, Phoenix, Arizona
85004.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Position(s) to be
Held With the
Name, Age and Address Fund\** Principal Occupation During Past Five Years
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mary A. Baldwin, Ph.D Director/Trustee Realtor, Caldwell Banker Success Realty (formerly, The
(Age 60) Prudential Arizona Realty) for more than the last five
years. Ms. Baldwin is also Vice President, United
States Olympic Committee (November 1996-present), and
formerly Treasurer, United States Olympic Committee
(November 1992-November 1996). Ms. Baldwin is also a
director, or trustee or advisory board member of each
of the funds managed by Pilgrim.***
---------------------------------------------------------------------------------------------------------------
Al Burton, Director/Trustee President of Al Burton Productions for more than the
(Age 71) last five years. Mr. Burton was formerly Vice
President, First Run Syndication, Castle Rock
Entertainment (July 1992-November 1994). Mr. Burton is
also a director, trustee or advisory board member of
each of the funds managed by Pilgrim.***
---------------------------------------------------------------------------------------------------------------
Paul S. Doherty, Director/Trustee President of Doherty, Wallace, Pillsbury and Murphy,
(Age 65) P.C., Attorneys. Mr. Doherty is a Director of
Tambrands, Inc. Mr. Doherty is also a director or
trustee of each of the funds managed by Pilgrim.***
---------------------------------------------------------------------------------------------------------------
Robert B. Goode, Director/Trustee Retired. Mr. Goode was formerly Chairman of American Direct
(Age 69) Business Insurance Agency, Inc. (1996-2000), Chairman of
The First Reinsurance Company of Hartford (1990-1991)
and President and Director of American Skandia Life
Assurance Company (1987-1989). Mr. Goode is also a
director or trustee of each of the funds managed by
Pilgrim.***
---------------------------------------------------------------------------------------------------------------
Alan L. Gosule, Director/Trustee Partner, Rogers & Wells (since 1991). Mr. Gosule is a
(Age 58) Director of F.L. Putnam Investment Management Co., Inc.,
Simpson Housing Limited Partnership, Home Properties of
New York, Inc., CORE Cap, Inc. and Colonnade Partners.
Mr. Gosule is also a director or trustee of each of the
funds managed by Pilgrim.***
---------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------
*Mark Lipson, Director/Trustee Mr. Lipson was formerly Chairman of Northstar Holding
(Age 50) Corporation, Northstar Investment Management
Corporation, and Northstar Distributors, Inc.;
Director of Northstar Funding, Inc.;
Director, President and Chief Executive Officer of
National Securities & Research Corporation; and
Director/Trustee and President of the National
Affiliated Investment Companies and certain of
National's subsidiaries (prior to August 1993). Mr.
Lipson is also a director or trustee of each of the
funds managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
Walter H. May, Director/Trustee Retired. Mr. May was formerly a Managing Director and
(Age 63) Director of Marketing for Piper Jaffray, Inc. Mr. May
is also a director or trustee of each of the funds
managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
Jock Patton, Director/Trustee Private Investor. Director of Hypercom Corporation
(Age 54) (since January 1999), Stuart Entertainment, Inc. (since
January 1999), and JDA Software Group, Inc. (since
January 1999). Mr. Patton is also a Director of Buick of
Scottsdale, Inc., National Airlines, Inc., BG
Associates, Inc., BK Entertainment, Inc., Arizona
Rotorcraft, Inc. and Director and Chief Executive
Officer of Rainbow Multimedia Group, Inc. Mr. Patton was
formerly Director of Stuart Entertainment, Inc.,
Director of Artisoft, Inc. (August 1994-July 1998);
President and Co-owner of StockVal, Inc. (April 1993 -
June 1997) and a Partner and Director of the law firm of
Streich, Lang, P.A.; (1972 - 1993). Mr. Patton is also a
director, trustee, or a member of the advisory board of
each of the funds managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
David W.C. Putnam, Director/Trustee President, Clerk and Director of F.L. Putnam Securities
(Age 60) Company, Inc. and its affiliates, Mr. Putnam is Director
of Anchor Investment Management Corporation and
President and Director/Trustee of Anchor Capital
Accumulation Trust, Anchor International Bond Trust,
Anchor Gold and Currency Trust, Anchor Resources and
Commodities Trust and Anchor Strategic Assets Trust. Mr.
Putnam was formerly Director of Trust Realty Corp. and
Bow Ridge Mining Co. Mr. Putnam is also a director or
trustee of each of the funds managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
John R. Smith, Director/Trustee President of New England Fiduciary Company (since 1991).
(Age 76) Mr. Smith is Chairman of Massachusetts Educational
Financing Authority (since 1987), Vice Chairman of
Massachusetts Health and Education Authority, Vice-
Chairman of MHI, Inc. (Massachusetts non-profit Energy
Purchasers consortium (since 1996) and formerly
Financial Vice President of Boston College (1970-1991).
Mr. Smith is also a director or trustee of each of the
funds managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------
*Robert W. Stallings, Director/Trustee Chairman, Chief Executive Officer and President of
(Age 50) Pilgrim Group, Inc. (since December 1994); Chairman,
Pilgrim Investments, Inc. (since December 1994); Chairman,
Pilgrim Securities, Inc. (since December 1994);
President and Chief Executive Officer of Pilgrim
Funding, Inc. (since November 1999); and, President
and Chief Executive Officer of Pilgrim Capital
Corporation and its predecessors (since August 1991).
Mr. Stallings is also a director, trustee, or a member
of the advisory board of each of the funds managed by
Pilgrim.***
--------------------------------------------------------------------------------------------------------------
*John G. Turner, Director/Trustee/ Chairman and Chief Executive Officer of ReliaStar
(Age 60) Chairman Financial Corp. and ReliaStar Life Insurance Co.
(since 1993); Chairman of ReliaStar Life Insurance
Company of New York (since 1995); Chairman of Northern
Life Insurance Company (since 1992). Formerly,
Director of Northstar Investment Management
Corporation and affiliates (1993-1999);
President of ReliaStar Financial Corp. and ReliaStar
Life Insurance Co. (1989-1991) and President and Chief
Operating Officer of ReliaStar Life Insurance Company
(1986-1991). Mr. Turner is also Chairman of each of
the funds managed by Pilgrim.***
--------------------------------------------------------------------------------------------------------------
David Wallace, Director/Trustee Chairman of Putnam Trust Company and FECO Engineered
(Age 75) Systems, Inc. Mr. Wallace is President and
Director/Trustee of the Robert R. Young Foundation;
Governor of the New York Hospital and Director of UMC
Electronics and Zurn Industries, Inc. Mr. Wallace was
formerly Chairman of Lone Star Industries, Putnam Trust
Company, Chairman and Chief Executive Officer of Todd
Shipyards, Bangor Punta Corporation, and National
Securities & Research Corporation. Mr. Wallace is also
a director or trustee of each of the funds managed by
Pilgrim.***
--------------------------------------------------------------------------------------------------------------
</TABLE>
* An "interested person" as defined in section 2(a)(19) of the 1940 Act.
** None of the Directors/Trustees own beneficial shares of the Funds as of May
23, 2000.
*** The funds managed by Pilgrim consist of 11 open-end investment companies
and one closed-end investment company. Ms. Baldwin and Messrs. Burton, Patton
and Stallings serve as members of an advisory board for certain of the Pilgrim
Funds. The advisory board members actively participate in discussions regarding
the Pilgrim Funds, but do not have the ability to vote on any matters.
At their meeting on April 18, 2000, the Directors/Trustees elected
Mr. S. M. S. Chadha and Dr. Andrew M. McCosh to serve, for a term to expire
December 31, 2006, as non-voting, Advisory Directors/Trustees to those Funds
having international portfolios. Mr. Chadha and Dr. McCosh currently serve as
Directors/Trustees of the Funds. The Boards' actions were based on the belief
that the Funds should continue to benefit from the particular experience and
expertise relating to international markets and economies that these two
individuals have brought to the Funds as current Directors/Trustees and that
their active participation will provide continuity of oversight to the Funds
with more unique portfolios. As Advisory Directors/Trustees, Mr. Chadha and
Dr. McCosh each will receive an annual retainer of $15,000 plus reasonable
travel expenses.
-8-
<PAGE>
C. Remuneration of Nominees:
The Nominees currently serve on the boards of a number of funds advised by
Pilgrim (the "Pilgrim Funds"). Those individuals who are Independent
Directors/Trustees/Advisory Board Members of the Pilgrim Funds receive (i) an
annual retainer of $20,000; (ii) $5,000 per quarterly and special Board meeting;
(iii) $500 per committee meeting; (iv) $500 per special or telephonic meeting;
and (v) out-of-pocket expenses. Pilgrim has advised the Funds that it is not
aware of any proposals to increase the fees paid to the Independent
Directors/Trustees/Advisory Board Members should the Nominees be elected to the
Boards of the Funds. The pro rata share of the retainer paid by each of the
Funds would likely be based on each Fund's average net assets as a percentage of
the average net assets of all the funds managed by Pilgrim for which the
Nominees serve in common as Directors/Trustees/Advisory Board Members.
Directors/Trustees/Advisory Board Members who are not Independent
Directors/Trustees/Advisory Board Members would continue to receive no fees from
the Funds. All Directors/Trustees/Advisory Board Members would continue to be
reimbursed for any expenses incurred in attending meetings of the Funds and for
other incidental expenses. Each Fund's Board fees are subject to the approval of
the New Board upon its election; shareholders are not being asked to vote on
these fees. Thereafter, Board fees may be reviewed periodically and changed by
the Board. The Pilgrim Funds currently do not provide retirement benefits for
their Directors/Trustees/Advisory Board Members.
The following table has been provided to the Funds by Pilgrim and sets
forth information regarding the compensation paid to the Nominees for the fiscal
year ended December 31, 1999 for service on the boards of the Pilgrim Funds.
Nominees whose names are preceded by an asterisk (*) will be
Directors/Trustees/Advisory Board Members who are not Independent
Directors/Trustees/Advisory Board Members of the Funds if elected and if the
Lexington Acquisition is completed.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Pension or
Retirement Estimated Annual Aggregate Number of
Name of Benefits Accrued Benefits Upon Compensation from the Directorships in the
Director/Trustee as Fund Expenses Retirement Pilgrim Funds Fund Complex
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mary A. Baldwin N/A N/A $40,875 15
--------------------------------------------------------------------------------------------------------------------
Al Burton N/A N/A $40,875 15
--------------------------------------------------------------------------------------------------------------------
Jock Patton N/A N/A $45,875 15
--------------------------------------------------------------------------------------------------------------------
*Robert W. Stallings N/A N/A $ 0 15
--------------------------------------------------------------------------------------------------------------------
*John G. Turner N/A N/A $ 0 15
--------------------------------------------------------------------------------------------------------------------
David W. Wallace N/A N/A $24,875 15
--------------------------------------------------------------------------------------------------------------------
Paul S. Doherty N/A N/A $27,125 15
--------------------------------------------------------------------------------------------------------------------
Robert B. Goode, Jr. N/A N/A $45,875 15
--------------------------------------------------------------------------------------------------------------------
Alan L. Gosule N/A N/A $25,125 15
--------------------------------------------------------------------------------------------------------------------
*Mark L. Lipson N/A N/A $ 0 15
--------------------------------------------------------------------------------------------------------------------
Walter H. May N/A N/A $27,125 15
--------------------------------------------------------------------------------------------------------------------
David W.C. Wallace N/A N/A $24,875 15
--------------------------------------------------------------------------------------------------------------------
John R. Smith N/A N/A $27,125 15
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* As of December 31, 1999, there were 15 directorships in the Pilgrim Fund
complex. As a result of fund mergers which occurred on April 1, 2000, there
are currently 12 directorships in the Pilgrim Fund complex.
-9-
<PAGE>
Upon the completion of the Lexington Acquisition, it is anticipated that
the officers of the Funds will be:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Position(s)
Name and Age with the Fund Principal Occupation During Past 5 Years
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert W. Stallings President and CEO Chairman, Chief Executive Officer and President of
(Age 51) Pilgrim Group, Inc. ("Pilgrim Group") (since December
1994); Chairman, Pilgrim Investments, Inc. (since
December 1994); Chairman, Pilgrim Securities, Inc.
("Pilgrim Securities") (since December 1994); President
and Chief Executive Officer of Pilgrim Funding, Inc.
(since November 1999); and President and Chief Executive
Officer of Pilgrim Capital Corporation and its
predecessors since August 1991. Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of
each of the Pilgrim Funds.
---------------------------------------------------------------------------------------------------------------------
James R. Reis Executive Vice Director, Vice Chairman (since December 1994), Executive
(Age 42) President and Assistant Vice President (since April 1995), and Director of
Secretary Structured Finance (since April 1998), Pilgrim Group,
Inc. and Pilgrim Investments; Director (since December
1994) and Vice Chairman (since November 1995) of Pilgrim
Securities; Executive Vice President, Assistant Secretary
and Chief Credit Officer of Pilgrim Prime Rate Trust;
Executive Vice President and Assistant Secretary of each
of the other Pilgrim Funds. Presently serves or has
served as an officer or director of other affiliates of
Pilgrim Capital Corporation.
---------------------------------------------------------------------------------------------------------------------
Stanley Vyner Executive Vice President President and Chief Executive Officer (since August
(Age 49) 1996), Pilgrim Investments; Executive Vice President of
most of the other Pilgrim Funds (since July 1996).
Formerly Chief Executive Officer (November 1993 -
December 1995) HSBC Asset Management Americas, Inc., and
Chief Executive Officer, and Actuary (May 1986 - October
1993) HSBC Life Assurance Co.
---------------------------------------------------------------------------------------------------------------------
James M. Hennessy Executive Vice Executive Vice President and Secretary, Pilgrim Capital
(Age 51) President and Secretary Corporation and its predecessors since April 1998.
Executive Vice President and Secretary (since April
1998), Pilgrim Group, Pilgrim Securities and Pilgrim
Investments; Executive Vice President and Secretary of
each of the other Pilgrim Funds. Formerly Senior Vice
President, Pilgrim Capital Corporation (April 1995 -
April 1998).
---------------------------------------------------------------------------------------------------------------------
Michael J. Roland Senior Vice President Senior Vice President and Chief Financial Officer,
(Age 41) and Principal Financial Pilgrim Group, Pilgrim Investments and Pilgrim Securities
Officer (since June 1998); Senior Vice President and Principal
Financial Officer of each of the other Pilgrim Funds. He
served in same capacity from January, 1995 - April, 1997.
Formerly, Chief Financial Officer of Endeaver Group
(April 1997 - June 1998).
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Robert S. Naka Senior Vice President Senior Vice President, Pilgrim Investments (since
(Age 36) and Assistant Secretary November 1999) and Pilgrim Group, Inc. (since August
1999). Senior Vice President and Assistant Secretary of
each of the other Pilgrim Funds. Formerly Vice
President, Pilgrim Investments (April 1997 - October
1999), Pilgrim Group, Inc. (February 1997 - August 1999).
Formerly Assistant Vice President, Pilgrim Group, Inc.
(August 1995 - February 1997). Formerly Operations
Manager, Pilgrim Group, Inc. (April 1992 - April 1995).
---------------------------------------------------------------------------------------------------------------------
Robyn Ichilov Vice President and Vice President, Pilgrim Investments (since August 1997),
(Age 32) Treasurer Accounting Manager (since November 1995). Vice President
and Treasurer of most of the other Pilgrim Funds.
Formerly Assistant Vice President and Accounting
Supervisor for PaineWebber (June 1993 - April 1995).
---------------------------------------------------------------------------------------------------------------------
</TABLE>
These officers of the Funds will receive no compensation directly from the
Funds for performing the duties of their offices.
The mailing address of each officer will be 40 N. Central Ave., Suite 1200,
Phoenix, AZ 85004.
D. Required Vote:
Directors/Trustees are elected by the affirmative vote of a plurality of
the outstanding shares of each Fund present in person or by proxy at the
Meeting.
E. Board Recommendation:
The Boards of Directors/Trustees recommend that shareholders VOTE FOR the
election of each of the Nominees to the Boards of Directors/Trustees of the
Funds subject to their terms commencing and continuing as described above. If
any of the Nominees is not elected by shareholders, the current
Directors/Trustees may consider other courses of action. Because the
commencement of each Nominee's term is conditioned upon the completion of the
Lexington Acquisition, the effectiveness of shareholder action in electing the
Nominees likewise will be conditioned on the consummation of the Lexington
Acquisition. In the event the Lexington Acquisition is not consummated, the
current Directors/Trustees will remain in office even if the Nominees are
elected by shareholders.
-11-
<PAGE>
PROPOSAL 2
THE APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT TO
--------------------------------------------------------
TAKE EFFECT UPON THE COMPLETION OF THE PROPOSED ACQUISITION OF
--------------------------------------------------------------
LEXINGTON GLOBAL ASSET MANAGERS, INC BY RELIASTAR FINANCIAL
-----------------------------------------------------------
CORP.
-----
A. General Information:
Under the 1940 Act, a transaction that results in a "change of control" or
management of an investment adviser may be deemed to result in an "assignment"
of any investment advisory agreement with that investment adviser. The 1940 Act
further provides that an investment advisory agreement will automatically
terminate in the event of its assignment. The Lexington Acquisition described
above may constitute a "change of control" of the adviser for purposes of the
1940 Act, which would cause the "assignment" and resulting termination of the
present management agreements between the Funds and LMC (the "Current
Agreements").
The Independent Directors/Trustees reviewed the proposed Lexington
Acquisition and the effect it would have on the Current Agreements in detail at
their meetings held on April 11, April 17 and April 18, 2000. On April 18, 2000
the full Boards, including a majority of the Independent Directors/Trustees,
after giving due consideration to the conditions of the Lexington Acquisition,
voted to approve a new investment management agreement between each Fund and
Pilgrim (the "Proposed Agreements") subject to the approval of Fund
shareholders. The Proposed Agreements would become effective upon the closing of
the Lexington Acquisition. (A copy of the form of the Proposed Agreement is
attached hereto as Exhibit A.)
If approved by shareholders, the Proposed Agreements would remain in effect
for two years from the date they take effect and, unless terminated early, would
continue from year to year thereafter, provided that each such continuance is
approved annually with respect to each Fund (i) by the applicable Fund's Board
of Directors/Trustees, or by the vote of a majority of the outstanding voting
securities of the particular Fund, and in either case, (ii) by a majority of the
Fund's Independent Directors/Trustees who are also not parties to the Proposed
Agreements.
B. The Terms of the Proposed Agreements:
The terms of the Proposed Agreements related to the advisory services to be
provided are substantially similar in all material respects to the terms of each
Current Agreement. In addition, there is no change in the advisory fees to be
paid by the Funds. The Proposed Agreements require Pilgrim to provide, subject
to the supervision of the Boards of the Directors/Trustees of the Funds, a
continuous investment program for each Fund and to determine the composition of
the assets of each Fund's portfolio, including determination of the purchase,
retention or sale of the securities, cash and other investments contained in the
portfolio. Pilgrim will provide investment research and conduct a continuous
program of evaluation, investment and reinvestment of each Fund's assets.
-12-
<PAGE>
There are, however, some important differences between the Proposed
Agreements and the Current Agreements you should take into consideration. Under
the Current Agreements, LMC, on behalf of the Funds, performs certain
accounting, shareholder servicing and other administrative services and is
reimbursed by the Funds for the costs of performing them. The Proposed
Agreements have no similar provision. Instead, certain accounting and
administrative services and shareholder servicing would be performed under a
separate Administrative Agreement whereby the Funds would pay an annual fee of
0.10% of average daily net assets.
In addition, the Current Agreements obligate LMC to limit the ordinary
business expenses of the Funds so as to not exceed the most restrictive expense
limits imposed by any statute or regulation. Currently, neither LMC nor Pilgrim
are aware of any, such statutes or regulations. LMC voluntarily limits expenses
of certain Funds by waiving some or all of its advisory fee and/or reimbursing
the Funds for certain expenses. While the Proposed Agreements contain no
provisions that limit expenses, Pilgrim has agreed under separate Expense
Limitation Agreements, which were approved by the Directors/Trustees at their
meetings on April 18, 2000, and again on May 23, 2000, to limit the expenses of
the Funds to the levels shown below. The "expense caps," along with all of the
current and expected expenses of the Funds, are described below in more detail.
As indicated above, the Proposed Agreements contain no increase in advisory
fees for any of the Funds. The annual advisory fees paid by the Funds to Pilgrim
as a percentage of each Fund's average daily net assets will be as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------
Fund Name Adviser Fee
---------------------------------------------------------------
<S> <C>
Lexington Emerging Markets Fund, Inc. 0.85%
---------------------------------------------------------------
Lexington Natural Resources Trust 1.00%
---------------------------------------------------------------
</TABLE>
Pilgrim will enter into expense limitation agreements with each Fund which
will limit for the next two years total expenses of the Funds (excluding:
interest; taxes; brokerage commissions; other investment related costs;
extraordinary expenses such as litigation; other expenses not incurred in the
ordinary course of the Fund's business; and expenses of counsel or other persons
or services retained by the Fund's Independent Directors) to the same total
expense limitations currently in effect for each Fund. The following table shows
the current expense limitation and the proposed expense limitation for each
Fund.
<TABLE>
<CAPTION>
Fund Name Expense Cap
-------------------------------------------------------------------------
Current Proposed
-------------------------------------------------------------------------
<S> <C> <C>
Lexington Emerging Markets Fund, Inc. 2.50% 2.50%
-------------------------------------------------------------------------
Lexington Natural Resources Trust 2.50% 2.50%
-------------------------------------------------------------------------
</TABLE>
The following chart compares the fees and expenses that shareholders in the
Funds currently pay and the fees and expenses it is estimated that shareholders
would pay if the Proposed Agreements are approved at the Meeting and the
Lexington Acquisition occurs. The information presented is based on the
assumptions that (1) shareholders approve all Proposed Agreements, and (2)
after the Lexington Acquisition, vendors and other service providers provide
services to the Funds under current fee arrangements in place for the Pilgrim
Funds or under lower fee arrangements that Pilgrim has negotiated with vendors.
The proposed expense ratios shown below were provided by Pilgrim and represent
good faith estimates of expenses.
-13-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Emerging Markets Natural Resources
Expenses --------------------------------------------------------------
Current Proposed Current Proposed
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment advisory 0.85% 0.85% 1.00% 1.00%
---------------------------------------------------------------------------------------------------------------
Custodian expenses 0.30% 0.33% 0.01% 0.02%
---------------------------------------------------------------------------------------------------------------
Transfer agent 0.02% 0.00% 0.00% 0.00%
---------------------------------------------------------------------------------------------------------------
Administrative service fees 0.00% 0.10% 0.00% 0.10%
---------------------------------------------------------------------------------------------------------------
Professional fees 0.15% 0.02% 0.09% 0.02%
---------------------------------------------------------------------------------------------------------------
Distribution expenses 0.00% 0.00% 0.00% 0.00%
---------------------------------------------------------------------------------------------------------------
Printing and mailing 0.11% 0.04% 0.02% 0.04%
---------------------------------------------------------------------------------------------------------------
Directors fees and expenses 0.08% 0.01% 0.05% 0.01%
---------------------------------------------------------------------------------------------------------------
Accounting and recordkeeping expenses 0.07% 0.02% 0.09% 0.02%
---------------------------------------------------------------------------------------------------------------
Registration fees 0.01% 0.01% 0.00% 0.01%
---------------------------------------------------------------------------------------------------------------
Computer processing fees 0.04% 0.00% 0.03% 0.00%
---------------------------------------------------------------------------------------------------------------
Amortization of deferred organization costs 0.01% 0.01% 0.00% 0.00%
---------------------------------------------------------------------------------------------------------------
Other expenses 0.04% 0.02% 0.03% 0.02%
---------------------------------------------------------------------------------------------------------------
Expenses before reimbursement* 1.68% 1.41% 1.33% 1.24%
---------------------------------------------------------------------------------------------------------------
Fund expense reimbursement 0.00% 0.00% 0.00% 0.00%
---------------------------------------------------------------------------------------------------------------
Expenses after reimbursement 1.68% 1.41% 1.33% 1.24%
---------------------------------------------------------------------------------------------------------------
</TABLE>
* May not reflect exactly the sum of the itemized expenses due to the effects of
rounding.
Like each Current Agreement, each Proposed Agreement provides that Pilgrim
is not subject to liability to the Fund, and shall be indemnified by the Fund,
for any act or omission in the course of, or connected with, rendering services
under the Agreement, except by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under the
Agreement. In addition, Pilgrim would not be subject to liability to the Fund,
and would be indemnified by the Fund, for any act or omission in the course of,
or in connection with a Sub-Advisers rendering services under a Sub-Adviser
Agreement, except by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of its obligations and duties under the Agreement.
Each Proposed Agreement may be terminated by a Fund without penalty upon
not less than 60 days' notice by the Board of Directors/Trustees or by a vote of
the shareholders of a majority of the Fund's outstanding shares voting as a
single class, or upon not less than 60 days' notice by Pilgrim. Each Proposed
Agreement would terminate automatically in the event of their "assignment" (as
defined in the 1940 Act).
C. Information About Pilgrim:
Organized in December 1994, Pilgrim is registered as an investment adviser
with the Securities and Exchange Commission. As of April 30, 2000, Pilgrim
managed over $16.2 billion in mutual funds and institutional accounts.
Pilgrim is an indirect, wholly owned subsidiary of ReliaStar, and is
located at 40 North Central Avenue, Suite 1200, Phoenix, Arizona 85004-4424.
Through its subsidiaries, ReliaStar offers individuals and institutions life
insurance and annuities, employee benefits products and services, life and
health reinsurance, retirement plans, mutual funds, bank products and personal
finance education. Additional information regarding Pilgrim can be found in Part
4 of this proxy statement.
-14-
<PAGE>
The individuals listed below are expected to be the portfolio managers for
Lexington Emerging Market Fund if the Proposed Agreement is approved by
shareholders and becomes effective.
Richard T. Saler: Mr. Saler will be a member of the investment management
team that manages Lexington Emerging Markets Fund. Mr. Saler is Senior Vice
President, Director of International Investment Strategy of LMC and is
responsible for international investment analysis and portfolio management at
LMC. He has thirteen years of investment experience. Mr. Saler first joined LMC
in 1986. In 1991 he was a strategist with Nomura Securities and rejoined LMC in
1992. Mr. Saler graduated from New York University with a B.S. in Marketing and
from New York University's Graduate School of Business Administration with an
M.B.A. in Finance.
Philip A. Schwartz, CFA: Mr. Schwartz also will be a member of an
investment management that manages Lexington Emerging Markets Fund. Mr. Schwartz
is a Vice President at LMC, and is a Chartered Financial Analyst and a member of
the New York Society of Security Analysts. He is responsible for international
investment analysis and portfolio management at LMC and has twelve years of
investment experience. Prior to joining LMC in 1993, Mr. Schwartz was Vice
President of European Research Sales with Cheuvreux De Virieu in Paris and New
York, serving the institutional market. Prior to Cheuvreux, he was affiliated
with Olde and Co. and Kidder, Peabody as stockbroker. Mr. Schwartz earned his
B.A. and M.A. degrees from Boston University.
Each portfolio manager has entered into an employment contract with
Pilgrim.
For information on the portfolio managers for Lexington Natural Resources
Trust, please refer to Proposal 5a.
-15-
<PAGE>
D. Evaluation by the Board of Directors/Trustees:
In approving the Proposed Agreements the Boards considered a number of
factors, including: (1) the performance of the mutual funds to which Pilgrim
currently serves as investment adviser; (2) the depth and experience of Pilgrim
and the financial strength of ReliaStar; (3) the fact that the advisory fees
imposed under the Proposed Agreements are identical to those imposed by LMC; (4)
in the case of Lexington Natural Resources Trust, the fact that the sub-adviser
will remain unchanged (5) Pilgrim's representation that it will not seek to
increase the rate of advisory fees paid by the Funds for a period of at least
two years, and that it will keep any existing expense limitation arrangements in
effect for a period of at least two years; (6) the projected expense ratios for
each Fund; (7) the commonality of terms of the Proposed Agreements and Current
Agreements; and (8) the fairness of the compensation payable to Pilgrim under
the Proposed Agreements in light of the services to be provided. In addition,
the Boards of Directors/Trustees, including the Independent Directors/Trustees,
considered various materials and representations provided by Pilgrim, and were
advised by independent legal counsel with respect to these matters.
Based upon their reviews, the Boards have determined that the Proposed
Agreements are in the best interests of the Funds and their shareholders.
Accordingly, after consideration of the factors described above and such other
factors and information it considered relevant, the Board of Directors/Trustees
of each Fund, including all of the Independent Directors/Trustees, approved the
Proposed Agreements and recommended that each Fund's shareholders vote FOR the
Proposed Agreement.
E. Vote Required:
Approval of the Proposed Agreements requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund, which, for this
purpose, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares of the Fund
present at the Meeting, if more than 50% of the outstanding shares of the Fund
are represented at the Meeting in person or by proxy.
F. Board Recommendation:
The Board of Directors/Trustees of each Fund recommends that you VOTE FOR
this Proposal. Should any Proposed Agreement not be approved by shareholders, or
the Lexington Acquisition not be completed, the Current Agreement for that Fund
will continue in effect. Should any Proposed Agreement not be approved by
shareholders, and the Lexington Acquisition is completed, Pilgrim may
nonetheless serve as investment adviser to that Fund at the lesser of the fees
that would be paid under the Proposed Agreement or Pilgrim's cost to render
services to the Fund until such time as the Directors/Trustees determine an
appropriate course of action. Under the agreement between ReliaStar and LGAM,
the Lexington Acquisition is conditioned upon approval of the Proposed
Agreements representing at least 90% of the aggregate assets of all the
Lexington Funds and the approval by shareholders of certain specific Lexington
Funds, including your Funds.
-16-
<PAGE>
PROPOSAL 3
----------
THE APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT TO
--------------------------------------------------------
TAKE EFFECT UPON THE COMPLETION OF THE PROPOSED ACQUISITION OF
--------------------------------------------------------------
RELIASTAR FINANCIAL CORP. BY ING GROUP
--------------------------------------
A. General Information:
As described earlier, certain transactions may result in the "assignment"
of an investment company's investment advisory agreement. When an assignment
occurs, the agreement terminates. The ReliaStar Acquisition described above may
constitute a "change of control" of the adviser for purposes of the 1940 Act,
which would cause the "assignment" and resulting termination of those investment
management agreements between the Funds and Pilgrim approved by you under
Proposal 2 (the "First Pilgrim Management Agreements").
The Independent Directors/Trustees reviewed the potential assignment and
termination of the First Pilgrim Management Agreements in detail at their
meetings held on May 22 and May 23, 2000. On May 23, 2000 the full Boards,
including a majority of the Independent Directors/Trustees, after giving due
consideration to the ReliaStar Acquisition, voted to approve a second new
investment management agreement between each Fund and Pilgrim (the "Second
Pilgrim Management Agreements") subject to the approval of Fund shareholders.
The Second Pilgrim Management Agreements would become effective upon the closing
of the ReliaStar Acquisition.
If approved by shareholders, the Second Pilgrim Management Agreements will
remain in effect for two years from the date they take effect and, unless
terminated early, would continue from year to year thereafter, provided that
each such continuance is approved annually with respect to each Fund (i) by the
applicable Fund's Board of Directors/Trustees, or by the vote of a majority of
the outstanding voting securities of the particular Fund, and in either case,
(ii) by a majority of the Fund's Independent Directors/Trustees who are also not
parties to the Second Pilgrim Management Agreements.
B. The Terms of the Proposed Agreements:
The terms of the Second Pilgrim Management Agreements will be identical to
the terms of the First Pilgrim Management Agreements. There will be no change in
fees, and the agreements will be the same in all respects. In addition, it is
expected that the same portfolio managers through the same sub-advisers who
would be responsible for your Funds under the First Pilgrim Management
Agreements would continue to be responsible for those same Funds under the
Second Pilgrim Management Agreements.
C. Evaluation by the Board of Directors/Trustees:
In approving the Second Pilgrim Management Agreements, the Boards
considered a number of factors specific to the acquisition of ReliaStar by ING.
Among others, these factors included: (1) the substantially greater financial
strength of ING and the overall impact the ReliaStar Acquisition would have on
Pilgrim and, ultimately, the Funds; (2) ING's representation that it will abide
by the agreement made by ReliaStar to LGAM, which was communicated to the
Directors/Trustees, that advisory fees imposed under the First Pilgrim
Management
-17-
<PAGE>
Agreements will be identical to those fees currently imposed by LMC; (3) ING's
representation that Pilgrim will not seek to increase the rate of advisory fees
paid by the Funds for a period of at least two years from the effective date of
the First Pilgrim Management Agreements, and that all existing expense
limitation arrangements will remain in effect for a period of at least two years
from the effective date of the First Pilgrim Management Agreements; (4) the
representation by ING that after the ReliaStar Acquisition, Pilgrim will remain
the investment adviser to the Funds, (5) the representation that ING, after the
ReliaStar Acquisition, will make every reasonable effort to keep Pilgrim senior
management and investment personnel in place and that ING will not intentionally
affect the plans for portfolio management, marketing and fund administration
discussed with the Boards by Pilgrim including the intent to retain many of the
current Fund portfolio managers; and (6) the Board's understanding that ING will
make every reasonable effort to ensure that the level and quality of service to
the Funds and their shareholders will not be diminished by the addition to
Pilgrim of assets currently managed by ING.
Based upon their review, the Boards have determined that the Second Pilgrim
Management Agreements are in the best interest of the Funds and their
shareholders. Accordingly, after consideration of all the factors mentioned
above and such other factors and information it considered relevant, and
particularly the fact that the Second Pilgrim Management Agreements would be
identical to the First Pilgrim Management Agreements and that there would be no
change in the fees paid to Pilgrim, the Board of Directors/Trustees of each Fund
unanimously approved the Second Pilgrim Management Agreements to take effect
upon the completion of the ReliaStar Acquisition and recommended that each
Fund's shareholders vote FOR the Second Pilgrim Management Agreements.
D. Vote Required:
Approval of the Second Pilgrim Management Agreements will require the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund, which, for this purpose, means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Fund, or (2) 67% or more of the
shares of the Fund present at the Meeting, if more than 50% of the outstanding
shares of the Fund are represented at the Meeting in person or by proxy.
E. Board Recommendation:
The Board of Directors/Trustees of each Fund recommends that you VOTE FOR
this Proposal. Should the ReliaStar Acquisition not be completed, the First
Pilgrim Management Agreements will continue in effect, so long as they were
approved by shareholders under Proposal 2. Should either Second Pilgrim
Management Agreement not be approved by shareholders, and the ReliaStar
Acquisition is completed, the First Pilgrim Management Agreement would
terminate. Pilgrim could nonetheless continue to serve as investment adviser to
that Fund at the lesser of the fees that would be paid under the proposed Second
Pilgrim Management Agreement or Pilgrim's cost to render services to the Fund
until such time as the Directors/Trustees determine an appropriate course of
action.
PROPOSAL 4a
-----------
-18-
<PAGE>
THE APPROVAL OF A NEW INVESTMENT SUB-ADVISER AGREEMENT
------------------------------------------------------
FOR THE LEXINGTON NATURAL RESOURCES TRUST TO TAKE EFFECT UPON
-------------------------------------------------------------
THE COMPLETION OF THE PROPOSED ACQUISITION OF LEXINGTON GLOBAL
--------------------------------------------------------------
ASSET MANAGERS, INC BY RELIASTAR FINANCIAL CORP.
------------------------------------------------
(Only shareholders of Lexington Natural Resources Trust will consider and vote
on this proposal.)
A. General Information:
Currently, LMC has engaged Market Systems Research Advisors, Inc. ("MSR")
to assist it in the management of Lexington Natural Resources Trust (the
"Current Sub-Adviser Agreement"). If the Lexington Acquisition is completed,
there may be an "assignment" of the Current Sub-Adviser Agreement. In order to
ensure continuity in the management of the Fund, Pilgrim has agreed to enter
into an agreement with MSR (the "Proposed Sub-Adviser Agreement") if
shareholders of the Fund approve the Investment Management Agreement with
Pilgrim. Under the Proposed Sub-Adviser Agreement, MSR would provide the same
services it currently provides under the agreement with LMC. There would be no
change in the sub-advisory fee. If the Proposed Sub-Adviser Agreement is
approved by shareholders, it would become effective upon the closing of the
Lexington Acquisition. (The form of the Proposed Sub-Adviser Agreement is
attached hereto as Exhibit B.)
The Independent Trustees met on April 11, April 17 and April 18, 2000, to
consider the Lexington Acquisition and, among other things, the Proposed Sub-
Adviser Agreement and the impact the Lexington Acquisition would have on the
Current Sub-Adviser Agreement. On April 18, 2000, the Fund's full Board of
Trustees, including all of the Independent Trustees, approved the
Proposed Sub-Adviser Agreement between Pilgrim and MSR. The Board also directed
that the Proposed Sub-Adviser Agreement be submitted to shareholders for
approval at the Meeting.
If approved by the Shareholders, the Proposed Sub-Adviser Agreement would
remain in effect for two years from the date it takes effect and, unless
terminated early, would continue from year to year thereafter, provided that
each such continuance is approved annually (i) by the Fund's Board of Trustees,
or by the vote of a majority of the outstanding voting securities of the Fund,
and in either case, (ii) by a majority of the Fund's Independent Trustees who
are also not parties to the Proposed Sub-Adviser Agreement.
B. The Terms of the Proposed Sub-Adviser Agreement:
Under the Proposed Sub-Adviser Agreement, MSR would act as Sub-Adviser to
the Fund. In this capacity, MSR, subject to the supervision of Pilgrim and the
Trustees of the Fund, would provide a continuous investment program of
evaluation, investment, sales, and reinvestment of the Fund's assets. The
Proposed Sub-Adviser Agreement is the same in many respects to the Current Sub-
Adviser Agreement. Even though the fee that would be paid by Pilgrim to MSR
would be calculated differently under the Proposed Sub-Adviser Agreement, it is
effectively the same as the fee paid under the Current Sub-Adviser Agreement.
The Current Sub-Adviser Agreement provides that the sub-adviser be paid a
percentage of the fee paid by the Fund to LMC after any reimbursement LMC might
make to the Fund. Under the Proposed Sub-Adviser Agreement, the sub-adviser is
paid a specific fee which is then subject proportionately to any reimbursements
to the Fund under a separate Expense Limitation Agreement.
The Proposed Sub-Adviser Agreement provides that MSR would not be liable
for any act or omission related to any portfolio for which MSR is not the sub-
adviser to that series nor for any act or omission related to any services
provided except by reason of willful misfeasance, bad faith or gross negligence
in the performance of those duties, or by reason of reckless disregard of its
obligations and duties under the Proposed Sub-Adviser Agreement. The Proposed
Sub-Adviser Agreement can be terminated by Pilgrim on 60 days' notice to MSR; by
the Fund, the Fund's Board of Trustees or by vote of the shareholders on 60
days' notice; or by MSR on three months' notice.
In addition, Pilgrim would not be subject to liability to the Fund, and
would be indemnified by the Fund, for any act or omission in the course of, or
in connection with, a Sub-Adviser's rendering services under a Sub-Adviser
Agreement, except by reason of willful
-19-
<PAGE>
misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations and duties under the Agreement.
The Current Sub-Adviser Agreement became effective on September 30, 1991,
and was last approved by shareholders on September 30, 1991. During the Fund's
last fiscal year, MSR received $169,353 from LMC under the Current Sub-Adviser
Agreement.
The Fund is expected to be managed by a portfolio management team
consisting of:
Robert M. DeMichele: Mr. DeMichele is Chairman and Chief Executive Officer
of the LMC and is also Chairman of the Investment Strategy Group. In addition,
he is President of LGAM, the LMC's parent company. He holds similar offices in
other companies owned by LGAM, 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, Paribas, 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.
in Economics and an M.B.A. in Finance from Cornell University.
Frank A. Peluso: Mr. Peluso is President and Chief Executive Officer of
Market Systems Research Advisors, Inc. 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.
The following persons are directors and/or senior officers of MSR: Robert
M. DeMichele, Chairman of the Board; Frank A. Peluso, President and Chief
Executive Officer; David S. Zocchi, Senior Vice President, Marketing and Client
Services; Cecella Waterman-Santigo, Vice President, Marketing and Client
Services and Margaret Inoue, Vice President.
The business address of MSR and of Mr. DeMichele, Mr. Zocchi and Ms.
Waterman-Santigo is Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663. The
business address for Mr. Peluso and Ms. Inoue is 80 Maiden Lane, New York, New
York, 10038. MSR is 65% owned by LGAM and 35% owned by Frank A. Peluso.
C. Adviser Fees:
As compensation for its services as investment adviser, the Fund would pay
Pilgrim a monthly advisory fee at the annual rate of 1.00% of the average daily
net assets of the Fund. Pilgrim would pay MSR an annual investment sub-advisory
fee of 0.50% of the Fund's average daily net assets. The investment sub-advisory
fee is paid by Pilgrim, not the Fund.
D. Board Considerations:
In considering whether to recommend that the Proposed Sub-Adviser Agreement
be approved by shareholders, the Board of Trustees considered, among other
things, the qualifications of MSR's professional staff and information related
to MSR's past performance. In addition, the Board considered the importance of
maintaining continuity of management should Pilgrim become the Fund's investment
adviser. Moreover, the Board noted that the
-20-
<PAGE>
sub-advisory fees effectively would remain the same and that the Proposed
Sub-Adviser Agreement would be materially the same as the Current Sub-Adviser
Agreement.
E. Required Vote:
Approval of the Proposed Sub-Adviser Agreement requires the affirmative
vote of a "majority of the outstanding voting securities" of the Fund, which,
for this purpose, means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of the Fund, or (2) 67% or more of the shares of the
Fund present at the Meeting, if more than 50% of the outstanding shares of the
Fund are represented at the Meeting in person or by proxy.
F. Board Recommendation:
The Board of Trustees recommends that you VOTE FOR approval of the Proposed
Sub-Adviser Agreement between Pilgrim and MSR. If the Proposed Sub-Adviser
Agreement is not approved, the Trustees will determine what action, if any,
should be taken. The Trustees may consider proposing a different sub-adviser, or
having no sub-adviser. The effectiveness of the Proposed Sub-Adviser Agreement,
if approved by shareholders, is conditioned on the completion of the Lexington
Acquisition and the approval of the First Pilgrim Management Agreement.
PROPOSAL 4b
-----------
THE APPROVAL OF A NEW INVESTMENT SUB-ADVISER AGREEMENT FOR THE
--------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST TO TAKE EFFECT UPON THE
---------------------------------------------------------
COMPLETION OF THE PROPOSED ACQUISITION OF RELIASTAR FINANCIAL
-------------------------------------------------------------
CORP. BY ING GROEP N.V.
-----------------------
(Only shareholders of Lexington Natural Resources Trust. will consider and vote
on this proposal.)
A. General Information:
--------------------
Should shareholders of the Fund approve the sub-advisory agreement between
Pilgrim and MSR as proposed in Proposal 5a, that agreement (the "First
Pilgrim Sub-Adviser Agreement") would become effective upon the completion of
the Lexington Acquisition. The First Pilgrim Sub-Adviser Agreement, however, may
terminate upon the completion of the ReliaStar Acquisition. In order to ensure
continuity in the management of the Fund, Pilgrim would enter into a second
agreement with MSR (the "Second Pilgrim Sub-Adviser Agreement") to take effect
upon the completion of the ReliaStar Acquisition if shareholders of the Fund
approve the Second Pilgrim Management Agreement with Pilgrim. Under the Second
Pilgrim Sub-Adviser Agreement, MSR would provide the same services it
currently provides under the agreement with LMC and which it proposes to provide
under the First Pilgrim Sub-Adviser Agreement. As with the First Pilgrim Sub-
Adviser Agreement, there will be no change in the sub-advisory fee.
The Independent Trustees reviewed the Second Pilgrim Sub-Adviser Agreement
in detail at its meetings on May 22 and May 23, 2000. On May 23, 2000, the
Fund's full Board of Trustees, including a majority of the Independent Trustees,
voted unanimous to approve the Second Pilgrim Sub-Adviser Agreement between
Pilgrim and MSR. The Board also directed that the Second Pilgrim Sub-Adviser
Agreement be submitted to shareholders for approval at the Meeting.
If the Second Pilgrim Sub-Adviser Agreement is approved by shareholders, it
would become effective upon the closing of the ReliaStar Acquisition. If
approved by shareholders, the Second Pilgrim Sub-Adviser Agreement would remain
in effect for two years from the date it takes effect and, unless terminated
early, would continue from year to year thereafter, provided that each such
continuance is approved annually (i) by the Fund's Board of Trustees, or by the
vote of a majority of the outstanding voting securities of the Fund, and in
either case, (ii) by a majority of the Fund's Independent Trustees who are also
not parties to the Second Pilgrim Sub-Adviser Agreement.
-21-
<PAGE>
B. The Terms of the Second Pilgrim Sub-Adviser Agreement:
------------------------------------------------------
The terms of the Second Pilgrim Sub-Adviser Agreement will be identical to
the terms of the First Pilgrim Sub-Adviser Agreement, including the amount of
the fee paid to MSR. In addition, it is expected that the Fund will be managed
by the same portfolio management team as is anticipated under the First Pilgrim
Sub-Adviser Agreement.
C. Board Considerations:
---------------------
In considering whether to recommend that the Second Pilgrim Sub-Adviser
Agreement be approved by shareholders, the Board of Trustees considered all of
the same factors it considered in approving the First Pilgrim Sub-Adviser
Agreement. In addition, the Board took into account the representations by
Pilgrim that the terms of the Second Pilgrim Sub-Adviser Agreement would be
identical to the First Pilgrim Sub-Adviser Agreement and that there would be no
change in the fee paid to MSR.
D. Required Vote:
--------------
Approval of the Second Pilgrim Sub-Adviser Agreement requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund, which, for this purpose, means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Fund, or (2) 67% or more of the
shares of the Fund present at the Meeting, if more than 50% of the outstanding
shares of the Fund are represented at the Meeting in person or by proxy.
E. Board Recommendation:
---------------------
The Board of Trustees recommends that you VOTE FOR approval of the Second
Pilgrim Sub-Adviser Agreement between Pilgrim and MSR. If the Second Pilgrim
Sub-Adviser Agreement is not approved, the Trustees will determine what action
should be taken. The Trustees may consider proposing a different sub-adviser, or
having no sub-adviser. The effectiveness of the Second Pilgrim Sub-Adviser
Agreement, if approved by shareholders, is conditioned on the completion of the
ReliaStar Acquisition and the approval of the Second Pilgrim Management
Agreement.
PROPOSAL 6
----------
THE RATIFICATION OF AUDITORS
----------------------------
A. General Information:
The Boards of Directors/Trustees, including a majority of the Independent
Directors/Trustees, unanimously appointed KPMG LLP as independent certified
public accountants to examine and to report on the financial statements of the
Funds for the fiscal year ending December 31, 2000. Such appointment was
expressly conditioned upon the right of the shareholders of the Funds to
terminate the employment of KPMG LLP by a vote of the majority
-22-
<PAGE>
of the outstanding voting securities at any meeting called for the purpose of
voting on such termination. The Board's selection of KPMG LLP is hereby
submitted to shareholders for ratification. Because the Funds are not required
to hold annual meetings of shareholders, the ratification of the selection by
the Boards of Directors/Trustees, of KPMG LLP, or any other independent
certified public accountant, may not be presented to shareholders in the future.
As the independent auditors, KPMG LLP audits and certifies each Fund's
financial statements. KPMG LLP also reviews each Fund's Annual Reports to
shareholders and filings with the SEC. Neither KPMG LLP nor any of its partners
has any direct or material indirect financial interest in any Fund.
Representatives of KPMG LLP are not expected to attend the Meeting, but have
been given the opportunity to make a statement if they so desire, and will be
available should any matter arise requiring their participation.
B. Required Vote:
The favorable vote of a majority of the shares of each Fund present in
person or by proxy at the Meeting is required to ratify the selection of the
KPMG LLP as the independent certified public accountants.
C. Board Recommendation:
The Boards of Directors/Trustees recommend that you VOTE FOR the
ratification of the selection of KPMG LLP as independent certified public
accountants to examine and to report on the financial statements of the Fund for
the fiscal year ending December 31, 2000. If this Proposal 6 is not approved,
the Boards of Directors/Trustees will take such action as they deem appropriate,
which may include retention of another accounting firm or re-proposal of KPMG
LLP to the shareholders of the Funds.
PROPOSAL 7
----------
APPROVAL OF THE AMENDED AND RESTATED ARTICLES OF
------------------------------------------------
INCORPORATION
-------------
(Only shareholders of Lexington Emerging Markets Fund, Inc. will consider and
vote on this proposal.)
A. General Information:
Mutual funds, such as the Fund are required to organize under the laws of a
state, and to create and be bound by organizational documents which outline how
they will operate. The Fund is organized as a Maryland corporation, and is
governed by its Articles of Incorporation (the "Current Articles"). In an
attempt to ensure that the Lexington Funds that are Maryland corporations
operate consistently under the same form of Articles of Incorporation, the Board
of Directors is taking this opportunity to ask shareholders to approve Amended
and Restated Articles of Incorporation (the "Proposed Articles") under an
identical form. This will enable all of the Lexington Funds that are Maryland
corporations to take advantage of all operational opportunities provided to them
under Maryland law. In this regard, the Board of Directors has determined that
it is in the best interest
-23-
<PAGE>
of the Fund and its shareholders to amend and restate the Current Articles. The
form of Proposed Articles is included with this proxy statement as Exhibit C.
The Fund will remain a Maryland corporation, and the interpretation of the
Proposed Articles will continue to be governed by Maryland law. In addition, the
operations of the Fund will remain subject to the provisions of the 1940 Act and
the rules promulgated thereunder. Finally, the total number of shares of stock
which the Fund has authority to issue will remain at one billion (1,000,000,000)
shares of which five hundred million (500,000,000) are designated "Lexington
Emerging Markets Fund Series", and of which five hundred million (500,000,000)
are unclassified. The par value of the shares of each class is one tenth of one
cent ($.001) per share, with an aggregate par value of all the authorized shares
being one million dollars ($1,000,000.00). No shares have been further
reclassified.
Please review the entire Proposed Articles before you decide how to vote on
this proposal.
B. The Differences between the Current Articles and the Proposed Articles:
The Proposed Articles are similar to the Current Articles in all material
respects. The Proposed Articles would give the Maryland corporations organized
under them the flexibility to classify their shares into Series and to further
classify their shares into Classes within a Series. The Fund is already
permitted to do this under the Current Articles. In addition, the quorum and
voting sections of the Proposed Articles are the same as provided in the Current
Articles. The presence in person or by proxy of the holders of one-third of the
shares of stock entitled to vote would constitute a quorum in order to conduct a
meeting of shareholders. And, unless the Articles of Incorporation provide
otherwise, the vote of a concurrence of a majority of the aggregate number of
shares entitled to vote would be permitted to approve or authorize an action
even though Maryland law would require concurrence by a greater number than a
majority. As provided for in the Current Articles, all shares vote as a single
class except where regulatory requirements dictate otherwise or where a matter
affects only one or more Series or Classes, in which case, only the holders of
shares of those Series or Classes will be entitle to vote on that matter.
Pilgrim has informed the Board that it currently does not intend to classify the
Fund's shares into multiple classes.
At a meeting held on April 18, 2000, the Directors approved the Proposed
Articles and recommended that they be presented to shareholders.
C. Required Vote:
The favorable vote of a majority of the shares of the Fund present in
person or by proxy at the Meeting is required to approve the Amended and
Restated Articles of Incorporation.
D. Board Recommendation:
The Board of Directors recommends that shareholders VOTE FOR the Proposed
Articles. In the event that the Proposed Articles are not approved by the
shareholders of the Fund, the Current Articles for the Fund would remain in
effect, and the Board of Directors of the Fund will consider what action, if
any, should be taken.
-24-
<PAGE>
PROPOSAL 8
----------
APPROVAL OF THE AMENDED AND RESTATED DECLARATION OF TRUST
---------------------------------------------------------
(Only shareholders of Lexington Natural Resources Trust will consider and vote
on this proposal.)
A. General Information:
Mutual funds, such as the Fund, are required to organize under the laws of
a state, and to create and be bound by organizational documents which outline
how they will operate. The Fund is organized as a Massachusetts business trust,
and is governed by its Declaration of Trust (the "Current Declaration"). In an
attempt to ensure that the Fund is able to take advantage of all operational
opportunities provided to it under Massachusetts business trust law, the Board
of Trustees of the Fund has determined that it is in the best interest of the
Fund and its shareholders to amend and restate the Current Declaration. In
addition, in contemplation of the completion of the Lexington Acquisition and
Pilgrim's future marketing plans for the Funds, the Trustees determined that
Fund should have the ability to divide its shares into separate classes, which
it cannot do under the Current Declaration. Pilgrim has, however, informed the
Board that it currently does not intend to classify the Fund's shares into
multiple classes. The form of amended and restated Declaration of Trust (the
"Proposed Declaration") is included with this proxy statement as Exhibit D.
The Fund will remain a Massachusetts business trust, and the interpretation
of the Proposed Declaration will continue to be governed by Massachusetts law.
In addition, the operations of the Fund will remain subject to the provisions of
the 1940 Act and the rules promulgated thereunder.
The following summarizes the material changes contained in the Proposed
Declaration. The Proposed Declaration also contains certain non-material changes
which are not described here. Because this is a summary, it does not detail all
of the changes in the Proposed Declaration. The provisions of the Proposed
Declaration would not negatively alter the rights and privileges of current Fund
shareholders under the Current Declaration. Please review the entire Proposed
Declaration before you decide how to vote on this proposal.
B. The Differences between the Current Declaration and the Proposed
Declaration:
Shareholders are being asked to approve the Proposed Declaration which
would give the Fund the flexibility to add Series and to designate one or more
Classes within a Series. The amendments would allow the Fund to classify its
shares in separate Series of shares of beneficial interest. A Series could be
further classified by the Board of Trustees into two or more Classes of shares
that may be invested together in the common investment portfolio in which the
Series is invested. All shares of the Fund shall be identical to all other
shares of the Fund, except that there may be variations between different
Classes as to allocation of expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights and conditions
under which the Classes shall have separate voting rights. Liabilities,
expenses, costs, charges and reserves related to the distribution of, and other
identified expenses that should properly be allocated to, the shares of a
particular Class may be charged to and borne solely by that Class. Those
expenses may be appropriately reflected (in a manner determined by the
-25-
<PAGE>
Trustees) and cause differences in the net asset value attributable to, and the
dividend, redemption and liquidation rights of, the shares of different Classes.
At a meeting held on April 18, 2000, the Trustees approved the Proposed
Declaration and recommended that it be presented to shareholders.
C. Required Vote:
Approval of the Proposed Declaration will require the affirmative vote of a
majority of the shares outstanding entitled to vote at the Meeting.
D. Board Recommendation:
The Board of Trustees recommends that shareholders VOTE FOR the Proposed
Declaration. In the event that the Proposed Declaration is not approved by the
shareholders of the Fund, the Current Declaration for the Fund will remain in
effect, and Board of Trustees of the Fund will consider what action, if any,
should be taken.
PROPOSAL 9
----------
OTHER MATTERS
-------------
The Board of Directors/Trustees of each Fund knows of no other matters to
be presented at the Meeting other than those set forth in this proxy statement.
If any other business should come before the Meeting, the persons named on the
accompanying proxy card will vote thereon in accordance with their best
judgment.
PART 3 - MORE ON PROXY VOTING
A. Who Can Vote:
Only shareholders of record of the Funds at the close of business on the
Record Date, May 23, 2000, may vote at the Meeting. As of the Record Date, each
of the Funds had the number of beneficial shares issued and outstanding listed
below, each share being entitled to one vote:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Fund Name Shares Entitled to Vote
--------------------------------------------------------------------
<S> <C>
Lexington Emerging Markets Fund, Inc. 3,677,517.823
--------------------------------------------------------------------
Lexington Natural Resources Trust 2,338,802.991
--------------------------------------------------------------------
</TABLE>
B. Information Concerning Outstanding Shares:
Shares of the Funds are held exclusively by insurance companies for the
purpose of funding variable annuity contracts and variable life insurance
policies. The insurance companies vote these shares in accordance with the
directions of the contract holders and policy owners. The number of votes a
contract holder or policy owner may direct is equal to the contract or policy
value invested in the Fund's shares on May 23, 2000, divided by the net asset
value of one share of the Fund on that date. The number of votes that each
contract holder may direct (or for
-26-
<PAGE>
which a participant may give instructions under group contracts where the
contract holder permits such instructions) or each policy owner may direct, is
stated in the authorizations and furnished with this Proxy Statement. Shares for
which no instructions have been given by participants under a group contract
will be voted in the same proportion as shares for which instructions have been
given under the same contract. Undirected shares of the Fund will be voted in
the same proportion as directed shares. Directions or instructions may be
revoked by written notice to the insurance carrier.
To the best knowledge of each Fund, the following shareholders beneficially
owned 5% or more of the outstanding shares of the Fund as of the Record Date:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Percent Owned Percent Owned
Fund Name Name and Address of Owner of Record Beneficially
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
C. Quorum Requirements:
At the Meeting, the presence in person or by proxy of shareholders of one-
third of the outstanding shares entitled to vote at the Meeting shall be
necessary and sufficient to constitute a quorum for the transaction of business
by Lexington Emerging Markets Fund, Inc. The presence in person or by proxy of
shareholders of one-half of the outstanding shares entitled to vote at the
Meeting shall be necessary and sufficient to constitute a quorum for the
transaction of business by Lexington Natural Resources Trust. In the event that
a quorum of shareholders is not present for any Fund at the Meeting, the persons
named as proxies shall have the power to adjourn the Meeting. Such meeting shall
be reconvened without additional notice within a period not to exceed 120 days
from the date originally set for the Meeting. In the event a quorum is present
but sufficient votes to approve a proposal are not received, the persons named
as proxies may propose one or more adjournments to permit further solicitation
of proxies. If this should occur, we will vote proxies for or against a motion
to adjourn in the same proportion to the votes received in favor or against the
proposal. A shareholder vote may be taken on one or more of the proposals in
this proxy statement prior to any adjournment if a quorum is present and
sufficient votes have been received.
If a proxy is marked with an abstention, the shares represented thereby
will be considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business but will not be voted. For
this reason, abstentions will have the affect of a "no" vote for purposes of
obtaining the requisite approval of some of the proposals.
D. The Proxy Solicitation Process:
The Board of Directors/Trustees of each Fund is soliciting your proxy to
vote on the matters described in this proxy statement. We expect to solicit
proxies primarily by mail, but
-27-
<PAGE>
representatives of Lexington Funds Distributors, Inc. or its affiliates or
others may communicate with you by mail or by telephone or other electronic
means to discuss your vote.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD
PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND
DELAY. NO POSTAGE IS NECESSARY.
PART 4 - ADDITIONAL INFORMATION:
A. Section 15(f) of the 1940 Act:
Section 15(f) of the 1940 Act provides that, when a change in the control
of an investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection therewith if the
following two conditions are satisfied:
(1) An "unfair burden" must not be imposed on the investment company as a
result of the transaction relating to the change of control, or any
express or implied terms, conditions or understandings applicable
thereto. The term "unfair burden" includes any arrangement during the
two-year period after the change in control whereby the investment
adviser (or predecessor or successor adviser), or any interested
person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or
its securities holders (other than fees for bona fide investment
adviser or other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or on
behalf of the investment company (other than fees for bona fide
principal underwriting services). No such compensation arrangements
are contemplated as a result of either the Lexington Acquisition or
the ReliaStar Acquisition.
(2) During the three-year period immediately following consummation of the
transactions, at least 75% of each Fund's Board of Directors/Trustees
must not be "interested persons" of the investment adviser or
predecessor investment adviser within the meaning of the 1940 Act.
Pilgrim Investments, Inc. and its affiliates have agreed to use their best
efforts to assure compliance with the conditions of Section 15(f) of the 1940
Act.
B. Information Regarding Committees, Meetings and Compensation of the Existing
Boards of Directors/Trustees:
On November 29, 1999, the Boards created an Audit Committee composed of Dr.
McCosh and Messrs. Preston (now deceased) and Miller. The committee did not hold
any meetings during the last fiscal year of the Funds.
Each Board of Directors/Trustees met five times during the last fiscal
year. Each of the Directors/Trustees attended at least 75% of the total number
of meetings of the Board of Directors/Trustees.
-28-
<PAGE>
Each Director/Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Directors/Trustees or any committee thereof up to a
maximum of $9,000 per year for Directors/Trustees living outside the U.S. and
$6,000 per year for Directors/Trustees living within the U.S. Each
Director/Trustee who is not an affiliate of LMC is compensated for his or her
services according to a fee schedule which recognizes the fact that each
Director/Trustee also serves as a Director/Trustee of other investment companies
advised by LMC. Each Director/Trustee receives a fee, allocated among all
investment companies for which the Director/Trustee serves.
Set forth below is information regarding compensation paid or accrued
during the last fiscal year for each existing Director/Trustee:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Total Compensation Number of Directorships
Name of Director/Trustee from Fund Complex in Fund Complex
----------------------------------------------------------------------------------------------
<S> <C> <C>
S.M.S. Chadha $24,006 15
----------------------------------------------------------------------------------------------
Robert M. DeMichele $ 0 15
----------------------------------------------------------------------------------------------
Beverly C. Duer $29,656 15
----------------------------------------------------------------------------------------------
Barbara R. Evans $ 0 15
----------------------------------------------------------------------------------------------
Richard M. Hisey $ 0 8
----------------------------------------------------------------------------------------------
Jerard F. Maher $22,976 15
----------------------------------------------------------------------------------------------
Andrew M. McCosh $24,006 15
----------------------------------------------------------------------------------------------
Donald B. Miller $24,006 15
----------------------------------------------------------------------------------------------
Frances Olmsted* $16,800 N/A
----------------------------------------------------------------------------------------------
John G. Preston $24,006 15
----------------------------------------------------------------------------------------------
Margaret W. Russell* $18,000 N/A
----------------------------------------------------------------------------------------------
Philip C. Smith* $19,200 N/A
----------------------------------------------------------------------------------------------
Allen H. Stowe $12,712 15
----------------------------------------------------------------------------------------------
Frances A. Sunderland* $16,800 N/A
----------------------------------------------------------------------------------------------
</TABLE>
* Retired
The following table shows the annual benefits payable to certain
Directors/Trustees who are now, or will be eligible for benefits under the
Lexington Group of Funds' Retirement Plan for Eligible Directors/Trustees,
effective as of September 12, 1995, and amended and restated on April 18, 2000
(the "Retirement Plan"). The Retirement Plan was amended by the
Directors/Trustees on April 18, 2000 to, among other things, eliminate the age a
Director/Trustee must attain in order to receive retirement benefits. As
amended, a Director/Trustee would be eligible for retirement benefits upon
completion of ten continuous or non-forfeited years of service, as defined in
the Retirement Plan, and service has terminated due to death, disability or
voluntary or involuntary termination other than for "cause," as defined in the
Retirement Plan. Messrs. Duer, Maher, Miller and Stowe have not been nominated
to serve as Directors/Trustees of the Funds after the completion of the
Lexington Acquisition. Therefore, their service will be terminated and their
benefits will commence with the closing of the Lexington Acquisition and will
continue for ten years, in accordance with the terms of the Retirement Plan.
As Advisory Directors/Trustees, the periods of service with the Funds will
continue for Mr. Chadha and Dr. McCosh. They will be eligible for retirement
benefits after more than six years of service, even if the Retirement Plan is
terminated during that period, and they will be eligible to receive those
benefits if their service as Advisory Director/Trustee is terminated before
their term expires or terminates for any reason other than for "cause," as
defined in the Retirement Plan
-29-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Name of Director/Trustee Annual Benefit Date Benefits Expected to End
-------------------------------------------------------------------------------
<S> <C> <C>
Beverly C. Duer $21,750 July 2010
-------------------------------------------------------------------------------
Jerard F. Maher* $18,000 July 2010
-------------------------------------------------------------------------------
Donald B. Miller $21,750 July 2010
-------------------------------------------------------------------------------
Frances Olmsted $16,800 October 1, 2005
-------------------------------------------------------------------------------
Margaret W. Russell $18,000 April 1, 2008
-------------------------------------------------------------------------------
Philip C. Smith $19,200 October 1, 2006
-------------------------------------------------------------------------------
Allen H. Stowe* $18,000 July 2010
-------------------------------------------------------------------------------
Frances A. Sunderland $16,800 April 1, 2006
-------------------------------------------------------------------------------
</TABLE>
* Messrs. Maher and Stowe are eligible to receive benefits under the Retirement
Plan as a result of their prior service as a Trustee of Lexington Convertible
Securities Fund See attached.
C. Officers of the Funds:
The officers of the Funds, their ages, and principal occupations
during the past five years, are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Name and Age as of Position(s)
December 31, 1999 with the Fund Principal Occupation During Past Five Years
----------------- ------------- -------------------------------------------
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Janice Carnicelli Vice President Vice President, Lexington Funds
(Age 40)
------------------------------------------------------------------------------------------------------------------------
Christie Carr-Waldron Treasurer Treasurer, Lexington Funds
(Age 32)
------------------------------------------------------------------------------------------------------------------------
Lisa Curcio Vice President and Senior Vice President and Secretary, Lexington Management
(Age 40) Secretary Corporation; Vice President and Secretary, Lexington Funds
Distributor, Inc.; Secretary, Lexington Global Asset
Managers, Inc.
------------------------------------------------------------------------------------------------------------------------
Robert M. DeMichele (Age 55) President Chairman and Chief Executive Officer, Lexington Management
Corporation; President and Director, Lexington Global Asset
Managers, Inc.; Chairman of the Board, Market Systems
Research, Inc. and Market Systems Research Advisors, Inc.;
Director, The Trenwick Group, The Navigator's Group, Inc.,
Unione Italiana Reinsurance, and Weeden & Co.;
Trustee, Union College and Smith Richardson Foundation.
</TABLE>
-30-
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------
Richard M. Hisey Vice President Executive Vice President (Mutual Funds), Chief Financial
(Age 41) Officer, Managing Director and Director, Lexington
Management Corporation; Chief Financial Officer, Vice
President and Director, Lexington Funds Distributor, Inc.;
Chief Financial Officer, Market Systems Research Advisors,
Inc.; Executive Vice President (Mutual Funds) and Chief
Financial Officer, Lexington Global Asset Mangers, Inc.
------------------------------------------------------------------------------------------------------------------------
Richard J. Lavery Vice President Senior Vice President, Lexington Management Corporation;
(Age 46) Vice President, Lexington Funds Distributor, Inc.
------------------------------------------------------------------------------------------------------------------------
Alfredo Viegas V.P. of Lexington Chief Executive Officer and Senior Portfolio Manager,
(Age 31) Emerging Markets Fund Stratos Advisors, Inc. Senior Portfolio Manager and
Partner, VZB Partners LLC. Prior to 1995, Vice President
and Latin American Equity Strategist for emerging markets,
Salomon Brothers.
------------------------------------------------------------------------------------------------------------------------
Mohammed Zaidi V.P. of Lexington Portfolio Manager, Stratos Advisors, Inc. Portfolio
(Age 30) Emerging Fund Manager, VZB Partners LLC. Prior to 1995, Chief Financial
Officer and Partner, Paradigm Software, Inc.
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The mailing address of each officer of the Funds is P.O. Box 1515, Park 80
West, Plaza Two, Saddle Brook, New Jersey 07663.
The officers of the Funds receive no compensation directly from the Funds
for performing the duties of their offices.
As of the end of the last fiscal year, the Directors/Trustees and officers
as a group owned beneficially less than 1% of all classes of the outstanding
shares of the Funds.
D. The Principal Underwriter:
Lexington Funds Distributor, Inc. is the principal underwriter of the
Funds. It is a wholly owned subsidiary of Lexington Global Asset Managers, Inc.
Lexington Funds Distributor, Inc. has its principal offices at Park 80 West,
Plaza Two, Saddle Brook, New Jersey 07663.
On April 18, 2000, the Boards of Directors/Trustees approved new
Underwriting Agreements on behalf of the Funds pursuant to which Pilgrim
Securities, Inc. will serve as principal underwriter of the Funds effective upon
the closing of the Lexington Acquisition. Pilgrim Securities, Inc. an indirect,
wholly-owned subsidiary of ReliaStar, has its offices at 40 North Central
Avenue, Phoenix, Arizona 85004.
E. The Administrator:
-31-
<PAGE>
LMC also acts as administrator to the Funds and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulating compliance preparation of
financial information for semi-annual and annual reports, preparing registration
statements, calculating net asset values, communicating with shareholders,
supervising the custodian and providing facilities for such services. At the
meetings of the Boards of Directors/Trustees of the Funds on April 18, 2000, the
Directors/Trustees approved a new administrative agreement with Pilgrim Group,
Inc. Under the agreement, each Fund will pay Pilgrim Group, Inc. a fee of 0.10%
of the Fund's average daily net assets for administrative and shareholder
services.
F. Information About Pilgrim:
The table below provides the name, address and principal occupation of each
of the current directors and principal executive officers of Pilgrim. The
address of each director and officer is 40 N. Central Avenue, Suite 1200,
Phoenix, AZ 85004:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Position(s)
Name and Age with the Fund Principal Occupation During Past 5 Years
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert W. Stallings President and CEO Chairman, Chief Executive Officer and President of
(Age 51) Pilgrim Group, Inc. ("Pilgrim Group") (since December
1994); Chairman, Pilgrim Investments, Inc. (since
December 1994); Chairman, Pilgrim Securities, Inc.
("Pilgrim Securities") (since December 1994); President
and Chief Executive Officer of Pilgrim Funding, Inc.
(since November 1999); and President and Chief Executive
Officer of Pilgrim Capital Corporation and its
predecessors since August 1991. Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of
each of the Pilgrim Funds.
---------------------------------------------------------------------------------------------------------------------
James R. Reis Executive Vice Director, Vice Chairman (since December 1994), Executive
(Age 42) President and Assistant Vice President (since April 1995), and Director of
Secretary Structured Finance (since April 1998), Pilgrim Group,
Inc. and Pilgrim Investments; Director (since December
1994) and Vice Chairman (since November 1995) of Pilgrim
Securities; Executive Vice President, Assistant Secretary
and Chief Credit Officer of Pilgrim Prime Rate Trust;
Executive Vice President and Assistant Secretary of each
of the other Pilgrim Funds. Presently serves or has
served as an officer or director of other affiliates of
Pilgrim Capital Corporation.
---------------------------------------------------------------------------------------------------------------------
Stanley Vyner Executive Vice President President and Chief Executive Officer (since August
(Age 49) 1996), Pilgrim Investments; Executive Vice President of
most of the other Pilgrim Funds (since July 1996).
Formerly Chief Executive Officer (November 1993 -
December 1995) HSBC Asset Management Americas, Inc., and
Chief Executive Officer, and Actuary (May 1986 - October
1993) HSBC Life Assurance Co.
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-32-
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------
James M. Hennessy Executive Vice Executive Vice President and Secretary, Pilgrim Capital
(Age 51) President and Secretary Corporation and its predecessors since April 1998.
Executive Vice President and Secretary (since April
1998), Pilgrim Group, Pilgrim Securities and Pilgrim
Investments; Executive Vice President and Secretary of
each of the other Pilgrim Funds. Formerly Senior Vice
President, Pilgrim Capital Corporation (April 1995 -
April 1998).
---------------------------------------------------------------------------------------------------------------------
Michael J. Roland Senior Vice President Senior Vice President and Chief Financial Officer,
(Age 41) and Principal Financial Pilgrim Group, Pilgrim Investments and Pilgrim Securities
Officer (since June 1998); Senior Vice President and Principal
Financial Officer of each of the other Pilgrim Funds. He
served in same capacity from January, 1995 - April, 1997.
Formerly, Chief Financial Officer of Endeaver Group
(April, 1997 to June, 1998).
---------------------------------------------------------------------------------------------------------------------
Robert S. Naka Senior Vice President Senior Vice President, Pilgrim Investments (since
(Age 36) and Assistant Secretary November 1999) and Pilgrim Group, Inc. (since August
1999). Senior Vice President and Assistant Secretary of
each of the other Pilgrim Funds. Formerly Vice
President, Pilgrim Investments (April 1997 - October
1999), Pilgrim Group, Inc. (February 1997 - August 1999).
Formerly Assistant Vice President, Pilgrim Group, Inc.
(August 1995 - February 1997). Formerly Operations
Manager, Pilgrim Group, Inc. (April 1992 - April 1995).
---------------------------------------------------------------------------------------------------------------------
Robyn Ichilov Vice President and Vice President, Pilgrim Investments (since August 1997),
(Age 32) Treasurer Accounting Manager (since November 1995). Vice President
and Treasurer of most of the other Pilgrim Funds.
Formerly Assistant Vice President and Accounting
Supervisor for PaineWebber (June 1993 - April 1995).
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table identifies other investment companies that are advised
by Pilgrim:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Net Assets as of
Company Name April 30, 2000 Pilgrim's Compensation Rate Fee Waiver
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pilgrim SmallCap $ 487,352,154 1.00% of the Fund's average net assets Class A - 1.95%
Growth Fund Class B - 2.60%
Class C - 2.60%
Class M - N/A
Class Q - 1.50%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim MidCap $ 505,057,569 0.75% of the first $500 million of the Class A - 1.60%
Growth Fund Fund's average net assets, 0.675% of the Class B - 2.25%
next $500 million of average net assets, Class C - 2.25%
and 0.65% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.25%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim LargeCap $ 629,253,899 0.75% of the first $500 million of the Class A - 1.60%
Growth Fund Fund's average net assets, 0.675% of the Class B - 2.25%
next $500 million of average net assets, Class C - 2.25%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-33-
<PAGE>
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
and 0.65% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.25%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim High Yield $ 201,495,161 0.60% of the Fund's average net assets Class A - 1.10%
Fund II Class B - 1.75%
Class C - 1.75%
Class M - N/A
Class Q - 1.00%
Class T - 1.40%
----------------------------------------------------------------------------------------------------------------------
Pilgrim Convertible $ 449,844,535 0.75% of the first $500 million of the Class A - 1.60%
Fund Fund's average net assets, 0.675% of the Class B - 2.25%
next $500 million of average net assets, Class C - 2.25%
and 0.65% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.25%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Balanced $ 146,303,153 0.75% of the first $500 million of the Class A - 1.60%
Fund Fund's average net assets, 0.675% of the Class B - 2.25%
next $500 million of average net assets, Class C - 2.25%
and 0.65% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.25%
Class T - 1.75%
----------------------------------------------------------------------------------------------------------------------
Pilgrim Strategic $ 11,296,730 0.45% of the first $500 million of the Class A - 0.95%
Income Fund Fund's average net assets, 0.40% of the Class B - 1.35%
next $250 million of average net assets, Class C - 1.35%
and 0.35% of the average net assets in Class M - N/A
excess of $750 million Class Q - 0.85%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Emerging $ 246,980,379 1.25% of the Fund's average net assets Class A - 2.25%
Countries Fund Class B - 2.90%
Class C - 2.90%
Class M - N/A
Class Q - 1.90%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Worldwide $ 602,711,243 1.00% of the first $500 million of the Class A - 1.85%
Growth Fund Fund's average net assets, 0.90% of the Class B - 2.50%
next $500 million of average net assets, Class C - 2.50%
and 0.85% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.60%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim $ 668,069,444 1.00% of the first $500 million of the Class A - 1.95%
International Fund's average net assets, 0.90% of the Class B - 2.60%
SmallCap Growth next $500 million of average net assets, Class C - 2.60%
Fund and 0.85% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.65%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim $ 85,214,314 1.00% of the first $500 million of the Class A - 1.95%
International Core Fund's average net assets, 0.90% of the Class B - 2.60%
Growth Fund next $500 million of average net assets, Class C - 2.60%
and 0.85% of the average net assets in Class M - N/A
excess of $1 billion Class Q - 1.65%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Money $ 68,739,086 0.50% of average net assets if the Fund Class A - 1.50%
Market Fund has not invested substantially all of Class B - 2.25%
its assets in another investment Class C - 2.25%
company, 0.15% if substantially all of Class M - N/A
its assets are invested in another Class Q - N/A
investment company Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim MidCap $ 30,431,196 1/12 of 1.00% of the Fund's average Class A - 1.75%
Value Fund daily net assets during the month Class B - 2.50%
(approximately 1.00% on an annual basis) Class C - 2.50%
Class M - 2.25%
Class Q - 1.75%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim LargeCap $ 40,843,850 1/12 of 1.00% of the Fund's average Class A - 1.75%
Leaders Fund daily net assets during the month Class B - 2.50%
(approximately 1.00% on an annual basis) Class C - 2.50%
Class M - 2.25%
Class Q - 1.75%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Asia-Pacific $ 29,322,354 1/12 of 1.25% of the Fund's average Class A - 2.00%
Equity Fund daily net assets during the month Class B - 2.75%
(approximately 1.25% on an annual basis) Class C - N/A
Class M - 2.50%
Class Q - N/A
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim MagnaCap $ 439,317,385 1.00% of the Fund's average daily net N/A
Fund assets on the first $30 million of net
assets. The annual rate is reduced to
0.75% on net assets from $30 million to
$250 million; to 0.625% on net assets
from $250 million to $500 million; and
to 0.50% on net assets over $500 million
----------------------------------------------------------------------------------------------------------------------
Pilgrim High Yield $ 322,344,790 0.60% of the Fund's average daily net Class A - 1.10%
Fund assets. Class B - 1.85%
Class C - 1.85%
Class M - 1.60%
Class Q - 1.10%
Class T - N/A
----------------------------------------------------------------------------------------------------------------------
Pilgrim Bank and $ 369,566,472 1.00% of the first $30 million of N/A
Thrift Fund average daily net assets, 0.75% of the
next $95 million of average daily net
assets and 0.70% of average daily net
assets in excess of $125 million
----------------------------------------------------------------------------------------------------------------------
</TABLE>
___________________________
* The Money Market Fund will also pay advisory fees to Reserve Management
Company, Inc., the investment adviser of Primary Institutional Fund, a series
of Reserve Institutional Trust, the investment company in which the Money
Market Fund invests substantially all of its assets.
-35-
<PAGE>
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Pilgrim Government $ 112,821,691 0.50% of the Fund's average daily net The annual rate is
Securities Income assets on the first $500 million of net reduced to 0.45% on net
Fund assets. assets from $500 million
to $1 billion, and to
0.40% on net assets in
excess of $1 billion
----------------------------------------------------------------------------------------------------------------------
Pilgrim SmallCap $ 674,376,211 0.75% of the Fund's average daily net N/A
Opportunities Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Mid-Cap $ 137,773,156 1.00% of the Fund's average daily net N/A
Opportunities Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Growth $ 680,447,976 0.75% of the Fund's average daily net N/A
Opportunities Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Growth + $ 808,556,707 1.00% of the Fund's average daily net N/A
Value Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim International $1,570,646,841 1.00% of the Fund's average daily net N/A
Value Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Emerging $ 16,354,604 1.00% of the Fund's average daily net N/A
Markets Value Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Research $ 251,917,222 0.70% of the Fund's average daily net N/A
Enhanced Index Fund assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim High Total $ 92,850,562 0.75% of the Fund's average daily net N/A
Return Fund II assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim High Total $ 236,910,599 0.75% on the first $250 million of N/A
Return Fund aggregate average daily net assets,
0.70% on the next $250 million of such
assets, 0.65% on the next $250 million
of such assets; 0.60% on the next $250
million of such assets, and 0.55% on the
remaining aggregate daily net assets in
excess of $1 billion.
----------------------------------------------------------------------------------------------------------------------
Pilgrim SmallCap $ 105,934,775 0.75% on the first $250,000,000 of Voluntary expense cap of
Opportunities aggregate average daily net assets; 0.90%.
Portfolio of Pilgrim 0.70% on the next $250,000,000 of such
Variable Products assets; 0.65% on the next $250,000,000
Trust of such assets; 0.60% on the next
$250,000,00 of such assets; and 0.55% in
excess of $1 billion of such assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim Growth + $ 131,592,674 0.75% on the first $250,000,000 of Voluntary expense cap of
Value Portfolio of aggregate average daily net assets; 0.80%.
Pilgrim Variable 0.70% on the next $250,000,000 of such
Products Trust assets; 0.65% on the next $250,000,000
of such assets; 0.60% on the next
$250,000,00 of such assets; and 0.55% in
excess of $1 billion of such assets.
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-36-
<PAGE>
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Pilgrim Research $ 28,059,885 0.75% on the first $250,000,000 of Voluntary expense cap of
Enhanced Index aggregate average daily net assets; 0.90%.
Portfolio of Pilgrim 0.70% on the next $250,000,000 of such
Variable Products assets; 0.65% on the next $250,000,000
Trust of such assets; 0.60% on the next
$250,000,00 of such assets; and 0.55% in
excess of $1 billion of such assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim High Yield $ 14,088,451 0.75% on the first $250,000,000 of Voluntary expense cap of
Bond Portfolio of aggregate average daily net assets; 0.80%.
Pilgrim Variable 0.70% on the next $250,000,000 of such
Products Trust assets; 0.65% on the next $250,000,000
of such assets; 0.60% on the next
$250,000,00 of such assets; and 0.55% in
excess of $1 billion of such assets.
----------------------------------------------------------------------------------------------------------------------
Pilgrim International $ 26,029,154 1.00% of aggregate average daily net
Value Portfolio of assets Voluntary expense cap of
Pilgrim Variable 1.00%.
Products Trust
----------------------------------------------------------------------------------------------------------------------
Pilgrim Growth $ 0 0.75% of aggregate average daily net Voluntary expense cap of
Opportunities (Commenced assets 0.90%.
Portfolio of Pilgrim operations on
Variable Products May 1, 2000)
Trust
----------------------------------------------------------------------------------------------------------------------
Pilgrim MagnaCap $ 0 0.75% of aggregate average daily net Voluntary expense cap of
Portfolio of Pilgrim (Commenced assets 0.90%.
Variable Products operations on
Trust May 1, 2000)
----------------------------------------------------------------------------------------------------------------------
Pilgrim MidCap $ 0 0.75% of aggregate average daily net Voluntary expense cap of
Opportunities (Commenced assets 0.90%.
Portfolio of Pilgrim operations on
Variable Products May 1, 2000)
Trust
----------------------------------------------------------------------------------------------------------------------
Pilgrim Prime Rate $1,715,854,189 0.80% of the average daily net assets N/A
Trust (Net assets plus
borrowings)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
G. LMC and Its Agreements With the Funds:
LMC, a wholly-owned subsidiary of LGAM, is located at P.O. Box 1515, Park
80 West Plaza Two, Saddle Brook, New Jersey 07663. LMC and its predecessor
companies were established in 1938. Descendants of Lunsford Richardson, Sr.,
their spouses, trusts and other related entities have a controlling interest in
LGAM. LMC advises private clients as well as the Lexington Funds. The names,
addresses and principal occupation of each director and the principal executive
officer of LMC are:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Name, Age and Address Position with LMC Principal Occupation during the past 5 years
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert M. DeMichele Chairman and Chief Chairman and Chief Executive Officer, Lexington
(Age 55) Executive Officer Management Corporation; President and Director,
Lexington Global Asset Managers, Inc.; Chairman of the
Board, Market Systems Research, Inc. and Market
Systems Research Advisors, Inc.; Director, The
Trenwick Group, The Navigator's Group, Inc.,
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
-37-
<PAGE>
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------------
Unione Italiana Reinsurance, and Weeden & Co.;
Vice Chairman of the Board of Trustees, Union
College and Trustee, Smith Richardson Foundation
-------------------------------------------------------------------------------------------------------------------------
Richard M. Hisey Executive Vice President Executive Vice President (Mutual Funds), Chief
(Age 41) (Mutual Funds), Chief Financial Officer, Managing Director and Director,
Financial Officer, Lexington Management Corporation; Chief Financial
Managing Director and Officer, Vice President and Director, Lexington Funds
Director Distributor, Inc.; Chief Financial Officer, Market
Systems Research Advisors, Inc.; Executive Vice
President (Mutual Funds) and Chief Financial Officer,
Lexington Global Asset Mangers, Inc.
-------------------------------------------------------------------------------------------------------------------------
Stuart S. Richardson Director Director, Lexington Management Corporation; Chairman,
(Age ) Lexington Global Asset Managers, Inc.; Vice Chairman,
Vanguard Cellular Systems, Inc. Prior to January 1986,
Chairman, Richardson-Vicks, Inc.
-------------------------------------------------------------------------------------------------------------------------
Lisa Curcio Senior Vice President and Senior Vice President and Secretary, Lexington
(Age 40) Secretary Management Corporation; Vice President and Secretary,
Lexington Funds Distributor, Inc.; Secretary,
Lexington Global Asset Managers, Inc.
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
The address of each director and officer of LMC is P.O. Box 1515, Park 80
West Plaza Two, Saddle Brook, New Jersey 07663.
The following chart provides information related to LMC's investment
advisory agreements with the Funds:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Date Last Amount of Fee
Approved By Paid During Last
Name of the Fund Date of Agreement Shareholders Fiscal Year
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lexington Emerging Markets Fund, Inc. Jan. 28, 1994 Jan. 21, 1994 $181,306
--------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Sept. 30, 1991 Sept. 30, 1991 $338,700
--------------------------------------------------------------------------------------------------------------------
</TABLE>
H. Submission of Proposals for the Next Meeting of the Fund:
Under each Fund's Articles of Incorporation or Declaration of Trust, as the
case may be, and By-Laws, annual meetings of shareholders are not required to be
held unless necessary under the 1940 Act. Therefore, the Funds do not hold
shareholder meetings on an annual basis. A shareholder proposal intended to be
presented at any meeting hereafter called should be sent to the Fund at PO Box
1515, Saddle Brook, New Jersey 07663, and must be received by the Fund within a
reasonable time before the solicitation relating thereto is made in order to be
included in the notice or proxy statement related to such meeting. The
submission by a shareholder of a proposal for inclusion in a proxy statement
does not guarantee that it will be included. Shareholder proposals are subject
to certain regulations under federal securities law.
-38-
<PAGE>
Exhibit A
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ____, 2000 between [Name of Fund] (the
"Fund"), a [type of entity] and Pilgrim Investments, Inc. (the "Manager"), a
Delaware corporation (the "Agreement").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is authorized to issue shares of common stock in separate
series with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund may offer shares of additional series in the future;
WHEREAS, the Fund desires to avail itself of the services of the Manager
for the provision of advisory and management services for the Fund; and
WHEREAS, the Manager is willing to render such services to the Fund;
NOW, THEREFORE, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. Appointment. The Fund hereby appoints the Manager, subject to the
-----------
direction of the Board of Directors, for the period and on the terms set forth
in this Agreement, to provide advisory, management, and other services, as
described herein, with respect to each series of the Fund (individually and
collectively referred to herein as "Series"). The Manager accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
In the event the Fund establishes and designates additional series with
respect to which it desires to retain the Manager to render advisory services
hereunder, it shall notify the Manager in writing. If the Manager is willing to
render such services, it shall notify the Fund in writing, whereupon such
additional series shall become a Series hereunder.
2. Services of the Manager. The Manager represents and warrants that it
-----------------------
is registered as an investment adviser under the Investment Advisers Act of 1940
and will maintain such registration for so long as required by applicable law.
Subject to the general supervision of the Board of Directors of the Fund, the
Manager shall provide the following advisory, management, and other services
with respect to the Series:
(a) Provide general, investment advice and guidance with respect to
the Series and provide advice and guidance to the Fund's Directors, and oversee
the management of the investments of the Series and the composition of each
Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition thereof, in accordance with each Series'
investment objective or objectives and policies as stated in the Fund's current
registration statement, which management may be provided by others selected by
the Manager and approved by the Board of Directors as provided below or directly
by the Manager as provided in Section 3 of this Agreement;
(b) In the event that the Manager wishes to select others to render
investment management services, the Manager shall analyze, select and recommend
for consideration and approval by the Fund's Board of Directors investment
advisory firms (however organized) to provide investment advice to one or more
of the Series, and, at the expense of the Manager, engage (which engagement may
also be by the Fund) such investment advisory firms to render investment advice
and manage the
<PAGE>
investments of such Series and the composition of each such Series' portfolio of
securities and investments, including cash, and the purchase, retention and
disposition thereof, in accordance with the Series' investment objective or
objectives and policies as stated in the Fund's current registration statement
(any such firms approved by the Board of Directors and engaged by the Fund
and/or the Manager are referred to herein as "Sub-Advisers");
(c) Periodically monitor and evaluate the performance of the Sub-
Advisers with respect to the investment objectives and policies of the Series;
(d) Monitor the Sub-Advisers for compliance with the investment
objective or objectives, policies and restrictions of each Series, the 1940 Act,
Subchapter M of the Internal Revenue Code, and if applicable, regulations under
such provisions, and other applicable law;
(e) If appropriate, analyze and recommend for consideration by the
Fund's Board of Directors termination of a contract with a Sub-Adviser under
which the Sub-Adviser provides investment advisory services to one or more of
the Series;
(f) Supervise Sub-Advisers with respect to the services that such
Sub-Advisers provide under respective portfolio management agreements ("Sub-
Adviser Agreements");
(g) Render to the Board of Directors of the Fund such periodic and
special reports as the Board may reasonably request; and
(h) Make available its officers and employees to the Board of
Directors and officers of the Fund for consultation and discussions regarding
the administration and management of the Series and services provided to the
Fund under this Agreement.
3. Investment Management Authority. In the event the Manager wishes to
-------------------------------
render investment management services directly to a Series, then with respect to
any such Series, the Manager, subject to the supervision of the Fund's Board of
Directors, will provide a continuous investment program for the Series'
portfolio and determine the composition of the assets of the Series' portfolio,
including determination of the purchase, retention, or sale of the securities,
cash, and other investments contained in the portfolio. The Manager will provide
investment research and conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Series' assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, offered
to the public, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the Manager
is hereby authorized to execute and perform such services on behalf of the
Series. To the extent permitted by the investment policies of the Series, the
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to, and execute and perform, foreign currency exchange
contracts on behalf of the Series. The Manager will provide the services under
this Agreement in accordance with the Series' investment objective or
objectives, policies, and restrictions as stated in the Fund's Registration
Statement filed with the Securities and Exchange Commission (the "SEC"), as
amended. Furthermore:
(a) The Manager will manage the Series so that each will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. In
managing the Series in accordance with these requirements, the Manager shall be
entitled to receive and act upon advice of counsel to the Fund or counsel to the
Manager.
-2-
<PAGE>
(b) The Manager will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Directors, and the provisions of the Registration Statement of the Fund under
the Securities Act of 1933 and the 1940 Act, as supplemented or amended.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations and any applicable procedures adopted by the
Fund's Board of Directors, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the Registration
Statement. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Manager in
a manner that is fair and equitable in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities of the
Series, the Manager will arrange for the transmission to the custodian for the
Fund on a daily basis, of such confirmation, trade tickets, and other documents
and information, including, but not limited to, Cusip, Cedel, or other numbers
that identify securities to be purchased or sold on behalf of the Series, as may
be reasonably necessary to enable the custodian to perform its administrative
and recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian.
(e) The Manager will assist the custodian or portfolio accounting
agent for the Fund in determining, consistent with the procedures and policies
stated in the Registration Statement for the Fund and any applicable procedures
adopted by the Fund's Board of Directors, the value of any portfolio securities
or other assets of the Series for which the custodian or portfolio accounting
agent seeks assistance or review from the Manager.
(f) The Manager will make available to the Fund, promptly upon
request, any of the Series' or the Managers' investment records and ledgers as
are necessary to assist the Fund to comply with requirements of the 1940 Act, as
well as other applicable laws. The Manager will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(g) The Manager will regularly report to the Fund's Board of
Directors on the investment program for the Series and the issuers and
securities represented in the Series' portfolio, and will furnish the Fund's
Board of Directors with respect to the Series such periodic and special reports
as the Directors may reasonably request.
(h) In connection with its responsibilities under this Section 3, the
Manager is responsible for decisions to buy and sell securities and other
investments for the Series' portfolio, broker-dealer selection, and negotiation
of brokerage commission rates. The Manager's primary consideration in effecting
a security transaction will be to obtain the best execution for the Series,
taking into account the factors specified in the Prospectus and/or Statement of
Additional Information for the Fund, which include price (including the
applicable brokerage commission or dollar spread), the size of the order, the
-3-
<PAGE>
nature of the market for the security, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer involved,
the quality of the service, the difficulty of execution, execution capabilities
and operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. Accordingly, the price to the Series in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified, in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund, by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, the Manager 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 Series to pay a broker-dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Manager 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-dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Series and to its other clients as to which it exercises investment
discretion. To the extent consistent with these standards and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, the Manager is further authorized to allocate the orders placed by
it on behalf of the Series to the Manager if it is registered as a broker-dealer
with the SEC, to an affiliated broker-dealer, or to such brokers and dealers who
also provide research or statistical material or other services to the Series,
the Manager or an affiliate of the Manager. Such allocation shall be in such
amounts and proportions as the Manager shall determine consistent with the above
standards, and the Manager will report on said allocation regularly to the Board
of Directors of the Fund indicating the broker-dealers to which such allocations
have been made and the basis therefor.
4. Conformity with Applicable Law. The Manager, in the performance of its
------------------------------
duties and obligations under this Agreement, shall act in conformity with the
Registration Statement of the Fund and with the instructions and directions of
the Board of Directors of the Fund and will conform to, and comply with, the
requirements of the 1940 Act and all other applicable federal and state laws and
regulations.
5. Exclusivity. The services of the Manager to the Fund under this
-----------
Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of any of the Series) and to engage in other activities, so
long as its services hereunder are not impaired thereby.
6. Documents. The Fund has delivered properly certified or authenticated
---------
copies of each of the following documents to the Manager and will deliver to it
all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Directors of the Fund
authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) the Registration Statement as filed with the SEC and any
amendments thereto; and
(c) exhibits, powers of attorney, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
-4-
<PAGE>
7. Records. The Fund agrees to maintain and to preserve for the periods
-------
prescribed under the 1940 Act any such records as are required to be maintained
by the Fund with respect to the Series by the 1940 Act. The Manager further
agrees that all records of the Series are the property of the Fund and, to the
extent held by the Manager, it will promptly surrender any of such records upon
request.
8. Expenses. During the term of this Agreement, the Manager will pay all
--------
expenses incurred by it in connection with its activities under this Agreement,
except such expenses as are assumed by the Fund under this Agreement and such
expenses as are assumed by a Sub-Adviser under its Sub-Adviser Agreement. The
Manager further agrees to pay all fees payable to the Sub-Advisers, executive
salaries and expenses of the Directors of the Fund who are employees of the
Manager or its affiliates, and office rent of the Fund. The Fund shall be
responsible for all of the other expenses of its operations, including, without
limitation, the management fee payable hereunder; brokerage commissions;
interest; legal fees and expenses of attorneys; fees of auditors, transfer
agents and dividend disbursing agents, custodians and shareholder servicing
agents; the expense of obtaining quotations for calculating each Fund's net
asset value; taxes, if any, and the preparation of the Fund's tax returns; cost
of stock certificates and any other expenses (including clerical expenses) of
issue, sale, repurchase or redemption of shares; expenses of registering and
qualifying shares of the Fund under federal and state laws and regulations
(including the salary of employees of the Manager engaged in the registering and
qualifying of shares of the Fund under federal and state laws and regulations or
a pro-rata portion of the salary of employees to the extent so engaged);
salaries of personnel involved in placing orders for the execution of the Fund's
portfolio transactions; expenses of disposition or offering any of the portfolio
securities held by a Series; expenses of printing and distributing reports,
notices and proxy materials to existing shareholders; expenses of printing and
filing reports and other documents filed with governmental agencies; expenses in
connection with shareholder and director meetings; expenses of printing and
distributing prospectuses and statements of additional information to existing
shareholders; fees and expenses of Directors of the Fund who are not employees
of the Manager or any Sub-Adviser, or their affiliates; trade association dues;
insurance premiums; extraordinary expenses such as litigation expenses. To the
extent the Manager incurs any costs or performs any services which are an
obligation of the Fund, as set forth herein, the Fund shall promptly reimburse
the Manager for such costs and expenses. To the extent the services for which
the Fund is obligated to pay are performed by the Manager, the Manager shall be
entitled to recover from the Fund only to the extent of its costs for such
services.
9. Compensation. For the services provided by the Manager to each Series
------------
pursuant to this Agreement, the Fund will pay to the Manager an annual fee equal
to the amount specified for such Series in Schedule A hereto, payable monthly in
arrears. Payment of the above fees shall be in addition to any amount paid to
the Manager for the salary of its employees for performing services which are an
obligation of the Fund as provided in Section 8. The fee will be appropriately
pro-rated to reflect any portion of a calendar month that this Agreement is not
in effect between us.
10. Liability of the Manager. The Manager may rely on information
------------------------
reasonably believed by it to be accurate and reliable. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to, and
the Fund will indemnify such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Manager's duties, or by reason of reckless disregard of the
Manager's obligations and duties under this Agreement. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or
-5-
<PAGE>
agents shall be subject to, and the Fund will indemnify such persons from and
against, any liability for, or any damages, expenses, or losses incurred in
connection with, any act or omission by a Sub-Adviser or any of the Sub-
Adviser's stockholders or partners, officers, directors, employees, or agents
connected with or arising out of any services rendered under a Sub-Adviser
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Manager's duties under this Agreement, or
by reason of reckless disregard of the Manager's obligations and duties under
this Agreement. No director, officer, employee or agent of the Fund shall be
subject to any personal liability whatsoever, in his or her official capacity,
to any person, including the Sub-Adviser, other than to the Fund or its
shareholders, in connection with Fund property or the affairs of the Fund, save
only that arising from his or her bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duty to such person; and all such
persons shall look solely to the Fund property for satisfaction of claims of any
nature against a director, officer, employee or agent of the Fund arising in
connection with the affairs of the Fund. Moreover, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a Series shall be enforceable against the assets and property of that
Series only, and not against the assets or property of any other series of the
Fund.
11. Continuation and Termination. This Agreement shall become effective
----------------------------
on the date first written above, subject to the condition that the Fund's Board
of Directors, including a majority of those Directors who are not interested
persons (as such term is defined in the 1940 Act) of the Manager, and the
shareholders of each Series, shall have approved this Agreement. Unless
terminated as provided herein, the Agreement shall continue in full force and
effect for two (2) years from the effective date of this Agreement, and shall
continue from year to year thereafter with respect to each Series so long as
such continuance is specifically approved at least annually (i) by the vote of a
majority of the Board of Directors of the Fund, or (ii) by vote of a majority of
the outstanding voting shares of the Series (as defined in the 1940 Act), and
provided continuance is also approved by the vote of a majority of the Board of
Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of the Fund or the Manager, cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
may not be amended in any material respect without a majority vote of the
outstanding voting shares (as defined in the 1940 Act).
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a Series shall be effective
to continue this Agreement with respect to such Series notwithstanding (i) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Fund, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement may be terminated by the Fund at any time, in its entirety or with
respect to a Series, without the payment of any penalty, by vote of a majority
of the Board of Directors of the Fund or by a vote of a majority of the
outstanding voting shares of the Fund, or with respect to a Series, by vote of a
majority of the outstanding voting shares of such Series, on sixty (60) days'
written notice to the Manager, or by the Manager at any time, without the
payment of any penalty, on sixty (60) days' written notice to the Fund. This
Agreement will automatically and immediately terminate in the event of its
"assignment" as described in the 1940 Act.
12. Use of Name. It is understood that the name "Pilgrim Investments,
-----------
Inc." or any derivative thereof (including the name "Pilgrim") or logo
associated with that name is the valuable property of the Manager and its
affiliates, and that the Fund and/or the Series have the right to use such name
(or derivative or logo) only so long as this Agreement shall continue with
respect to such Fund and/or Series. Upon termination of this Agreement, the Fund
(or Series) shall forthwith cease to use such
-6-
<PAGE>
name (or derivative or logo) and, in the case of the Fund, shall promptly amend
its Articles of Incorporation to change its name (if such name is included
therein).
13. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original.
14. Applicable Law.
--------------
(a) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
[Name of Fund]
By:___________________________
______________________________
Title
PILGRIM INVESTMENTS, INC.
By:___________________________
______________________________
Title
-7-
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Fund Annual Investment Management Fee
---- --------------------------------
<S> <C>
Pilgrim Growth and Income Fund, Inc. 0.75% of the Fund's average daily net assets up to
$100 million, 0.60% of the Fund's average daily net
assets in excess of $100 million up to $150
million, 0.50% of the Fund's average daily net
assets in excess of $150 million up to $250
million, and 0.40% of the Fund's average daily net
assets in excess of $250 million.
Pilgrim Global Corporate Leaders Fund, Inc. 1.00% of the Fund's average daily net assets.
Pilgrim International Fund, Inc. 1.00% of the Fund's average daily net assets.
Pilgrim Worldwide Emerging Markets Fund, Inc. 1.00% of the Fund's average daily net assets.
Pilgrim Small Cap Asia Growth Fund, Inc. 1.25% of the Fund's average daily net assets.
Pilgrim Troika Dialog Russia Fund, Inc. 1.25% of the Fund's average daily net assets.
Pilgrim GNMA Income Fund, Inc. 0.60% of the Fund's average daily net assets up to
$150 million, 0.50% of the Fund's average daily net
assets in excess of $150 million up to $400
million, 0.45% of the Fund's average daily net
assets in excess of $400 million up to $800
million, and 0.40% of the Fund's average daily net
assets in excess of $800 million.
Pilgrim Global Income Fund 1.00% of the Fund's average daily net assets.
Pilgrim Money Market Trust 0.50% of the Trust's average daily net assets up to
$500 million, and 0.45% of the Trust's average
daily net assets in excess of $500 million.
Pilgrim Goldfund, Inc. 1.00% of the Fund's average daily net assets up to
$50 million, and 0.75% of the Fund's average daily
net assets in excess of $50 million.
Pilgrim Silver Fund, Inc. 1.00% of the Fund's average daily net assets of the
first $30 million, and 0.75% of the Fund's average
daily net assets in excess of $30 million.
Pilgrim Emerging Markets Fund, Inc. 0.85% of the Fund's average daily net assets.
Pilgrim Natural Resources Trust 0.85% of the Fund's average daily net assets.
Pilgrim Global Technology Fund 1.25% of the Fund's average daily net assets.
Pilgrim Corporate Leaders Trust Fund [To Be Added]
</TABLE>
-8-
<PAGE>
Exhibit B
SUB-ADVISER AGREEMENT
AGREEMENT made this ____ day of ________, 2000 between Pilgrim
Investments, Inc., a Delaware corporation (the "Manager"), and [Name of Sub-
Adviser], a [type of entity] (the "Sub-Adviser").
WHEREAS, [Name of Fund] (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, the Fund is authorized to issue separate series, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Fund may offer shares of additional series in the future;
WHEREAS, pursuant to an Investment Management Agreement, dated the
date hereof (the "Management Agreement"), a copy of which has been provided to
the Sub-Adviser, the Fund has retained the Manager to render advisory and
management services with respect to each of the Fund's series; and
WHEREAS, pursuant to authority granted to the Manager in the
Management Agreement, the Manager wishes to retain the Sub-Adviser to furnish
investment advisory services to one or more of the series of the Fund, and the
Sub-Adviser is willing to furnish such services to the Fund and the Manager;
NOW, THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Manager and the Sub-
Adviser as follows:
1. Appointment. The Manager hereby appoints the Sub-Adviser to act
-----------
as the investment adviser and manager to the series of the Fund set forth on
Schedule A hereto (the "Series") for the periods and on the terms set forth in
this Agreement The Sub-Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
In the event the Fund designates one or more series (other than the
Series) with respect to which the Manager wishes to retain the Sub-Adviser to
render investment advisory services hereunder, it shall notify the Sub-Adviser
in writing. If the Sub-Adviser is willing to render such services, it shall
notify the Manager in writing, whereupon such series shall become a Series
hereunder, and be subject to this Agreement.
2. Sub-Adviser Duties. Subject to the supervision of the Fund's
------------------
Board of Directors and the Manager, the Sub-Adviser will provide a continuous
investment program for each Series' portfolio and determine in its discretion
the composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Sub-Adviser will provide investment
research and conduct a continuous program of evaluation, investment, sales, and
reinvestment of each
<PAGE>
Series' assets by determining the securities and other investments that shall be
purchased, entered into, sold, closed, or exchanged for the Series, when these
transactions should be executed, and what portion of the assets of the Series
should be held in the various securities and other investments in which it may
invest. To the extent permitted by the investment policies of each Series, the
Sub-Adviser shall make decisions for the Series as to foreign currency matters
and make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Sub-Adviser will provide the services
under this Agreement in accordance with each Series' investment objective or
objectives, policies, and restrictions as stated in the Fund's Registration
Statement filed with the Securities and Exchange Commission ("SEC"), as amended,
copies of which shall be sent to the Sub-Adviser by the Manager prior to the
commencement of this Agreement and promptly following any such amendment. The
Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Directors of which the Sub-Adviser has been sent a copy, and the provisions of
the Registration Statement of the Fund filed under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended, of which the Sub-
Adviser has received a copy, and with the Manager's portfolio manager operating
policies and procedures as in effect on the date hereof, as such policies and
procedures may be revised or amended by the Manager and agreed to by the Sub-
Adviser. In carrying out its duties under the Sub-Adviser Agreement, the Sub-
Adviser will comply with the following policies and procedures:
(i) The Sub-Adviser will manage each Series so that it meets the
income and asset diversification requirements of Section 851 of the Internal
Revenue Code.
(ii) The Sub-Adviser will vote all proxies solicited by or with
respect to the issuers of securities which assets of the Series are invested
consistent with any procedures or guidelines promulgated by the Board or the
Manager, or if none, in the discretion of the Sub-Adviser based upon the best
interests of the Series. The Sub-Adviser will maintain appropriate records
detailing its voting of proxies on behalf of the Fund and will provide to the
Fund at least quarterly a report setting forth the proposals voted on and how
the Series' shares were voted since the prior report, including the name of the
corresponding issuers.
(iii) In connection with the purchase and sale of securities for each
Series, the Sub-Adviser will arrange for the transmission to the custodian and
portfolio accounting agent for the Series on a daily basis, such confirmation,
trade tickets, and other documents and information, including, but not limited
to, Cusip, Cedel, or other numbers that identify securities to be purchased or
sold on behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be settled through the Depository Trust Company, the
Sub-Adviser will arrange for the prompt transmission of the confirmation of such
trades to the Fund's custodian and portfolio accounting agent.
-2-
<PAGE>
(iv) The Sub-Adviser will assist the custodian and portfolio
accounting agent for the Fund in determining or confirming, consistent with the
procedures and policies stated in the Registration Statement for the Fund or
adopted by the Board of Directors, the value of any portfolio securities or
other assets of the Series for which the custodian and portfolio accounting
agent seeks assistance from or identifies for review by the Sub-Adviser. The
parties acknowledge that the Sub-Adviser is not a custodian of the Series'
assets and will not take possession or custody of such assets.
(v) The Sub-Adviser will provide the Manager, no later than the
20th day following the end of each of the first three fiscal quarters of each
Series and the 45th day following the end of each Series' fiscal year, a letter
to shareholders (to be subject to review and editing by the Manager) containing
a discussion of those factors referred to in Item 5(a) of 1940 Act Form N-1A in
respect of both the prior quarter and the fiscal year to date.
(vi) The Sub-Adviser will complete and deliver to the Manager a
written compliance checklist in a form provided by the Manager for each month by
the 10th day of the following month.
(vii) The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Sub-Adviser for its approval and the Sub-Adviser has not
commented within 10 days, the Manager and its affiliated persons may use and
distribute such sales literature or other promotional material.
(b) In connection with the purchase and sale of securities for each
Series, the Sub-Adviser will arrange for the transmission to the custodian and
portfolio accounting agent for the Series on a daily basis, such confirmation,
trade tickets, and other documents and information, including, but not limited
to, Cusip, Cedel, or other numbers that identify securities to be purchased or
sold on behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be settled through the Depository Trust Company, the
Sub-Adviser will arrange for the prompt transmission of the confirmation of such
trades to the Fund's custodian and portfolio accounting agent.
(c) The Sub-Adviser will make available to the Fund and the
Manager, promptly upon request, any of the Series' investment records
and ledgers maintained by the Sub-Adviser (which shall not include the
records and ledgers maintained by the custodian or portfolio
accounting agent for the Fund) as are necessary to assist the Fund and
the Manager to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940 (the "Advisers Act"), as well as other
applicable laws. The Sub-Adviser will furnish to regulatory
authorities having the requisite authority any information or reports
in connection with such services in respect to the Series which may be
requested in order to ascertain whether the operations of the Fund are
being conducted in a manner consistent with applicable laws and
regulations.
-3-
<PAGE>
(d) The Sub-Adviser will provide reports to the Fund's Board of
Directors for consideration at meetings of the Board on the investment program
for each Series and the issuers and securities represented in each Series'
portfolio, and will furnish the Fund's Board of Directors with respect to each
Series such periodic and special reports as the Directors and the Manager may
reasonably request.
3. Broker-Dealer Selection. The Sub-Adviser is authorized to make
-----------------------
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates in effecting a security transaction. The Sub-Adviser's primary
consideration in effecting a security transaction will be to obtain the best
execution for the Series, taking into account the factors specified in the
prospectus and/or statement of additional information for the Fund, and
determined in consultation with the Manager, which include price (including the
applicable brokerage commission or dollar spread), the size of the order, the
nature of the market for the security, the timing of the transaction, the
reputation, the experience and financial stability of the broker-dealer
involved, the quality of the service, the difficulty of execution, and the
execution capabilities and operational facilities of the firm involved, and the
firm's risk in positioning a block of securities. Accordingly, the price to a
Series in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified, in the judgment of the
Sub-Adviser in the exercise of its fiduciary obligations to the Fund, by other
aspects of the portfolio execution services offered. Subject to such policies as
the Fund's Board of Directors or Manager may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser 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 a Series to pay a
broker-dealer for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser 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-dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's or the Manager's overall
responsibilities with respect to the Series and to their respective other
clients as to which they exercise investment discretion. The Sub-Adviser will
consult with the Manager to the end that portfolio transactions on behalf of a
Series are directed to broker-dealers on the basis of criteria reasonably
considered appropriate by the Manager. To the extent consistent with these
standards, the Sub-Adviser is further authorized to allocate the orders placed
by it on behalf of a Series to the Sub-Adviser if it is registered as a broker-
dealer with the SEC, to an affiliated broker-dealer, or to such brokers and
dealers who also provide research or statistical material, or other services to
the Series, the Sub-Adviser, or an affiliate of the Sub-Adviser. Such allocation
shall be in such amounts and proportions as the Sub-Adviser shall determine
consistent with the above standards, and the Sub-Adviser will report on said
allocation regularly to the Fund's Board of Directors indicating the broker-
dealers to which such allocations have been made and the basis therefor.
4. Disclosure about Sub-Adviser. The Sub-Adviser has reviewed Post-
----------------------------
Effective Amendment No. ___ to the Registration Statement for the Fund filed
with the SEC that contains disclosure about the Sub-Adviser, and represents and
warrants that, with respect to the disclosure
-4-
<PAGE>
about the Sub-Adviser or information relating, directly or indirectly, to the
Sub-Adviser, such Registration Statement contains, as of the date hereof, no
untrue statement of any material fact and does not omit any statement of a
material fact which was required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The Sub-Adviser further represents and warrants that
it is a duly registered investment adviser under the Advisers Act and will
maintain such registration so long as this Agreement remains in effect. The Sub-
Adviser will provide the Manager with a copy of the Sub-Adviser's Form ADV, Part
II at the time the Form ADV is filed with the SEC.
5. Expenses. During the term of this Agreement, the Sub-Adviser will
--------
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Fund shall be responsible for all the expenses of the Fund's
operations.
6. Compensation. For the services provided to each Series, the
------------
Manager will pay the Sub-Adviser an annual fee equal to the amount specified for
such Series in Schedule A hereto, payable monthly in arrears. The fee will be
appropriately prorated to reflect any portion of a calendar month that this
Agreement is not in effect among the parties. In accordance with the provisions
of the Management Agreement, the Manager is solely responsible for the payment
of fees to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of its
fees solely from the Manager; provided, however, that if the Fund fails to pay
the Manager all or a portion of the management fee under said Management
Agreement when due, and the amount that was paid is insufficient to cover the
Sub-Adviser's fee under this Agreement for the period in question, then the Sub-
Adviser may enforce against the Fund any rights it may have as a third-party
beneficiary under the Management Agreement and the Manager will take all steps
appropriate under the circumstances to collect the amount due from the Fund.
7. Compliance.
----------
(a) The Sub-Adviser agrees to use reasonable compliance techniques as
the Manager or the Board of Directors may adopt, including any written
compliance procedures.
(b) The Sub-Adviser agrees that it shall promptly notify the Manager
and the Fund (1) in the event that the SEC has censured the Sub-Adviser; placed
limitations upon its activities, functions or operations; suspended or revoked
its registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, or (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. The Sub-Adviser further agrees to notify the Manager and the Fund
promptly of any material fact known to the Sub-Adviser respecting or relating to
the Sub-Adviser that is not contained in the Registration Statement or
prospectus for the Fund (which describes the Series), or any amendment or
supplement thereto, or if any statement contained therein that becomes untrue in
any material respect.
-5-
<PAGE>
(c) The Manager agrees that it shall promptly notify the Sub-Adviser
(1) in the event that the SEC has censured the Manager or the Fund; placed
limitations upon either of their activities, functions, or operations; suspended
or revoked the Manager's registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, or (2)
upon having a reasonable basis for believing that the Series has ceased to
qualify or might not qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code.
8. Books and Records. The Sub-Adviser hereby agrees that all records
-----------------
which it maintains for the Series are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's or
the Manager's request in compliance with the requirements of Rule 31a-3 under
the 1940 Act, although the Sub-Adviser may, at its own expense, make and retain
a copy of such records. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-l under the 1940 Act.
9. Cooperation; Confidentiality. Each party to this Agreement agrees
----------------------------
to cooperate with the other party and with all appropriate governmental
authorities having the requisite jurisdiction (including, but not limited to,
the SEC) in connection with any investigation or inquiry relating to this
Agreement or the Fund. Subject to the foregoing, the Sub-Adviser shall treat as
confidential all information pertaining to the Fund and actions of the Fund, the
Manager and the Sub-Adviser, and the Manager shall treat as confidential and use
only in connection with the Series all information furnished to the Fund or the
Manager by the Sub-Adviser, in connection with its duties under the agreement
except that the aforesaid information need not be treated as confidential if
required to be disclosed under applicable law, if generally available to the
public through means other than by disclosure by the Sub-Adviser or the Manager,
or if available from a source other than the Manager, Sub-Adviser or this Fund.
10. Representations Respecting Sub-Adviser. The Manager agrees that
--------------------------------------
neither the Manager, nor affiliated persons of the Manager, shall give any
information or make any representations or statements in connection with the
sale of shares of the Series concerning the Sub-Adviser or the Series other than
the information or representations contained in the Registration Statement,
prospectus, or statement of additional information for the Fund's shares, as
they may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved in advance by the Sub-Adviser, except with the prior permission of the
Sub-Adviser.
11. [Intentionally Omitted]
12. Control. Notwithstanding any other provision of the Agreement, it
-------
is understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and has reserved the right to reasonably direct any action hereunder
taken on its behalf by the Sub-Adviser.
-6-
<PAGE>
13. Liability. Except as may otherwise be required by the 1940 Act or
---------
the rules thereunder or other applicable law, the Manager agrees that the Sub-
Adviser, any affiliated person of the Sub-Adviser, and each person, if any, who,
within the meaning of Section 15 of the 1933 Act controls the Sub-Adviser (1)
shall bear no responsibility and shall not be subject to any liability for any
act or omission respecting any series of the Fund that is not a Series
hereunder, and (2) shall not be liable for, or subject to any damages, expenses,
or losses in connection with, any act or omission connected with or arising out
of any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the Sub-
Adviser's duties, or by reason of reckless disregard of the Sub-Adviser's
obligations and duties under this Agreement.
14. Indemnification.
---------------
(a) The Manager agrees to indemnify and hold harmless the Sub-
Adviser, any affiliated person of the Sub-Adviser, and each person, if any, who,
within the meaning of Section 15 of the 1933 Act controls ("controlling person")
the Sub-Adviser (all of such persons being referred to as "Sub-Adviser
Indemnified Persons") against any and all losses, claims, damages, liabilities,
or litigation (including legal and other expenses) to which a Sub-Adviser
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, under any other statute, at common law or otherwise, arising out
of the Manager's responsibilities to the Fund which (1) may be based upon the
Manager's negligence, willful misfeasance, or bad faith in the performance of
its duties (which could include a negligent action or a negligent omission to
act), or by reason of the Manager's reckless disregard of its obligations and
duties under this Agreement, or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering shares of the Fund or any Series, or any
amendment thereof or any supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished to the Manager or the Fund or to
any affiliated person of the Manager by a Sub-Adviser Indemnified Person;
provided however, that in no case shall the indemnity in favor of the Sub-
Adviser Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of obligations and duties under
this Agreement.
(b) Notwithstanding Section 13 of this Agreement, the Sub-Adviser
agrees to indemnify and hold harmless the Manager, any affiliated person of the
Manager, and any controlling person of the Manager (all of such persons being
referred to as "Manager Indemnified Persons") against any and all losses,
claims, damages, liabilities, or litigation (including legal and other expenses)
to which a Manager Indemnified Person may become subject under the 1933 Act,
1940 Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Sub-Adviser's responsibilities as Sub-Adviser of the Series
which (1) may be based upon the Sub-Adviser's negligence, willful misfeasance,
or bad faith in the performance of its duties (which could include a negligent
action or a negligent omission to act),
-7-
<PAGE>
or by reason of the Sub-Adviser's reckless disregard of its obligations and
duties under this Agreement, or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering the shares of the Fund or any Series, or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact known or which should have been known to the Sub-Adviser
and was required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon information furnished to the Manager, the Fund, or any affiliated person of
the Manager or Fund by the Sub-Adviser or any affiliated person of the Sub-
Adviser; provided, however, that in no case shall the indemnity in favor of a
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 14 with respect to any claim made against a Sub-Adviser Indemnified
Person unless such Sub-Adviser Indemnified Person shall have notified the
Manager in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Sub-Adviser Indemnified Person (or after such Sub-Adviser
Indemnified Person shall have received notice of such service on any designated
agent), but failure to notify the Manager of any such claim shall not relieve
the Manager from any liability which it may have to the Sub-Adviser Indemnified
Person against whom such action is brought except to the extent the Manager is
prejudiced by the failure or delay in giving such notice. In case any such
action is brought against the Sub-Adviser Indemnified Person, the Manager will
be entitled to participate, at its own expense, in the defense thereof or, after
notice to the Sub-Adviser Indemnified Person, to assume the defense thereof,
with counsel satisfactory to the Sub-Adviser Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent the Manager and the Sub-Adviser Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Sub-Adviser Indemnified Person, adequately represent the
interests of the Sub-Adviser Indemnified Person, the Manager will, at its own
expense, assume the defense with counsel to the Manager and, also at its own
expense, with separate counsel to the Sub-Adviser Indemnified Person, which
counsel shall be satisfactory to the Manager and to the Sub-Adviser Indemnified
Person. The Sub-Adviser Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Manager shall not be liable to
the Sub-Adviser Indemnified Person under this Agreement for any legal or other
expenses subsequently incurred by the Sub-Adviser Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Sub-Adviser
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Sub-Adviser Indemnified Person.
(d) The Sub-Adviser shall not be liable under Paragraph (b) of this
Section 14 with respect to any claim made against a Manager Indemnified Person
unless such Manager
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<PAGE>
Indemnified Person shall have notified the Sub-Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such Manager
Indemnified Person (or after such Manager Indemnified Person shall have received
notice of such service on any designated agent), but failure to notify the Sub-
Adviser of any such claim shall not relieve the Sub-Adviser from any liability
which it may have to the Manager Indemnified Person against whom such action is
brought except to the extent the Sub-Adviser is prejudiced by the failure or
delay in giving such notice. In case any such action is brought against the
Manager Indemnified Person, the Sub-Adviser will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory to
the Manager Indemnified Person. If the Sub-Adviser assumes the defense of any
such action and the selection of counsel by the Sub-Adviser to represent both
the Sub-Adviser and the Manager Indemnified Person would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the Manager
Indemnified Person, adequately represent the interests of the Manager
Indemnified Person, the Sub-Adviser will, at its own expense, assume the defense
with counsel to the Sub-Adviser and, also at its own expense, with separate
counsel to the Manager Indemnified Person, which counsel shall be satisfactory
to the Sub-Adviser and to the Manager Indemnified Person. The Manager
Indemnified Person shall bear the fees and expenses of any additional counsel
retained by it, and the Sub-Adviser shall not be liable to the Manager
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Sub-Adviser shall not have the right to compromise on or
settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
15. Duration and Termination.
------------------------
(a) This Agreement shall become effective on the date first indicated
above, subject to the condition that the Fund's Board of Directors, including a
majority of those Directors who are not interested persons (as such term is
defined in the 1940 Act) of the Manager or the Sub-Adviser, and the shareholders
of each Series, shall have approved this Agreement. Unless terminated as
provided herein, this Agreement shall remain in full force and effect for two
years from such date and continue on an annual basis thereafter with respect to
each Series covered by this Agreement; provided that such annual continuance is
specifically approved each year by (a) the Board of Directors of the Fund, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Directors who
are not parties to this Agreement or interested persons (as such term is defined
in the 1940 Act) of any such party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval. However, any approval of this
Agreement by the holders of a majority of the outstanding shares (as defined in
the 1940 Act) of a Series shall be effective to continue this Agreement with
respect to such Series notwithstanding (i) that this Agreement has not been
approved by the holders of a majority of the outstanding shares of any other
Series or (ii) that this agreement has not been approved by the vote of a
majority of the
-9-
<PAGE>
outstanding shares of the Fund, unless such approval shall be required by any
other applicable law or otherwise. Notwithstanding the foregoing, this Agreement
may be terminated with respect to any Series covered by this Agreement: (a) by
the Manager at any time, upon sixty (60) days' written notice to the Sub-Adviser
and the Fund, (b) at any time without payment of any penalty by the Fund, by the
Fund's Board of Directors or a majority of the outstanding voting securities of
each Series, upon sixty (60) days' written notice to the Manager and the Sub-
Adviser, or (c) by the Sub-Adviser upon three (3) months written notice unless
the Fund or the Manager requests additional time to find a replacement for the
Sub-Adviser, in which case the Sub-Adviser shall allow the additional time
requested by the Fund or Manager not to exceed three (3) additional months
beyond the initial three-month notice period; provided, however, that the Sub-
Adviser may terminate this Agreement at any time without penalty, effective upon
written notice to the Manager and the Fund, in the event either the Sub-Adviser
(acting in good faith) or the Manager ceases to be registered as an investment
adviser under the Advisers Act or otherwise becomes legally incapable of
providing investment management services pursuant to its respective contract
with the Fund, or in the event the Manager becomes bankrupt or otherwise
incapable of carrying out its obligations under this Agreement, or in the event
that the Sub-Adviser does not receive compensation for its services from the
Manager or the Fund as required by the terms of this agreement.
In the event of termination for any reason, all records of each Series
for which the Agreement is terminated shall promptly be returned to the Manager
or the Fund, free from any claim or retention of rights in such record by the
Sub-Adviser, although the Sub-Adviser may, at its own expense, make and retain a
copy of such records. This Agreement shall automatically terminate in the event
of its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 8, 9, 10, 12, 13 and 14 of this Agreement shall
remain in effect, as well as any applicable provision of this Section numbered
15 and, to the extent that only amounts are owed to the Sub-Adviser as
compensation for services rendered while the agreement was in effect, Section 6.
(b) Notices.
-------
Any notice must be in writing and shall be sufficiently given (1) when
delivered in person, (2) when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by postage prepaid first class air mail
simultaneously dispatched), (3) when sent by internationally recognized
overnight courier service (with receipt confirmed by such overnight courier
service), or (4) when sent by registered or certified mail, to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Fund:
[Name of Fund]
[Address]
-10-
<PAGE>
[City, State Zip Code]
Attention: [Name of Contact Person]
If to the Sub-Adviser:
[Name of Sub-Adviser]
[Address]
[City, State Zip Code]
Attention: [Name of Contact Person]
16. Amendments. No provision of this Agreement may be changed,
----------
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Directors of the Fund,
including a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law.
17. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of
__________, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder, and without regard for the conflicts of laws principle thereof. The
term "affiliate" or "affiliated person" as used in this Agreement shall mean
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The Manager and the Sub-Adviser acknowledge that the Fund enjoys
the rights of a third-party beneficiary under this Agreement, and the Manager
acknowledges that the Sub-Adviser enjoys the rights of a third party beneficiary
under the Management Agreement.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent of
the other parties.
(e) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent or co-partner of the Manager, or constituting the Manager as an
agent or co-partner of the Sub-Adviser.
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<PAGE>
(g) This agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
PILGRIM INVESTMENTS, INC.
By:_________________________
_________________________
Title
[Name of Sub-Adviser]
By:_________________________
_________________________
Title
-12-
<PAGE>
Schedule A (per Fund)
Fund Annual Sub-Adviser Fee
---- ----------------------
Lexington Natural Resources Trust 0.50% of the Fund's average daily net
assets.
-13-
<PAGE>
Exhibit C
ARTICLES OF INCORPORATION
OF
LEXINGTON [_________________] FUND, INC.
FIRST: The undersigned, ______________, whose address is ____________,
-----
being at least eighteen years of age, hereby forms a corporation under the
Maryland General Corporation Law.
SECOND: The name of the corporation is ["____________________."]
------
(hereinafter called the "corporation").
THIRD: The purpose for which the corporation is formed and the
-----
business or objects to be transacted, carried on and promoted by it, is to act
as an open-end investment company of the management type registered as such with
the Securities and Exchange Commission pursuant to the Investment Company Act of
1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the general laws of
the State of Maryland now or hereafter in force.
FOURTH: The post office address of the principal office and Resident
------
Agent of the corporation within the State of Maryland is 11 East Chase Street,
Suite 9E, c/o CSC-Lawyers Incorporating Service Company, Baltimore, Maryland
21202. The name and address of the Resident Agent of the corporation is CSC-
Lawyers Incorporating Service Company, 11 East Chase Street, Suite 9E,
Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock which the
-----
corporation initially has authority to issue is one billion (1,000,000,000)
shares of Common Stock which are initially designated by series as follows:
_____________________ shares are designated ["__________ _______________
______"] series and of which ___________________ shares are unclassified. All of
the shares of Common Stock of each series are initially designated as one class
of shares. The par value of the shares of each class is one tenth of one cent
($.001) per share.
(2) The aggregate par value of all the authorized shares of stock is
one million dollars ($1,000,000.00).
(3) The Board of Directors of the corporation is authorized, from
time to time, to fix the price or the minimum price or the consideration or
minimum consideration for, and to authorize the issuance of, the shares of stock
of the corporation and securities convertible into shares of stock of the
corporation.
(4) The Board of Directors of the corporation is authorized, from
time to time, to further classify or to reclassify, as the case may be, any
unissued shares of stock of the corporation by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption of the stock.
<PAGE>
(5) Subject to the power of the Board of Directors to classify and
reclassify unissued shares, the shares of each class of stock of the corporation
shall have the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(a) (i) All consideration received by the corporation for the
issuance or sale of shares of the class together with all income, earnings,
profits and proceeds thereof, shall irrevocably belong to such class for
all purposes, subject only to the rights of creditors and to effect the
conversion of shares of any class of stock into another class of stock of
the corporation, and are herein referred to as "assets belonging to" such
class.
(ii) The assets belonging to such class shall be charged with
the liabilities of the corporation in respect of such class and with
such class's share of the general liabilities of the corporation, in
the latter case in proportion that the net asset value of such class
bears to the net asset value of all classes. The determination of the
Board of Directors shall be conclusive as to the allocation of
liabilities, including accrued expenses and reserves, to a class.
(iii) Dividends or distributions on shares of each class, whether
payable in stock or cash, shall be paid only out of earnings, surplus
or other assets belonging to such class.
(iv) In the event of the liquidation or dissolution of the
corporation, stockholders of each class shall be entitled to receive,
as a class, out of the assets of the corporation available for
distribution to stockholders, the assets belonging to such class and
the assets so distributable to the stockholders of such class shall be
distributed among such stockholders in proportion to the number of
shares of such class held by them.
(b) A series of Common Stock may be further classified by the Board
of Directors into two or more classes of stock that may be invested
together in the common investment portfolio in which the series is
invested. Notwithstanding the provisions of paragraph (5)(a) of this
Article FIFTH, if two or more classes are invested in a common investment
portfolio as a series, the shares of each such class of stock of the
corporation shall be subject to the following preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, and, if there are
other classes of stock of another series invested in a different investment
portfolio, shall also be subject to the provisions of paragraph (5)(a) of
this Article FIFTH at the series level as if the classes within the series
were one class:
(i) The income and expenses of the series shall be allocated
among the classes in the series in accordance with the number of
shares outstanding of each such class or as otherwise determined by
the Board of Directors in a manner consistent with subparagraph (iii)
below.
(ii) As more fully set forth in this paragraph (5)(b) of Article
FIFTH, the liabilities and expenses of the classes in the series shall
be determined
-2-
<PAGE>
separately from those of each other and, accordingly, the net asset
value, the dividends and distributions payable to holders, and the
amounts distributable in the event of liquidation of the corporation
to holders of shares of the corporation's stock may vary from class to
class within the series. Except for these differences and certain
other differences set forth in this paragraph (5) of Article FIFTH or
elsewhere in the Articles of Incorporation, the classes in the same
series shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption.
(iii) The dividends and distributions of investment income and
capital gains with respect to the classes in the series shall be in
such amounts as may be declared from time to time by the Board of
Directors, and such dividends and distributions may vary among the
classes in the series to reflect differing allocations of the expenses
of the corporation among the classes and any resultant differences
among the net asset values per share of the classes, to such extent
and for such purposes as the Board of Directors may deem appropriate.
The allocation of investment income, capital gains, expenses and
liabilities of the corporation among the classes in the series shall
be determined by the Board of Directors in a manner that is consistent
with an order, if any, obtained from the Securities and Exchange
Commission or any future amendment to such order or any rule or
interpretation under the Investment Company Act of 1940, as amended.
(c) Except as provided below, on each matter submitted to a vote of
the stockholders, each holder of a share of stock shall be entitled to one
vote for each share standing in his name on the books of the corporation
irrespective of the class or series thereof. All holders of shares of stock
shall vote as a single class except as may otherwise be required by law
pursuant to any applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, or except with respect to
any matter which affects only one or more classes or series of stock, in
which case only the holders of shares of the class, classes or series
affected shall be entitled to vote.
(d) The proceeds of the redemption of shares of any class of stock of
the corporation may be reduced by the amount of any contingent deferred
sales charge or other charge (which charges may vary within and among the
classes) payable on such redemption pursuant to the terms of issuance of
such shares, all in accordance with the Investment Company Act of 1940,
applicable rules and regulations thereunder, and applicable rules and
regulations of the National Association of Securities Dealers, Inc.
("NASD").
(e) At such times as may be determined by the Board of Directors (or
with the authorization of the Board of Directors, by the officers of the
corporation) in accordance with the Investment Company Act of 1940,
applicable rules and regulations thereunder, and applicable rules and
regulations of the NASD and reflected in the corporation's current
registration statement, shares of a particular class of stock of the
corporation may be automatically converted into shares of another class of
stock of the corporation based
-3-
<PAGE>
on the relative net asset values of such classes at the time of conversion,
subject, however, to any conditions of conversion that may be imposed by
the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the corporation) and reflected in the
corporation's current registration statement as aforesaid.
Except as provided above, all provisions of the Articles of Incorporation
relating to stock of the corporation shall apply to shares of, and to the
holders of, all classes of stock.
(6) Notwithstanding any provisions of the Maryland General
Corporation Law requiring a greater proportion than a majority of the votes of
stockholders of all classes or of any class of stock entitled to be cast in
order to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate number of votes
entitled to be cast thereon.
(7) The presence in person or by proxy of the holders of one-third of
the shares of stock of the corporation entitled to vote (without regard to
class) shall constitute a quorum at any meeting of the stockholders, except with
respect to any matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the holders of one-
third of the shares of stock of each class required to vote as a class on the
matter shall constitute a quorum.
(8) The corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares, including, without
limitation, the right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the corporation, but excluding
the right to receive a stock certificate evidencing a fractional share.
(9) No holder of any shares of any class of the corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any shares
of any class which the corporation proposes to issue, or any rights or options
which the corporation proposes to issue or to grant for the purchase of shares
of any class or for the purchase of any shares, bonds, securities, or
obligations of the corporation which are convertible into or exchangeable for,
or which carry any rights to subscribe for, purchase, or otherwise acquire
shares of any class of the corporation; and any and all of such shares, bonds,
securities or obligations of the corporation, whether now or hereafter
authorized or created, may be issued, or may be reissued if the same have been
reacquired, and any and all of such rights and options may be granted by the
Board of Directors to such persons, firms, corporations and associations, and
for such lawful consideration, and on such terms, as the Board of Directors in
its discretion may determine, without first offering the same, or any thereof,
to any said holder.
SIXTH: (1) The initial number of directors of the corporation is
-----
_____ (__) and the names of those who will serve as such until the first annual
meeting or until their successors are duly elected and qualify are as follows:
-4-
<PAGE>
The By-Laws of the corporation may fix the number of directors at a
number greater or less than that named in these Articles of Incorporation and
may authorize a majority of the entire Board of Directors to increase or
decrease the number of directors. The number of directors shall never be less
than the minimum number prescribed by the Maryland General Corporation Law.
(2) The initial by-laws of the corporation shall be adopted by the
directors at their organizational meeting or by their informal written action,
as the case may be. Thereafter, the power to make, alter, and repeal the by-laws
of the corporation shall be vested in the Board of Directors of the corporation.
(3) Any determination made in good faith by or pursuant to the
direction of the Board of Directors, as to: the amount of the assets, debts,
obligations, or liabilities of the corporation; the amount of any reserves or
charges set up and the propriety thereof; the time of or purpose for creating
such reserves or charges; the use, alteration or cancellation of any reserves or
charges (whether or not any debt, obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged
or shall be then or thereafter required to be paid or discharged); the value of
any investment or fair value of any other asset of the corporation; the amount
of net investment income; the number of shares of stock outstanding; the
estimated expense in connection with purchases or redemptions of the
corporation's stock; the ability to liquidate investments in an orderly fashion;
the extent to which it is practicable to deliver a cross-section of the
portfolio of the corporation in payment for any such shares, or as to any other
matters relating to the issue, sale, purchase, redemption and/or other
acquisition or disposition of investments or shares of the corporation, or the
determination of the net asset value of shares of the corporation shall be final
and conclusive, and shall be binding upon the corporation and all holders of its
shares, past, present and future, and shares of the corporation are issued and
sold on the condition and understanding that any and all such determinations
shall be binding as aforesaid.
SEVENTH: (1) To the fullest extent that limitations on the liability
-------
of directors and officers are permitted by the Maryland General Corporation Law,
no director or officer of the corporation shall have any liability to the
corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may, through a by-law, resolution or agreement, make
further provisions for indemnification of directors, officers, employees and
agents to the fullest extent permitted by the Maryland General Corporation Law.
(3) No provision of this Article SEVENTH shall be effective (i) to
require a waiver of compliance with any provision of the Securities Act of 1933,
or of the Investment Company Act of 1940, or of any valid rule, regulation or
order of the Securities and Exchange
-5-
<PAGE>
Commission thereunder or (ii) to protect or purport to protect any director or
officer of the corporation against any liability to the corporation or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(4) References to the Maryland General Corporation Law in this
Article SEVENTH are to the law as from time to time amended. No amendment to the
Articles of Incorporation of the corporation shall affect any right of any
person under this Article SEVENTH based on any event, omission or proceeding
prior to such amendment.
EIGHTH: (1) Any holder of shares of stock of the corporation may
------
require the corporation to redeem and the corporation shall be obligated to
redeem at the option of such holder all or any part of the shares of the
corporation owned by said holder, at the redemption price, pursuant to the
method, upon the terms and subject to the conditions hereinafter set forth:
(a) The redemption price per share shall be the net asset value per
share determined at such time or times as the Board of Directors of the
corporation shall designate in accordance with any provision of the
Investment Company Act of 1940, any rule or regulation thereunder or
exemption or exception therefrom, or any rule or regulation made or adopted
by any securities association registered under the Securities Exchange Act
of 1934.
(b) Net asset value per share of a class shall be determined by
dividing:
(i) The total value of the assets of such class, or in the
case of a series with more than one class, such class's
proportionate share of the total value of the assets of the
series, such value determined as provided in Subsection (c) below
less, to the extent determined by or pursuant to the direction of
the Board of Directors, all debts, obligations and liabilities of
such class (which debts, obligations and liabilities shall
include, without limitation of the generality of the foregoing,
any and all debts, obligations, liabilities, or claims, of any
and every kind and nature, fixed, accrued and otherwise,
including the estimated accrued expenses of management and
supervision, administration and distribution and any reserves or
charges for any or all of the foregoing, whether for taxes,
expenses or otherwise) but excluding such class's liability upon
its shares and its surplus, by
(ii) The total number of shares of such class outstanding.
The Board of Directors is empowered, in its absolute discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by it to be necessary in order to enable the
corporation to comply with, or are deemed by it to be desirable provided
they are not inconsistent with, any provision of the Investment Company Act
of 1940 or any rule or regulation thereunder.
(c) In determining for the purposes of these Articles of
Incorporation the total value of the assets of the
-6-
<PAGE>
corporation at any time, investments and any other assets of the
corporation shall be valued in such manner as may be determined from time
to time by the Board of Directors.
(d) Payment of the redemption price by the corporation may be made
either in cash or in securities or other assets at the time owned by the
corporation or partly in cash and partly in securities or other assets at
the time owned by the corporation. The value of any part of such payment to
be made in securities or other assets of the corporation shall be the value
employed in determining the redemption price. Payment of the redemption
price shall be made on or before the seventh day following the day on which
the shares are properly presented for redemption hereunder, except that
delivery of any securities included in any such payment shall be made as
promptly as any necessary transfers on the books of the issuers whose
securities are to be delivered may be made.
The corporation, pursuant to resolution of the Board of Directors, may
deduct from the payment made for any shares redeemed a liquidating,
redemption or similar charge as may be determined by the Board of Directors
from time to time.
(e) Redemption of shares of stock by the corporation is conditional
upon the corporation having funds or property legally available therefor.
(2) The corporation, either directly or through an agent, may
repurchase its shares, out of funds legally available therefor, upon such terms
and conditions and for such consideration as the Board of Directors shall deem
advisable, by agreement with the owner at a price not exceeding the net asset
value per share as determined by the corporation at such time or times as the
Board of Directors of the corporation shall designate, less any liquidating,
redemption or similar charge as may be fixed by resolution of the Board of
Directors of the corporation from time to time, and take all other steps deemed
necessary or advisable in connection therewith.
(3) The corporation may cause the redemption, upon the terms set
forth in subsections (1)(a) through (e) and subsection (5) of this Article
EIGHTH, of shares of a class of stock held by a stockholder if the net asset
value of the shares of stock is less than $500 or such other amount not
exceeding $5000 as may be fixed from time to time by the Board of Directors (the
"Minimum Amount") with respect to that class. The Board of Directors may
establish differing Minimum Amounts for each class of the corporation's stock
and for categories of holders of stock based on such criteria as the Board of
Directors may deem appropriate. The corporation shall give the stockholder
notice which shall be in writing personally delivered or deposited in the mail,
at least 30 days (or such other number of days as may be specified from time to
time by the Board of Directors) prior to such redemption.
Notwithstanding any other provision of this Article EIGHTH, if
certificates representing such shares have been issued, the redemption price
need not be paid by the corporation until such certificates are presented in
proper form for transfer to the corporation or the agent of the corporation
appointed for such purpose; however, the redemption shall be effective, in
accordance with the resolution of the Board of Directors, regardless of whether
or not such presentation has been made.
-7-
<PAGE>
(4) The obligations set forth in this Article EIGHTH may be suspended
or postponed as may be permissible under the Investment Company Act of 1940 and
the rules and regulations thereunder.
(5) The Board of Directors may establish other terms and conditions
and procedures for redemption, including requirements as to delivery of
certificates evidencing shares, if issued.
NINTH: All persons who shall acquire stock or other securities of the
-----
corporation shall acquire the same subject to the provisions of the
corporation's Charter, as from time to time amended.
TENTH: From time to time any of the provisions of the Charter of the
-----
corporation may be amended, altered or repealed, including amendments which
alter the contract rights of any class of stock outstanding, and other
provisions authorized by the Maryland General Corporation Law at the time in
force may be added or inserted in the manner and at the time prescribed by said
Law, and all rights at any time conferred upon the stockholders of the
corporation by its Charter are granted subject to the provisions of this
Article.
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
Dated:
_____________________________
[_____________]
Sole Incorporator
-8-
<PAGE>
EXHIBIT D
DECLARATION OF TRUST
[________________________________]
DATED: [____________]
<PAGE>
DECLARATION OF TRUST
[__________________]
DATED: [___________]
DECLARATION OF TRUST, made this [__ day of ______, 2000 by the undersigned
Trustees (Together with all other persons from time to time duly elected,
qualified and serving as Trustees) in accordance with the provisions of Article
II hereof, (the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided; and
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder, and subject to the provisions hereof.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1.1. Name. The name of the Trust created hereby is
------------ ----
["______________________"].
Section 1.2. Definitions. Wherever they are used herein the following
------------ -----------
terms have the following respective meanings:
(a) "Administrator" means a party furnishing services to the Trust
-------------
pursuant to any contract described in Section 3.3 hereof.
(b) "By-Laws" means the By-laws referred to in Section 2.8 hereof, as
-------
from time to time amended.
(c) "Class" means the two or more classes as may be established and
-----
designated from time to time by the Trustees pursuant to Section 5.13 hereof.
<PAGE>
(d) "Commission" has the meaning given to it in the 1940 Act. The term
----------
"Interested Person" has the meaning given it in the 1940 Act, as modified by any
----------- ------
applicable order or orders of the Commission. Except as otherwise defined by the
Trustees in conjunction with the establishment of any series of Shares, the term
"vote of a majority of the Shares outstanding and entitled to vote" shall have
-----------------------------------------------------------------
the same meaning as the term "vote of a majority of the outstanding voting
--------------------------------------------
securities" given it in the 1940 Act.
------------------------------------
(e) "Custodian" means any Person other than the Trust who has custody of
---------
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as further amended from
-----------
time to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
----------- ------
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
------- ---------
than exclusively to the article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust, to the contract
-----------
described in Section 3.1 hereof.
(h) "His" shall include the feminine and neuter, as well as the masculine
---
genders.
(i) "Investment Adviser" means the party, other than the Trust, to the
------------------
contract described in Section 3.2 hereof.
(j) "Municipal Bonds" means obligations issued by or on behalf of states,
---------------
territories of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which
is exempt from regular Federal income tax.
(k) The "1940 Act" means the Investment Company Act of 1940, as amended
--------
from time to time.
(l) "Person" means and includes individuals, corporations, partnerships,
------
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(m) "Series" individually or collectively means the two or more Series as
------
may be established and designated from time to time by the Trustees pursuant to
Section 5.11 hereof. Unless the context otherwise requires, the term "Series"
shall include Classes into which shares of the Trust, or of a Series, may be
divided from time to time.
(n) "Shareholder" means a record owner of Outstanding Shares.
-----------
(o) "Shareholder Servicing Agent" means a party furnishing services to the
---------------------------
Trust pursuant to any shareholder servicing contract described in Section. 3.4
hereof.
(p) "Shares" means the equal proportionate units of interest into which
------
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series
-2-
<PAGE>
and Classes which may be established by the Trustees, and includes fractions of
Shares as well as whole Shares. "Outstanding Shares" means those Shares shown
------------------
from time to time on the books of the Trust or its Transfer Agent as then issued
and outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust.
(q) "Transfer Agent" means any one or more Persons other than the Trust
--------------
who maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(r) "Trust" means the Trust referred to in Section 1.1.
-----
(s) "Trust Property" means any and all property, real or personal,
--------------
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(t) "Trustees" means the person, or persons, who has, or have, signed this
--------
Declaration, so long as he, or they, shall continue in office in accordance with
the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or person in this capacity ox their capacities as trustees hereunder.
ARTICLE II
----------
TRUSTEES
--------
Section 2.1. General Powers. The Trustees shall have exclusive and
------------ --------------
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of American, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
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<PAGE>
Section 2.2. Investments.
------------ -----------
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or non-negotiable
instruments; any form of gold or other precious metal; commodity contracts;
shares of, or any other interest in, any investment company as defined in the
1940 Act; government securities, including securities of any state, municipality
or other political subdivision thereof, or any governmental or quasi-
governmental agency or instrumentality; and money market instruments including
bank certificates of deposit, finance paper, commercial paper, bankers
acceptances and all kinds of repurchase agreements, of any corporation, company,
trust, association, firm or other business organization however established, and
of any country, state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality; "when issued"
contracts for any such securities, contracts or interests; to retain Trust
assets in cash and from time to time to change the securities contracts or
interest in which the assets of the Trust are invested,
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend, and to pledge any such securities, contracts or
interests, and to enter into repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell futures contracts on securities,
securities indices and foreign currencies, to purchase or sell options on sucks
contracts, foreign currency contracts, and foreign currencies and to engage in
all types of hedging and risk management transactions
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities, repurchase agreements, futures contracts and options and
other assets included in the Trust Property, including the right to vote thereon
and otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of any obligation or engagement of any other Person and to lend
Trust property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest, and to guarantee or
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become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in the sale of Shares.
(i) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or Proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either along or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connection with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust., nor shall the Trustees be limited
by any law limiting the investment which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property,
------------ -----------
including the property of any Series of the Trust, shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any other person as
nominee, on such terms as the Trustees may determine, provided that the interest
of the Trust therein is deemed appropriately protected. The right, title and
interest of the Trustees in the Trust Property and the property of each Series
of the Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any Series of the
Trust, and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have
------------ ---------------------------------
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporation.
Section 2.5. Delegation; Committees. The Trustees shall have power to
------------ ----------------------
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of
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such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient, to the sine extent as such delegations permitted by the 1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have the power to
------------ ----------------------
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and pay
------------ --------
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise, provided
------------ -------------------------
herein or in the By-laws, any action to be taken by the Trustee may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if The acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11 hereof, the
------------ --------------------
Trustees shall have the power to: (a) employ or contract with such Persons as
the Trustees may deem desirable for the transaction of the business of the
Trust; (b) enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
the Administrator, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust
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would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not permitted
------------- ----------------------
by the 1940 Act or rules and regulations adopted by the Commission, the Trustees
may, on behalf of the Trust, buy any securities from or sell any securities to,
or lend any assets of the Trust to, any Trustee or officer of the Trust or any
firm of which any such Trustee or officer is a member acting as principal, or
have any such dealings with the Investment Adviser, Distributor or transfer
agent or with any interested Person of such Person; arid the Trust may employ
any such person, or firm or company which such Person is an Interested Person,
as broker, legal counsel, registrar, transfer agent,, dividend disbursing agent
or Custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall initially
------------- ------------------
be two (2), and thereafter shall be such number as shall be fixed from time to
time by a written instrument signed by a majority of the Trustees, provided,
however, that the number of Trustees shall in no event be more than fifteen
(15).
Section 2.12. Election and Term. Except for the Trustees named herein or
------------- -----------------
appointed to fill vacancies pursuant to Section 2.14 hereof, the Trustees shall
be elected by the Shareholders owning of record a plurality of the Shares voting
at a meeting of Shareholders. Such a meeting shall be held on a date fixed by
the Trustees. Except in the event of resignation or removals pursuant to Section
2.13 hereof, each Trustee shall hold office until such time as less than a
majority of the Trustees bolding office have been elected by Shareholders. In
such event the Trustees then in office will call a Shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees shall
continue to hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may resign his trust
------------- -----------------------
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him, and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees. Any Trustee may be removed
at any meeting of Shareholders by vote of two-thirds of the Outstanding Shares.
The Trustees shall promptly call a meeting of the Shareholders for the purpose
of voting upon the question of removal of any such Trustee or Trustees when
requested in writing so to do by the holders of not less than ten percent of the
Outstanding Shares and, in that connection, the Trustees will assist shareholder
communications to the extent provided for in Section 16(c) under the 1940 Act.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall
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execute and deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees any Trust
Property or property of any series of the Trust held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall terminate
------------- ---------
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any Trustee may, by
------------- -------------------------------------
power of attorney, delegate his power for a period not to exceed six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
-----------
CONTRACTS
---------
Section 3.1. Distribution Contract. The Trustees may in their discretion
------------ ---------------------
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of the Shares at a price based on the net
asset value of a Share, whereby the Trustees may either agree to sell the Shares
to the other party to the contract or appoint such other party their sales agent
for the Shares, and in either case on such terms and conditions, if any, as may
be prescribed in the By-Laws, and such further terms and conditions as the
Trustees may inn their discretion determine not inconsistent with the provision
of this Article III or of the By-Laws; and such contract may also provide for
the repurchase of the Shares by such other parry as agent of the Trustees. Such
contract may also further provide that such other party may enter into selected
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dealer agreements with registered securities dealers to further the purpose of
the distribution or repurchase of the Shares. The foregoing services may be
provided by one or more persons.
Section 3.2. Advisory or Management Contract. The Trustees may in their
------------ -------------------------------
discretion from time to time enter into an investment advisory or management
contract or separate advisory contracts with respect to one or more Series
whereby the other party to such contract shall undertake to furnish to the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions as the Trustees may in their discretion determine, including the
grant of authority to such other party to determine what securities shall be
purchased or sold by the Trust and what portion of its assets shall be
uninvested, which authority shall include the power to make changes in the
investments of the Trust or any Series.
The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the Investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires
Section 3.3. Administrator. The Trustees may in their discretion from
------------ -------------
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more persons.
Section 3.4. Transfer Agent and Shareholder Servicing Agents. The
------------ -----------------------------------------------
Trustees may in their discretion from time to time enter into one or more
transfer agency contracts and one or more shareholder servicing contracts
whereby the other party to each such contract shall undertake to furnish such
transfer agency and/or shareholder services to the Trust as the Trustees shall
from time to time consider desirable and all upon such terms and conditions as
the Trustees may in their discretion determine, provided that such terms and
conditions are not inconsistent with the provisions of this Declaration or the
By-Laws. Such services may be provided by one or more Persons.
Section 3.5. Affiliations of Trustees or Officers.
------------ -------------------------------------
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholders, director, officer, partner, trustee, employee, manager,
adviser or distributor of or for any partnership, corporation, trust,
association or other organization or of or for any parent or affiliate of
any organization, with which a contract of the character described in
Sections 3.1, 3.2, 3.3 or 3.4 above or any Custodian contract as described
in Article X of the By-Laws, or for related services may have been or may
hereafter be made, or that any
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such organization, or any parent or affiliate thereof, is a Shareholder of
or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other organization
with which a contract of the character described in Sections 3.1, 3.2, 3.3
or 3.4 above or for services as Custodian or for related services may have
been or may hereafter be made also has any one or more of such contracts
with one or more other partnerships corporations, trusts, associations, or
other organizations, or has other business or interests, shall not affect
the validity of any such contract or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
Section 3.6. Compliance with 1940 Act. Any contract entered into pursuant
------------ ------------------------
to Sections 3.1 or 3.2, shall be consistent with and subject to the requirements
of Section 15 of the 1940 Act (including any amendment thereof or other
applicable act of Congress hereafter enacted), as modified by any applicable
order or orders of the Commission, with respect to its continuance in effect,
its termination and the method of authorization and approval of such contract or
renewal thereof.
ARTICLE IV
----------
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OFFICERS
---------------------
Section 4.1. No Personal Liability of Shareholders, Trustees. No
------------ -----------------------------------------------
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from, and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to
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indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
Section 4.2. Non-Liability of Trustees. No Trustee, officer, employee or
------------ -------------------------
agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
------------ -------------------------
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by law
against all liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or having
been, a Trustee or officer and against amounts paid or incurred by him in
the settlement thereof; and
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, administrative
or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys
fees, costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting
in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
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(A) by the court or other body approving the settlement of other
disposition; or,
(B) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee or officer may now or hereafter be entitled,
shall continue as to a person who has ceased to be such Trustee or officer and
shall inure to the benefit of the heirs, executors, administrators and assigns
of such a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than Trustees and officers
may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the
matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not
(i) an Interested Person of the Trust (including anyone who has been exempted
from being an Interested Person by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated
------------ ----------------------------
to give any bond or other security for the Performance of any of his duties
hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments. No
------------ -----------------------------------------------------
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share,
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other security of the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
`trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, share, other security of the Trust or undertaking made or issued by
the Trustees may recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations of
the Trust under any such instrument are not binding upon any of the Trustees or
Shareholders individually, but bind only the trust estate, and may contain any
further recital which they or he may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 4.6. Reliance on Experts. Each Trustee and officer or employee of
------------ -------------------
the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE V
---------
SHARE OF BENEFICIAL INTEREST
----------------------------
Section 5.1. Beneficial Interest. The interest of the beneficiaries
------------ -------------------
hereunder shall be divided into transferable Shares of beneficial interest, all
of one class, except as provided in Section 5.11 and Section 5.13 hereof, par
value $.01 per share. The number of Shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property
------------ ----------------------
and the property of each Series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they be called upon to share or assume any losses of the
Trust nor can they suffer an assessment of any kind by virtue of their ownership
of Shares. The Shares shall be personal property giving only the rights
specifically set forth in this Declaration. The Shares shall not entitle the
holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any Series of Shares.
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Section 5.3. Trust Only. It is the intention of the Trustees to create
------------ ----------
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or member of a
joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
------------ ------------------
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the
------------ ------------------
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
Section 5.6. Transfer of Shares. Except as otherwise provided by the
------------ ------------------
Trustees, shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matter as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor any transfer
agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees
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nor any Transfer Agent or registrar nor any officer or agent of the Trust shall
be affected by any notice of such death, bankruptcy or incompetence, or other
operation of law.
Section 5.7. Notices, Reports, Any and all notices to which any
------------ ----------------
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust. A
notice of a meeting, an annual report and any other communication to
Shareholders need not be sent to a Shareholder (i) if an annual report and a
proxy statement for two consecutive shareholder meetings have been mailed to
such Shareholders address and have been returned as undeliverable, (ii) if all,
and at least two, checks (if sent by first class mail) in payment of dividends
on Shares during a twelve-month period have been mailed to such Shareholder's
address and have been returned as undeliverable or (iii) in any other case in
which a proxy statement concerning a meeting of security holders is not required
to be given pursuant to the Commission's proxy rules as from time to time in
effect under the Securities Exchange Act of 1934. However, delivery of such
proxy statements, annual reports and other communications shall resume if and
when such Shareholder delivers or causes to be delivered to the Trust written
notice setting forth such Shareholder's then current address.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
------------ ---------------
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
------------ -------------
only (i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in Section 2.13; (iii) with respect to any
investment advisory or management contract entered into pursuant to Section 3.2;
(iv) with respect to termination of the Trust as provided in Section 9.2; (v)
with respect to any amendment of this Declaration to the extent and as provided
in Section 9.3; (vi) with respect to any merger, consolidation or sale of assets
as provided in Section 9.4; (vii) with respect to incorporation of the Trust or
any Series to the extent and as provided in Section 9.5; (viii) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or any
Series or Class thereof or the Shareholders (provided, however, that a
Shareholder of a particular Series or Class shall not be entitled to a
derivative or class action on behalf of any other Series or Class (or
Shareholder of any other Series or Class) of the Trust); (ix) with respect to
any plan adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940
Act; and (x) with respect to such additional matters relating to the Trust as
may be required by this Declaration, the By-Laws or any registration of the
Trust as an investment company under the 1940 Act with the Commission (or any
successor agency) or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote, except that the Trustees may, in conjunction with the
establishment of any Series or Class of Shares, establish or reserve the right
to establish conditions under which the several Series or Classes shall have
separate voting rights or, if a Series or Class would not, in the sole judgment
of the Trustees, be materially affected by a proposal, no voting rights. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may
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take any action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders votes
and meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of Shareholders may be
------------- ------------------------
called at any time by the President, and shall be called by the President and
Secretary at the request in writing or by resolution, of a majority of Trustees,
or at the written request of the holder or holders of ten percent (10%) or more
of the total number of Shares then issued and outstanding of the Trust entitled
to vote at such meeting. Any such request shall state the purpose of the
proposed meeting. At any meeting of Shareholders of the Trust or of any series
of the Trust, a Shareholder Servicing Agent may vote any shares as to which such
Shareholder Servicing Agent is the Agent of record and which are not otherwise
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares otherwise represented at the
meeting in person or by proxy as to which such Shareholder Servicing Agent is
the agent of record. Any shares so voted by a Shareholder Servicing Agent will
be deemed represented at the meeting for quorum purposes.
Section 5.11. Series Designation. The Trustees, in their discretion, may
------------- ------------------
authorize the division of Shares into two or more Series, and the different
Series shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different Series as
to investment objective, purchase price, allocation of expenses, right of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all series as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
Series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to
each Series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of each
Series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series that may be established and designated froze
time to time. The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable laws, and shall be so recorded upon the books of
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account of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series, the Trustees shall allocate
them among any one or more of the Series established and designated from time to
time in such matter and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the shareholders of all Series for all purposes.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The assets of
a particular Series of the Trust shall, under no circumstances, be charged with
liabilities attributable to any other Series of the Trust. All persons extending
credit to, or contracting with or having any claim against a particular Series
of the Trust shall look only to the assets of that particular Series for payment
of such credit, contract or claim- No Shareholder or former Shareholder of any
Series shall have any claim on or right to any assets allocated or belonging to
any other series.
(e) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such Series. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or having been a
Shareholder of a Series, such shareholder shall be paid solely out of the funds
and property of such Series of the Trust. Upon liquidation or termination of a
Series of the Trust, Shareholders of such Series shall be entitled to receive a
pro rata share of the net assets of such Series. A Shareholder of a particular
Series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other Series or the Shareholders of any other
Series of the Trust.
(f) The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such instrument. The
Trustees may by an instrument executed by a majority of their number abolish any
Series and the establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights, of each class and
Series of Shares. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
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Section 5.12. Assent to Declaration of Trust. Every Shareholder, by virtue
------------- ------------------------------
of having become a shareholder, shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto.
Section 5.13. Class Designation. The Trustees, in their discretion, may
------------- -----------------
authorize the division of the Shares of the Trust, or, if any Series be
established, the Shares of any Series, into two or more Classes, and the
different Classes shall be established and designated, and the variations in the
relative rights and preferences as between the different Classes shall be fixed
and determined, by the Trustees; provided, that all Shares of the Trust or of
any Series shall be identical to all other Shares of the Trust or the same
Series, as the case may be, except that there may be variations between
different classes as to allocation of expenses, right of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several Classes shall have separate voting rights.
All references to Shares in this Declaration shall be deemed to be Shares of any
or all Classes as the context may require.
If the Trustees shall divide the Shares of the Trust or any Series into two
or more Classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any Series of the
Trust, shall apply equally to each class of Shares of the Trust or of any Series
of the Trust, except as the context requires otherwise.
(b) The number of Shares of each Class that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares of the
Trust or any Series or any Shares previously issued and reacquired of any Class
of the Trust or of any Series into one or more Classes that may be established
and designated from time to time. The Trustees may hold as treasury Shares (of
the same or some other class), reissue for such consideration and on such terms
as they may determine, or cancel any Shares of any Class reacquired by the Trust
at their discretion from time to time.
(c) Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be allocated
to, the Shares of a particular Class may be charged to and borne solely by such
Class and the bearing of expenses solely by a Class of Shares may be
appropriately reflected (in a manner determined by the Trustees) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the Shares of different Classes. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Classes for all purposes.
(d) The establishment and designation of any Class of Shares shall be
effective upon the execution of a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Class, or as otherwise provided in such instrument. The
Trustees may, by an instrument executed by a majority of their number, abolish
any Class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
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ARTICLE VI
----------
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
Section 6.1. Redemption of Shares. All Shares of the Trust shall be
------------ --------------------
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares upon the appropriately verified written
application of the record holder thereof (or upon such other form of request as
the Trustees may determine) at the office of the Transfer Agent, the Shareholder
Servicing Agent, which is the agent of record for such Shareholder, or at the
office of any bank or trust company, either in or outside the office of any bank
or trust company, either in or outside the Commonwealth of Massachusetts, which
is a member of the Federal Reserve System and which the said Transfer Agent or
the said Shareholder Servicing Agent has designated for that purpose, or at such
office or agency as may be designated from, time to time in the Trust's then
effective registration statement under the Securities Act of 1933. The Trustees
may from time to time specify additional conditions, not inconsistent with the
1940 Act, regarding the redemption of Shares in the Trust's then effective
registration statement under the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net asset value
------------ -----
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
Section 6.3. Payment. Payment for such Shares shall be made in cash or in
------------ -------
property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement under the Securities Act of 1933,
subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
------------ --------------------------------------------------------
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 6.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on deposit.
The redemption price of Shares for which redemption applications have not been
revoked shall be the net asset value of such Shares next determined as set forth
in Section 7.1 after the termination of such suspension, and payment shall be
made within seven (7) days after the date upon which the application was made
plus the period after such application during which the determination of net
asset value was suspended.
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Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
------------ -----------------------
directly, or through the Distributor or another agent designated for the purpose
by agreement with the owner thereof at a price not exceeding the net asset value
per share determined as of the time when the purchase or contract of purchase is
made or the net asset value as of any time which may be later determined
pursuant to Section 7.1 hereof, provided payment is not made for the Shares
prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Sub-Minimum Accounts. The Trust shall have the
------------ ----------------------------------
right at any time without prior notice to the shareholder to redeem shares of
any shareholder for their then current net asset value per share if at such time
the shareholder own Shares having an aggregate net asset value of less than an
amount set forth from time to time by the Trustees, subject to such terms and
conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all shareholders of its intention to avail itself of such
right, either by publication in the Trust's registration statement, if any, or
by such other means as the Trustees may determine.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
------------ -----------------------------------------------------
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
-----------------------------------------
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any Series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person a number, or principal amount, of Shares or other
securities of the Trust sufficient to maintain or bring the direct or indirect
ownership of Shares or other securities of the Trust into conformity with the
requirements for such qualification, and (ii) to refuse to transfer or issue
Shares or other securities of the Trust to any Person whose acquisition of the
Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
------------ ----------------------------------------------------------
Asset Value Formula. The Trust may also reduce the number of Outstanding Shares
-------------------
pursuant to the provisions of Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
------------ ---------------------------------
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of
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the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the Period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
ARTICLE VII
-----------
DETERMINATION OF NET ASSET VALUE,
---------------------------------
NET INCOME AND DISTRIBUTIONS
----------------------------
Section 7.1. Net Asset Value. The value of the assets of the Trust or any
------------ ---------------
Series of the Trust shall be determined by appraisal of the securities of the
Trust or allocated to such Series, such appraisal to be on the basis of the
amortized cost of such securities in the case of money market securities, market
value in the case of other securities, or by such other method as shall be
deemed to reflect the fair value thereof, determined in good faith by or under
the direction of the Trustees. From the total value of said assets, there shall
be deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
the Trust or such Series or Class thereof which shall be deemed appropriate. The
net asset value of a Share shall be determined by dividing the net asset value
of the Class, or, if no Class has been established, of the Series, or if no
Series has been established, of the Trust, by the number of Shares of that
Class, or Series, of the Trust as applicable, outstanding. The net asset value
of Shares of the Trust or any Class or Series of the Trust shall be determined
pursuant to the procedure and methods prescribed or approved by the Trustees in
their discretion and as set forth in the most recent Registration Statement of
the Trust as filed with the Securities and Exchange Commission pursuant to the
requirements of the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and the Rules thereunder. The net asset value of the
Shares shall be determined at least once on each business day, as of the close
of trading on the New York Stock Exchange or as of such other time or times as
the Trustees shall determine. The power and duty to make the daily calculations
may be delegated by the Trustees to the Investment Adviser, the custodian, the
Transfer Agent or such other person as the Trustees may determine by resolution,
or by approving a contract which delegates such duty to another Person. The
Trustees may suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.
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Section 7.2. Distributions to Shareholders. The Trustees shall from time
------------ -----------------------------
to time distribute ratably among the Shareholders of the Trust or a Series such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets of the Trust or such Series held by the Trustees as they may deem proper.
Such distributions may be made in cash or property (including without limitation
any type of obligations of the Trust or such Series or any assets thereof), and
the Trustees may distribute ratably among the Shareholders additional Shares of
the Trust or such Series issuable hereunder in such manner, at such times, and
on such terms as the Trustees may deem proper. Such distributions may be among
the Shareholders of record at the time of declaring a distribution or among the
Shareholders of record at such other date or time or dates or times as the
Trustees shall determine. To the extent the Trustees deem it appropriate as a
matter of administrative convenience, distributions to Shareholders may be
effected on different dates to different Shareholders, provided that such
distributions shall be made at regularly occurring intervals of approximately
the same length with respect to each Shareholder of the Trust. The Trustees may
in their discretion determine that, solely for the purposes of such
distributions, Outstanding Shares shall exclude Shares for which orders have
been placed subsequent to a specified time on the date the distribution is
declared or on the preceding day if the distribution is declared as of a day on
which Boston banks are not open for business, all as described in the
registration statement under the Securities Act of 1933. The Trustees may always
retain from the net profits such amount as they may deem necessary to pay the
debts or expenses of the Trust or the Series or to meet obligations of the Trust
or the Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders such dividend reinvestment plans,
cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the Series to avoid or reduce liability of taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
------------ ------------------------------------------------------
Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net income
-------------------------------
of the Trust or any Series shall be determined in such manner as the Trustees
shall provide by resolution. Expenses of the Trust or a Series, including the
advisory or management fee and service fees, shall be accrued each day. Such net
income may be determined by or under the direction of the Trustees as of the
close of trading on the New York Stock Exchange on each day on which such
Exchange is open or as of such other time or times as the Trustees shall
determine, and, except as provided therein, all the net income of the Trust or
any Series, as so determined, may be declared as a dividend on the Outstanding
Shares of the Trust or such Series. If for any reason, the net income of the
Trust or any Series, determined at any time is a negative amount, the Trustees
shall have the power with respect to the Trust or such Series (i) to offset each
Shareholder's pro rata shares of such negative amount from the accrued dividend
account of such Shareholder, or (ii) to reduce the number of Outstanding Shares
of the Trust or such Series by reducing the number of Shares in the account of
such Shareholder by that number of full and fractional Shares which represents
the amount of such excess negative net income, or (iii) to cause to be recorded
on the books of
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the Trust or such Series an asset account in the amount of such negative net
income, which account may be reduced by the amount, provided that the same shall
thereupon become the property of the Trust or such Series with respect to the
Trust or such Series and shall not be paid to any Shareholder, of dividends
declared thereafter upon the Outstanding Shares of the Trust or such Series on
the day such negative net income is experienced, until such asset account is
reduced to zero, or (iv) to combine the methods described in clauses (i) and
(ii) and (iii) of this sentence, in order to cause the net asset value per Share
of the Trust or such Series to remain at a constant amount per Outstanding Share
immediately after each such determination and declaration. The Trustees shall
also have the power to fail to declare a dividend out of net income for the
purpose of causing the net asset value per share to be increased to a constant
amount. The Trustees shall not be required to adopt, but may at any time adopt,
discontinue or amend the practice of maintaining the net asset value per Share
of the Trust or a Series at a constant amount.
Section 7.4. Allocation Between Principal and Income. The Trustees shall
------------ ---------------------------------------
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any of
------------ ------------------------------------
the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable.
ARTICLE VIII
------------
DURATION; TERMINATION OF TRUST;
-------------------------------
AMENDMENT; MERGERS, ETC.
------------------------
Section 8.1. Duration. The Trust shall continue without limitation of
------------ --------
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust. (a) The Trust or any Series of the
------------ --------------------
Trust may be terminated by an instrument in writing signed by a majority of the
Trustees, or by the affirmative vote of the holders of a majority of the Shares
of the Trust or Series outstanding and entitled to vote, at any meeting of
Shareholders. Upon the termination of the Trust or any Series,
(i) the Trust or any Series shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust or
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or
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Series shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust or Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property or property of the Series to one or more persons at public or
private sale for consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its liabilities, and
do all other acts appropriate to liquidate its business; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or property of the Series, in cash or in
kind or partly each, among the Shareholders of the Trust or Series according to
their respective rights.
(b) After termination of the Trust or any Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests of
all Shareholders of the Trust or Series shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by
------------ -------------------
a vote of the holders of a majority of the Shares outstanding and entitled to
vote. Amendments shall be effective upon the taking of action as provided in
this section or at such later time as shall be specified in the applicable vote
or instrument. The Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code (including those provisions of such Code relating to the retention
of the exemption from federal income tax with respect to dividends paid by the
Trust out of interest income received on Municipal Bonds), but the Trustees
shall not be liable for failing so to do. The Trustees may also amend this
Declaration without the vote or consent of Shareholders if they deem it
necessary or desirable to change the name of the Trust or to make any other
changes in the Declaration which do not materially adversely affect the rights
of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which would change
any rights with respect to any Shares of the Trust or Series by reducing the
amount payable thereon upon liquidation of the Trust of Series or by diminishing
or eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares of the Trust or Series
outstanding and entitled to vote. Noting contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
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<PAGE>
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
------------ ----------------------------------------
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or the property of any Series, including its good
will, upon such terms and conditions and for such consideration when and as
authorized at any meeting of Shareholders of the Trust or Series called for the
purpose by the affirmative vote of the holders of a majority of the Shares of
the Trust or Series.
Section 8.5. Incorporation. With the approval of the holders of a
------------ -------------
majority of the Shares of the Trust or any Series outstanding and entitled to
vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the property of any Series or to carry on any business in
which the Trust or the Series shall directly of indirectly have any interest,
and to sell, convey and transfer the Trust property or the property of any
Series to any such corporation, partnership, trust, association or organization
in exchange for the Shares or securities thereof or otherwise, and to lend money
to, subscribe for the Shares or securities of, and enter into any contracts with
any such corporation, partnership, trust, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
or the Series holds or is about to acquire Shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
Series or any successor thereto and any such corporation, partnership, trust,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, partnerships, trusts,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
ARTICLE IX
----------
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus or
statement of additional information, of the transactions of the Trust, including
financial statements which shall at least annually be certified by independent
public accountants.
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<PAGE>
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1. Filing. This Declaration and any amendment hereto shall be
------------- ------
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Unless the amendment is embodied in an instrument signed by a majority of the
Trustees, each amendment filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto. The
restated Declaration may include any amendment which the Trustees are empowered
to adopt, whether or not such amendment has been adopted prior to the execution
of the restated Declaration.
Section 10.2. Governing Law. This Declaration is executed by the Trustees
------------- -------------
and delivered in the Commonwealth of Massachusetts and with reference to the
internal laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the internal laws of said State without regard to the choice of law
rules thereof.
Section 10.3. Counterparts. This Declaration may be simultaneously
------------- ------------
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
------------- -------------------------
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees and their successors.
Section 10.5. Provisions in Conflict with law or Regulations. (a) The
------------- -----------------------------------------------
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of
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<PAGE>
this Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration or jurisdiction.
Section 10.6. Principal Place of Business. The principal place of business
------------- ---------------------------
of the Trust is 300 First Stamford Place, Stamford, CT 06902. The principal
place of business may be changed by resolution of a majority of the Trustees.
Section 10.7. Resident Agent. The Trust shall maintain a resident agent in
------------- --------------
the Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, MA 02109. The Trustees may designate a
successor resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the office of the
Secretary of the Commonwealth.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
__ day of April, 2000.
________________________________________
(as Trustee and not individually)
Ten Post Office Square, Suite 1230
Boston, MA 02109
________________________________________
(as Trustee and not individually)
Ten Post Office Square, Suite 1230
Boston, MA 02109
COMMONWEALTH OF MASSACHUSETTS
SS. [_____ __, 2000]
There personally appeared the above named _________________________ and
______________________ who acknowledge the foregoing instrument to be their free
act and deed.
Before me,
________________________________________
Notary Public
MY commission expires:
-27-
<PAGE>
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED ON THE REVERSE SIDE
---- ---------------------------------------------------------------
Please vote by filling in the appropriate box below.
<TABLE>
<CAPTION>
Proposal: FOR ALL FOR ALL EXCEPT AS WITHHOLD ALL
--------- MARKED BELOW
<S> <C> <C> <C>
1. To elect each of the following nominees (except as
noted on the line below) to the Board of Directors
(Trustees) of the Fund, for a term of office to
commence upon the completion of the acquisition
described in the accompanying proxy statement and to [_] [_] [_]
continue until the next meeting of shareholder at
which Directors (Trustees) are elected and their
successors have been duly elected and qualified.
(1) Mary A. Baldwin, Ph.D (2) Al Burton, (3) Paul S.
Doherty, (4) Robert B. Goode, (5) Alan L. Gosule, (6)
Mark Lipson (7) Walter H. May, (8) Jock Patton, (9) David
W.C. Putnam, (10) John R. Smith, (11) Robert W.
Stallings, (12) John G. Turner and (13) David W. Wallace.
To withhold authority to vote for any individual
nominee, print that nominee's name on the line
below
________________________________________________
________________________________________________
FOR AGAINST ABSTAIN
2. To approve a new Investment Management Agreement
between each Fund and Pilgrim Investments, Inc. to
take effect upon the completion of the proposed [_] [_] [_]
acquisition of Lexington Global Asset Managers, Inc.
by ReliaStar Financial Corp.
3. To approve a new Investment Management Agreement
between each Fund and Pilgrim Investments, Inc. to
take effect upon the completion of the proposed [_] [_] [_]
acquisition of ReliaStar Financial Corp. by ING Groep N.V.
4. Lexington Natural Resources Trust only:
a. To approve a new Sub-Adviser Agreement
between Pilgrim Investments Inc. and
Market Systems Research Advisors, Inc. for
Lexington Natural Resources Trust to take
effect upon the completion of the proposed [_] [_] [_]
acquisition of Lexington Global Asset
Managers, Inc. by ReliaStar Financial
Corp.;
b. To approve a new Sub-Adviser Agreement
between Pilgrim Investments, Inc. and
Market Systems Research Advisors, Inc. for
the Lexington Natural Resources Trust to
take effect upon the completion of the [_] [_] [_]
proposed acquisition of ReliaStar Financial
Corp. by ING Groep N.V.
5. To ratify the selection of KPMG LLP as the Fund's
independent public accountants for the fiscal year ending [_] [_] [_]
December 31, 2000.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
6. To approve Amended and Restated Articles of
Incorporation for Lexington Emerging Markets Fund, Inc. [_] [_] [_]
7. To approve an Amended and Restated Declaration of
Trust for Lexington Natural Resources Trust. [_] [_] [_]
8. To transact such other business as may properly come
before the Meeting or any adjournment(s) thereof. [_] [_] [_]
(NAME OF THE FUND)
PLEASE SIGN IN THE BOX BELOW
Please sign exactly as your name appears on this Proxy. If Joint owners,
EITHER may sign the Proxy. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your full title.
__________________________________________________________________________________
__________________________________________________________________________________
Signature(s) Titles(s), if applicable Date
__________________________________________________________________________________
</TABLE>
<PAGE>
[NAME OF THE FUND]
MEETING: July 21, 2000 AT 9:00 AM
PROXY SOLICITED BY THE BOARD OF DIRECTORS (TRUSTEES)
The undersigned holder of shares of the [Name of the Fund ] (the "Fund") hereby
appoints Enrique Faust and Richard J. Lavery, attorneys with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of the Fund that the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at Park 80
West, Plaza Two, Saddle Brook, New Jersey at the date and time indicated above
and at any postponements or adjournments thereof. The undersigned hereby
acknowledges receipt of the enclosed Notice of Special Meeting and Proxy
Statement and hereby instructs said attorneys and proxies to vote said shares as
indicated herein. Every properly signed proxy will be voted in the manner
specified thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items. In their discretion, the
proxies are authorized to vote on such other business as may properly come
before the Special Meeting. A majority of the persons appointed as attorneys or
proxies who are present and acting at the Special Meeting in person or by
substitute (or, if only one shall be so present, then that one) shall have and
may exercise all of the power and authority of said attorneys or proxies
hereunder. The undersigned hereby revokes any proxy previously given.
