As filed with the Securities and Exchange Commission on April 18, 1996
Registration No. 33-73520
811-8250
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 3 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 X
(Check appropriate box or boxes.)
LEXINGTON EMERGING MARKETS FUND, INC.
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Emerging Markets Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, NY 10022
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It is proposed that this filing will become effective
April 29, 1996 pursuant to paragraph (b) of Rule 485.
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933, pursuant to Section 24(f) of the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
December 31, 1996 was filed on February 23, 1996.
<PAGE>
LEXINGTON EMERGING MARKETS FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
- --------------- ------------------ -----------
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information *
4. General Description of Registrant 2
5. Management of the Fund 5
6. Capital Stock and Other Securities 8
7. Purchase of Securities Being Offered 6
8. Redemption or Repurchase 6
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
<PAGE>
LEXINGTON EMERGING MARKETS FUND, INC.
STATEMENT OF ADDITIONAL STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION INFORMATION PAGE NUMBER
- ------ ----------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History 8 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 7
15. Control Persons and Principal Holders 9
of Securities
16. Investment Advisory and Other Services 9
17. Brokerage Allocation and Other Practices 10
18. Capital Stock and Other Securities 8 (Part A)
19. Purchase, Redemption and Pricing of 6 (Part A)
securities being offered
20. Tax Status 11
21. Underwriters 5 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 20
PART C
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration
Statement.
Note * Omitted since answer is negative or inapplicable
<PAGE>
PROSPECTUS
April 29, 1996
Lexington Emerging Markets Fund, Inc.
P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
(201) 845-7300
A NO-LOAD MUTUAL FUND WHOSE INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM
GROWTH OF CAPITAL PRIMARILY THROUGH INVESTMENT IN EQUITY SECURITIES OF
COMPANIES DOMICILED IN, OR DOING BUSINESS IN EMERGING COUNTRIES AND
EMERGING MARKETS.
- --------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. is a no-load open-end
diversified management investment company. The Fund's investment
objective is to seek long-term growth of capital primarily through
investment in equity securities of companies domiciled in, or doing
business in emerging countries and emerging markets.
Shares of the Fund may be purchased only by insurance companies
for the purpose of funding variable annuity contracts and variable
life insurance policies.
Lexington Management Corporation ("LMC") is the Fund's investment
adviser. Lexington Funds Distributor, Inc. ("LFD") is the distributor
of Fund shares.
This Prospectus sets forth information about the Fund you should
know before investing. It should be read and retained for future
reference.
A Statement of Additional Information dated April 29, 1996 which
provides a further discussion of certain matters in this Prospectus
and other matters that may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, call the telephone number above
or write to the address listed above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Investors Should Read and Retain this Prospectus for Future Reference
<PAGE>
FINANCIAL HIGHLIGHTS
The following Per Share Income and Capital Changes Information for the year
ended December 31, 1995 and for the period March 30, 1994 (commencement of
operations) to December 31, 1994 has been audited by KPMG Peat Marwick LLP,
Independent Auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
Financial Statements and related notes thereto included in the Statement of
Additional Information. The Fund's annual report, which contains additional
performance information, is available upon request and without charge.
<TABLE>
<CAPTION>
March 30, 1994
(commencement of
Year Ended operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Selected Per Share Data for a share outstanding throughout the period:
Net asset value, beginning of period ................................................. $ 9.86 $10.00
------ ------
Income from investment operations:
Net investment income ................................................................. 0.09 0.03
Net realized and unrealized gain (loss) on investments ................................ (0.48) 0.04
------ ------
Total income (loss) from investment operations .................................. (0.39) 0.07
------ ------
Less distributions:
Distributions from net realized capital gains ......................................... (0.09) (0.02)
Distributions in excess of net realized capital gains (Temporary book-tax difference) . - (0.19)
------ ------
Total distributions ............................................................. (0.09) (0.21)
------ ------
Net asset value, end of period .......................................................... $ 9.38 $ 9.86
====== ======
Total return ............................................................................ (3.93%) 0.76%*
Ratio to average net assets:
Expenses, before reimbursement ........................................................ 4.09% 6.28%*
Expenses, net of reimbursement ........................................................ 1.32% 1.30%*
Net investment income (loss), before reimbursement .................................... (1.45%) (4.29)%*
Net investment income ................................................................. 1.33% 0.70%*
Portfolio turnover ...................................................................... 88.92% 71.21
Net assets at end of period (000's omitted) ............................................. $7,815 $4,624
*Annualized
</TABLE>
DESCRIPTION OF THE FUND
Lexington Emerging Markets Fund is an open-end management investment company
organized as a corporation under the laws of Maryland. The Fund is intended to
be the funding vehicle for variable annuity contracts and variable life
insurance policies to be offered by the separate accounts of certain life
insurance companies ("participating insurance companies"). The Fund currently
does not foresee any disadvantages to the holders of variable annuity contracts
and variable life insurance policies arising from the fact that the interests of
the holders of such contracts and policies may differ. Nevertheless, the Fund's
Directors intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto. If a conflict were to occur, an
insurance company separate account might be required to withdraw its investments
in the Fund and the Fund might be forced to sell securities at disadvantageous
prices. The variable annuity contracts and variable life insurance policies are
described in the separate prospectuses issued by the Participating Insurance
Companies. The Fund assumes no responsibility for such prospectuses.
Individual variable annuity contract holders and variable life insurance
policy holders are not "shareholders" of the Fund. The Participating Insurance
Companies and their separate accounts are the shareholders or investors,
although such companies may pass through voting rights to their variable annuity
contract or variable life insurance policy. Shares of the Fund are not offered
directly to the general public.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek long-term growth of capital
primarily through investment in equity securities and equivalents of companies
domiciled in, or doing business in, emerging countries and emerging markets, as
defined below.
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Due to the risks inherent in international investments generally, the Fund
should be considered as a vehicle for investing a portion of an investor's
assets in foreign securities markets and not as a complete investment program.
The investment objective of the Fund is long-term growth of capital. The
Fund seeks to achieve this objective by investing primarily in emerging country
and emerging market equity securities. Equity securities will consist of all
types of common stocks and equivalents (the following constitute equivalents:
convertible debt securities and warrants.) The Fund may also invest in preferred
stocks, bonds, money market instruments of foreign and domestic companies, U.S.
government, and governmental agencies. There can be no assurance that the Fund
will be able to achieve its investment objective. The Fund's investment
objective is a fundamental policy that may not be changed without the approval
of a "majority of the Fund's outstanding voting securities" which means the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented, or (ii) more than 50% of the
outstanding shares.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in emerging country and emerging market equity securities in at least
three countries outside of the United States. For purposes of its investment
objective, the Fund considers emerging country equity securities to be any
country whose economy and market the World Bank or United Nations considers to
be emerging or developing. The Fund may also invest in equity securities and
equivalents traded in any market, of companies that derive 50% or more of their
total revenue from either goods or services produced in such emerging countries
and emerging markets or sales made in such countries. Determinations as to
eligibility will be made by LMC based on publicly available information and
inquiries made to the companies. It is possible in the future that sufficient
numbers of emerging country or emerging market equity securities would be traded
on securities markets in industrialized countries so that a major portion, if
not all, of the Fund's assets would be invested in securities traded on such
markets, although such a situation is unlikely at present. The Fund will
maintain investments at all times in a minimum of three countries outside of the
United States.
Currently, investing in many of the emerging countries and emerging markets
is not feasible or may involve political risks. Accordingly, LMC currently
intends to consider investments only in those countries in which it believes
investing is feasible and does not involve such risks. The list of acceptable
countries will be reviewed by LMC and approved by the Board of Directors on a
periodic basis and any additions or deletions with respect to such list will be
made in accordance with changing economic and political circumstances involving
such countries. (See Appendix).
The Fund's investments in emerging country equity securities are not subject
to any maximum limit, and it is the intention of LMC to invest substantially all
of the Fund's assets in emerging country and emerging market equity securities.
However, to the extent that the Fund's assets are not invested in emerging
country and emerging market equity securities, the remaining 35% of the assets
may be invested in (i) other equity securities without regard to whether they
qualify as emerging country or emerging market equity securities, (ii) debt
securities denominated in the currency of an emerging market or issued or
guaranteed by an emerging market company or the government of an emerging
country, and (iii) short-term and medium-term debt securities of the type
described below under "Temporary Investments." The Fund's assets may be so
invested in debt securities when LMC believes that, based upon factors such as
relative interest rate levels and foreign exchange rates, such debt securities
offer opportunities for long-term growth of capital. It is likely that many of
the debt securities in which the Fund will invest will be unrated, and whether
or not rated, such securities may have speculative characteristics. All unrated
debt securities purchased by the Fund will be comparable to, or the issuers of
such unrated securities will have the capacity to meet its debt obligations
comparable to those issuers of rated securities. In addition, for temporary
defensive purposes, the Fund may invest less than 65% of its assets in emerging
country and emerging market equity securities, in which case the Fund may invest
in other equity securities or may invest in debt securities of the sort
described under "Temporary Investments" below.
The Fund intends to purchase and hold securities for long-term growth of
capital and does not expect to trade for short-term gain. Accordingly, it is
anticipated that the annual portfolio turnover rate normally will not exceed
75%. A 100% turnover rate would occur if all of the Fund's portfolio investments
were sold and either repurchased or replaced in a year. A higher turnover rate
results in correspondingly greater brokerage commissions and other transactional
expenses which are borne by the Fund. The Fund's portfolio turnover rate for the
year ended December 31, 1995 was 88.92%. High portfolio turnover may result in
the realization of net short-term capital gains by the Fund which, when
distributed to shareholders, will be taxable as ordinary income. See "Tax
Matters."
The operating expenses of the Fund can be expected to be greater than that
of an investment company investing exclusively in United States securities.
3
<PAGE>
Temporary Investments
For temporary defensive purposes, the Fund may invest up to 100% of its
total assets in money market securities, denominated in dollars in the currency
of any emerging country, issued by entities organized in the U.S. or any
emerging country, such as: short-term (less than twelve months to maturity) and
medium-term (not greater than five years to maturity) obligations issued or
guaranteed by the U.S. Government or the government of an emerging country,
their agencies or instrumentalities; finance company and corporate commercial
paper, and other short-term corporate obligations, in each case rated Prime-1 by
Moody's Investors Services, Inc. or A or better by Standard & Poor's Corporation
or, if unrated, of comparable quality as determined by LMC, obligations
(including certificates of deposit, time deposits and banker's acceptances) of
banks; and repurchase agreements with banks and broker-dealers with respect to
such securities.
Repurchase agreements with respect to the securities described in the
preceding paragraph are contracts under which the Fund would acquire a security
for a relatively short period (usually not more than 7 days) subject to the
obligations of the seller to repurchase and the Fund to resell such security at
a fixed time and price (representing the Fund's cost plus interest). Although
the Fund may enter into repurchase agreements with respect to any portfolio
securities which it may acquire consistent with its investment policies and
restrictions, it is the Fund's present intention to enter into repurchase
agreements only with respect to obligations of the United States Government or
its agencies or instrumentalities to meet anticipated redemptions or pending
investments or reinvestments of Fund assets in portfolio securities. The Fund
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with "primary dealers" in United States Government
securities. Repurchase agreements are considered loans which must be fully
collateralized including interest earned thereon during the entire term of the
agreement. If the institution defaults on the repurchase agreement, the Fund
will retain possession of the underlying securities. In addition if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in market value of the collateral securities. The Fund intends to limit
repurchase agreements to institutions believed by LMC to present minimal credit
risk. The Fund will not enter into repurchase agreements maturing in more than
seven days if the aggregate of such repurchase agreements and all other illiquid
securities when taken together would exceed 10% of the total assets of the Fund.
Certain Investment Methods-The Fund may from time to time engage in the
following investment practices:
Settlement Transactions-The Fund may, for a fixed amount of United States
dollars, enter into a foreign exchange contract for the purchase or sale of the
amount of foreign currency involved in the underlying securities transaction. In
so doing, the Fund will attempt to insulate itself against possible losses and
gains resulting from a change in the relationship between the United States
dollar and the foreign currency during the period between the date a security is
purchased or sold and the date on which payment is made or received. This
process is known as "transaction hedging".
To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt or delivery at a specified date which may be any fixed
number of days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Fund's portfolio or securities or prevent loss if the price
of such securities should decline.
Portfolio Hedging-When, in the opinion of LMC, it is desirable to limit or
reduce exposure in a foreign currency in order to moderate potential changes in
the United States dollar value of the portfolio, the Fund may enter into a
forward foreign currency exchange contract by which the United States dollar
value of the underlying foreign portfolio securities can be approximately
matched by an equivalent United States dollar liability. The Fund, for hedging
purposes only, may also enter into forward currency exchange contracts to
increase its exposure to a foreign currency that LMC expects to increase in
value relative to the United States dollar. The Fund will not attempt to hedge
all of its portfolio positions and will enter into such transactions only to the
extent, if any, deemed appropriate by LMC. Hedging against a decline in the
value of currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. The Fund
will not enter into forward foreign currency exchange transactions for
speculative purposes. The Fund intends to limit such transactions to not more
than 70% of total Fund assets.
4
<PAGE>
Forward Commitments-The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if LMC deems it appropriate to do so. The Fund may realize
short-term profits or losses upon the sale of forward commitments. When the Fund
engages in a forward commitment transaction, the custodian will set aside cash,
U.S. Government securities or other high quality debt obligations equal to the
amount of the commitment in a separate account.
Except as otherwise specifically noted, the Fund's investment objective and
its investment restrictions are fundamental and may not be changed without the
approval of a majority of the outstanding voting securities of the Fund. The
Statement of Additional Information contains a complete description of the
Fund's restrictions and additional information on policies relating to the
investment of its assets and its activities.
Risk Considerations
Investments in emerging market and emerging country equity securities may
involve risks and considerations not present in domestic investments. Since
foreign securities generally are denominated and pay interest or dividends in
foreign currencies, the value of the assets of the Fund as measured in United
States dollars will be affected favorably or unfavorably by changes in the
relationship of the United States dollar and other currencies. The Fund may
incur costs in connection with the conversion or transfer of foreign currencies.
In addition, there may be less publicly available information about foreign
companies than United States companies. Foreign companies may not be subject to
accounting, auditing, and financial reporting standards, practices and
requirements comparable to those applicable to United States companies. Foreign
securities markets, while growing in volume, have for the most part
substantially less volume than United States securities markets and securities
of foreign companies are generally less liquid and at times their prices may be
more volatile than securities of comparable United States companies. Foreign
stock exchanges, brokers and listed companies are generally subject to less
government supervision and regulation than in the United States. The customary
settlement time for foreign securities may be longer than the 5 day customary
settlement time for United States securities. Although the Fund will try to
invest in companies and governments of countries having stable political
environments, there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization or foreign government restrictions or other
adverse political, social or diplomatic developments that could affect
investment in these nations. (See "Risk Considerations" in the Statement of
Additional Information for further information.)
Income from foreign securities held by the Fund may, and in some cases will
be reduced by a withholding tax at the source or other foreign taxes. A
shareholder of the Fund will, subject to certain restrictions, be entitled to
claim a credit or deduction for United States Federal income tax purposes for
the shareholder's pro rata share of such foreign taxes paid by the Fund. (See
"Tax Matters.")
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in certain types of securities or engaging in
certain transactions. The most significant of these restrictions provide that:
(1) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (c) for temporary
emergency purposes, the Fund may borrow money in amounts not exceeding
5% of the value of its total assets at the time when the loan is made;
(d) The Fund may pledge its portfolio securities or receivables or
transfer or assign or otherwise encumber them in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test. The
Fund will only invest up to 5% of its total assets in reverse repurchase
agreements.
5
<PAGE>
(2) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase transactions and (c) lend portfolio securities
provided that the value of such loaned securities does not exceed
one-third of the Fund's total assets.
(3) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in
securities issued by companies principally engaged in any one industry.
The Fund considers foreign government securities and supranational
organizations to be industries for the purposes of this restriction.
This limitation, however, will not apply to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
(4) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction
shall not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities or, with respect to 25%
of the Fund's total assets, to securities issued or guaranteed by the
government of any country other than the United States which is a member
of the Organization for Economic Cooperation and Development ("OECD").
The member countries of OECD are at present: Australia, Austria,
Belgium, Canada, Denmark, Germany, Finland, France, Greece, Iceland,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more
than 10% of the outstanding voting securities of such issuer being held
by the Fund.
The forgoing investment restrictions (as well as certain others set forth in
the Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of the majority of the
shareholders of the Fund.
The investment policies described below are non-fundamental, therefore,
changes to such policies may be made in the future by the Board of Directors
without the approval of the shareholders of the Fund:
(1) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.
(2) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced price.
Such securities include, but are not limited to, time deposits and
repurchase agreements with maturities longer than seven days. Securities
that may be resold under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended, shall not be
deemed illiquid solely by reason of being unregistered. The Investment
Adviser shall determine whether a particular security is deemed to be
liquid based on the trading markets for the specific security and other
factors.
MANAGEMENT OF THE FUND
The Fund has a Board of Directors which establishes the Fund's policies and
supervises and reviews the operations and management of the Fund. Lexington
Management Corporation ("LMC"), P.O. Box 1515, Park 80 West Plaza Two, Saddle
Brook, New Jersey 07663, is the investment adviser of the Fund. For its
investment management services to the Fund, under its investment advisory
agreement, LMC will receive a monthly fee at the annual rate of 0.85% of the
Fund's average daily net assets. LMC has agreed to voluntarily limit the total
expenses of the Fund (excluding interest, taxes, brokerage, and extraordinary
expenses but including management fee and operating expenses) to an annual rate
of 1.75% of the Fund's average net assets through April 30, 1997.
Lexington Funds Distributor, Inc. ("LFD"), a registered broker-dealer, is
the Fund's distributor. LMC also acts as administrator to the Fund and performs
certain administrative and accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
From time to time, LMC may pay amounts from its past profits to
participating insurance companies or insurance companies or other financial
institutions that provide administrative services for the Fund or that provide
to contract
6
<PAGE>
holders other services relating to the Fund. These services may include, among
other things, sub-accounting services, answering inquiries of contract holders
regarding the Fund, transmitting, on behalf of the Fund, proxy statements,
annual reports, updated prospectus and other communications to contract holders
regarding the Fund, and such other related services as the Fund or a contract
holder may request. LMC will not pay more than 0.25% of the average daily net
assets of the Fund represented by shares of the Fund held in the separate
account of any participating insurance company. Payment of such amounts by LMC
will not increase the fees paid by the Fund or its shareholders.
LMC was established in 1938 and currently manages and administers over $3.0
billion in assets. LMC serves as investment adviser to other investment
companies and private and institutional investment accounts. Included among
these clients are persons and organizations that own significant amounts of
capital stock of LMC's parent, Lexington Global Asset Managers, Inc. The clients
pay fees that LMC considers comparable to the fees paid by similarly served
clients.
LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities are the beneficial owners of a
majority of the shares of Lexington Global Asset Managers, Inc. common stock.
See "Investment Adviser and Distributor" in the Statement of Additional
Information.
Portfolio Manager
The Fund is managed by an investment management team. Richard T. Saler is
the lead manager. Richard T. Saler is Senior Vice President, Director of
International Investment Strategy of LMC. Mr. Saler is responsible for
international investment analysis and portfolio management at LMC. He has ten
years of investment experience. Mr. Saler has focused on international markets
since first joining Lexington in 1986. In 1991 he was an investment strategist
with Nomura Securities and rejoined Lexington in 1992. Mr. Saler is a graduate
of New York University with a B.S. Degree in Marketing and an M.B.A. in Finance
from New York University's Graduate School of Business Administration.
HOW TO PURCHASE AND REDEEM SHARES
With the exception of shares held in connection with initial capital of the
Fund, shares of the Fund are currently available for purchase solely by
insurance companies for the purpose of funding variable annuity contracts and
variable life policies. Shares of the Fund are purchased and redeemed at net
asset value next calculated after a purchase or redemption order is received by
the Fund in good order. There are no minimum investment requirements. Payment
for shares redeemed will be made as soon as possible, but in any event within
three business days after the order for redemption is received by the Fund.
However, payment may be postponed under unusual circumstances, such as when
normal trading is not taking place on the New York Stock Exchange.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is computed as of the close of
trading on each day the New York Stock Exchange is open, by dividing the value
of the Fund's securities plus any cash and other assets (including accrued
dividends and interest) less all liabilities (including accrued expenses) by the
number of shares outstanding, the result being adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange is valued at
its last sale price prior to the time when assets are valued on the principal
exchange on which the security is traded. If no sale is reported at that time,
the mean between the current bid and asked price will be used. All other
securities for which the over-the-counter market quotations are readily
available are valued at the mean between the last current bid and asked price.
Short-term securities having maturity of 60 days or less are valued at amortized
cost when it is determined by the Fund's Board of Directors that amortized cost
reflects the fair value of such securities. Securities for which market
quotations are not readily available and other assets are valued at fair value
as determined by the management and approved in good faith by the Board of
Directors.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the New York Stock Exchange (the "Exchange"). Foreign currency exchange
rates are also generally determined prior to the close of the Exchange.
Occasionally, events affecting the value of such securities and such exchange
rates may occur between the times at which they are determined and the close of
the Exchange, which will not be reflected in the computation of net asset value.
If, during such periods, events occur which materially affect the value of such
securities, the securities will be valued at their fair market value as
determined by the investment adviser and approved in good faith by the
Directors.
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<PAGE>
In order to determine net asset value per share, the aggregate value of
portfolio securities is added to the value of the Fund's other assets, such as
cash and receivables; the total of the assets thus obtained, less liabilities,
is then divided by the number of shares outstanding.
PERFORMANCE CALCULATION
The Fund will calculate performance on a total return basis for various
periods. The total return basis combines changes in principal and dividends for
the periods shown. Principal changes are based on the difference between the
beginning and closing net asset value for the period and assumes reinvestment of
dividends paid by the Fund. Dividends are comprised of net investment income and
net realized capital gains, respectively.
Performance will vary from time to time and past results are not necessarily
representative of future results. A shareholder should remember that performance
is a function of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index, Standard & Poor's 500 Composite Stock Price Index and
Morgan Stanley Capital International World Index. Such comparative performance
information will be stated in the same terms in which the comparative data and
indices are stated. Further information about the Fund's performance is
contained in the annual report, which may be obtained without charge.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to declare or distribute a dividend from its net investment
income and/or net capital gain income to shareholders annually or more
frequently if necessary in order to comply with distribution requirements of the
Code to avoid the imposition of regular Federal income tax, and if applicable, a
4% excise tax.
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund. Dividend and capital gain distributions are generally not currently
taxable to owners of variable contracts.
TAX MATTERS
The Fund. The Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), concerning the diversification of assets,
distribution of income, and sources of income. When the Fund qualifies as a
regulated investment company and all of its taxable income is distributed in
accordance with the timing requirements imposed by the Code, the Fund will not
be subject to federal income tax. If, however, for any taxable year the Fund
does not qualify as a regulated investment company, then all of its income will
be subject to tax at regular corporate rates (without any deduction for
distributions to the separate accounts of the Participating Insurance Companies
(the "Accounts")), and the receipt of such distributions will be taxable to the
extent that the Fund has current and accumulated earnings and profits.
Fund distributions. Distributions by the Fund are taxable, if at all, to the
Accounts, and not to variable annuity contract holders or variable life
insurance policy holders. An Account will include distributions in its taxable
income in the year in which they are received (whether paid in cash or
reinvested).
Share redemptions. Redemptions of the shares held by the Accounts generally will
not result in gain or loss for the Accounts and will not result in gain or loss
for the variable annuity contract holders or variable life insurance policy
holders.
Summary. The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. The foregoing
discussion also assumes that the Accounts are the owners of the shares and that
the policies or contracts qualify as life insurance policies or annuities,
respectively, under the Code. If the foregoing requirements are not met then the
variable annuity contract holders or variable life insurance policy holders will
be treated as recognizing income (from distributions or otherwise) related to
the ownership of Fund shares. The foregoing discussion is for general
information only; a more detailed discussion of federal income tax
considerations is contained in the Statement of Additional Information. Variable
annuity contract holders or variable life insurance policy holders must consult
the prospectuses of their respective contracts or policies for information
concerning the federal income tax consequences of owning such contracts or
policies.
8
<PAGE>
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Company is an open-end, diversified management investment company
organized as a corporation under the laws of the State of Maryland on December
27, 1993, and has authorized capital of 1,000,000,000 shares of common stock,
par value $.001 of which 500,000,000 have been designated Lexington Emerging
Markets Fund Series. Each share of common stock has one vote and shares equally
in dividends and distributions when and if declared by the Company and in the
Company's net assets upon liquidation. All shares, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or exchange rights. Fund
shares do not have cumulative voting rights and, as such, holders of at least
50% of the shares voting for Directors can elect all Directors and the remaining
shareholders would not be able to elect any Directors.
Voting Rights
Shareholders of the Fund are given certain voting rights. Each share of the
Fund will be given one vote. Participating insurance companies provide variable
annuity contracts holders and variable life insurance policy holders the right
to direct the voting of Fund shares at shareholder meetings to the extent
required by law. See the Separate Account Prospectus for the Variable Annuity
Contract or Variable Life Insurance Policy Section for more information
regarding the pass through of these voting rights.
The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 10% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as custodian for the Fund's portfolio securities
including those to be held by foreign banks and foreign securities depositories
that qualify as eligible foreign custodians under the rules adopted by the SEC
and for the Fund's domestic securities and other assets. State Street Bank and
Trust Company, c/o National Financial Data Services, 1004 Baltimore, Kansas
City, Missouri 64105, has been retained to act as the transfer agent and
dividend disbursing agent for the Fund. Neither Chase Manhattan Bank, N.A. nor
State Street Bank and Trust Company have any part in determining the investment
policies of the Fund or in determining which portfolio securities are to be
purchased or sold by the Fund or in the declaration of dividends and
distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus. KPMG Peat Marwick LLP, 345 Park
Avenue, New York, New York 10154, has been selected as independent auditors for
the Fund for the fiscal year ending December 31, 1996.
OTHER INFORMATION
This prospectus omits certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Statement of Additional
Information included in such registration statement may be obtained without
charge from the Fund.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus, and information or
representations not herein contained, if given or made, must not be relied upon
as having been authorized by the Fund. This Prospectus does not constitute an
offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
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(Right column)
L E X I N G T O N
LEXINGTON
EMERGING
MARKETS
FUND, INC.
(filled box)
P R O S P E C T U S
APRIL 29, 1996
--------------
(Left column)
Investment Adviser
- ----------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Distributor
- ----------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Transfer Agent
- ----------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105
Table of Contents Page
- ----------------------------------------------------
Financial Highlights ............................ 2
Description of the Fund ......................... 2
Investment Objective and Policies ............... 2
Investment Restrictions ......................... 5
Management of the Fund .......................... 6
Portfolio Manager ............................. 7
How to Purchase and Redeem Shares ............... 7
Determination of Net Asset Value ................ 7
Performance Calculation ......................... 8
Dividend, Distribution and Reinvestment Policy .. 8
Tax Matters ..................................... 8
Organization and Description of Common Stock .... 9
Custodian, Transfer Agent and
Dividend Disbursing Agent ..................... 9
Counsel and Independent Auditors ................ 9
Other Information ............................... 9
<PAGE>
LEXINGTON EMERGING MARKETS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
This Statement of Additional Information which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Emerging Markets
Fund, Inc. (the "Fund"), dated April 29, 1996 and as it may be revised from time
to time. To obtain a copy of the Fund's prospectus at no charge, please write to
the Fund at P.O. Box 1515/Park 80 West - Plaza Two, Saddle Brook, New Jersey
07663 or call the following number: 201-845-7300.
Lexington Management Corporation is the Fund's investment adviser. Lexington
Funds Distributor, Inc. is the Fund's distributor.
TABLE OF CONTENTS
Investment Objective and Policies ......................................... 2
Risk Considerations ....................................................... 3
Investment Restrictions ................................................... 4
Management of the Fund .................................................... 6
Investment Adviser, Distributor and Administrator ......................... 8
Portfolio Transactions and Brokerage Commissions .......................... 9
Determination of Net Asset Value .......................................... 10
Tax Matters ............................................................... 10
Performance Calculation ................................................... 10
Other Information ......................................................... 11
Financial Statements ...................................................... 12
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
For a full description of the Fund's investment objective and policies, see
the Prospectus under "Investment Objective and Policies".
CERTAIN INVESTMENT METHODS
Settlement Transactions-When the Fund enters into contracts for purchase or sale
of a portfolio security denominated in a foreign currency, it may be required to
settle a purchase transaction in the relevant foreign currency or receive the
proceeds of a sale in that currency. In either event, the Fund will be obligated
to acquire or dispose of such foreign currency as is represented by the
transaction by selling or buying an equivalent amount of United States dollars.
Furthermore, the Fund may wish to "lock in" the United States dollar value of
the transaction at or near the time of a purchase or sale of portfolio
securities at the exchange rate or rates then prevailing between the United
States dollar and the currency in which the foreign security is denominated.
Therefore, the Fund may, for a fixed amount of United States dollars, enter into
a forward foreign exchange contract for the purchase or sale of the amount of
foreign currency involved in the underlying securities transaction. In so doing,
the Fund will attempt to insulate itself against possible losses and gains
resulting from a change in the relationship between the United States dollar and
the foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is known
as "transaction hedging".
To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign dollar and the relevant foreign currency
when foreign securities are purchased or sold for settlement beyond customary
settlement time (as described below). Neither type of foreign currency
transaction will eliminate fluctuations in the prices of the Fund's portfolio or
securities or prevent loss if the price of such securities should decline.
Portfolio Hedging-Some or all of the Fund's portfolio will be denominated in
foreign currencies. As a result, in addition to the risk of change in the market
value of portfolio securities, the value of the portfolio in United States
dollars is subject to fluctuations in the exchange rate between such foreign
currencies and the United States dollar. When, in the opinion of LMC, it is
desirable to limit or reduce exposure in a foreign currency in order to moderate
potential changes in the United States dollar value of the portfolio, the Fund
may enter into a forward foreign currency exchange contract by which the United
States dollar value of the underlying foreign portfolio securities can be
approximately matched by an equivalent United States dollar liability. This
technique is known as "portfolio hedging" and moderates or reduces the risk of
change in the United States dollar value of the Fund's portfolio only during the
period before the maturity of the forward contract (which will not be in excess
of one year). The Fund, for hedging purposes only, may also enter into forward
foreign currency exchange contracts to increase its exposure to a foreign
currency that the Fund's investment adviser expects to increase in value
relative to the United States dollar. The Fund will not attempt to hedge all of
its foreign portfolio positions and will enter into such transactions only to
the extent, if any, deemed appropriate by the investment adviser. Hedging
against a decline in the value of currency does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. The Fund will not enter into forward foreign currency
exchange transactions for speculative purposes. The Fund intends to limit
transactions as described in this paragraph to not more than 70% of the total
Fund assets.
Forward Commitments-The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments.
Covered Call Options-Call options may also be used as a means of participating
in an anticipated price increase of a security on a more limited basis than
would be possible if the security itself were purchased. The Fund may write only
covered call options. Since it can be expected that a call option will be
exercised if the market value of the underlying
2
<PAGE>
security increases to a level greater than the exercise price, this strategy
will generally be used when the investment adviser believes that the call
premium received by the Fund plus anticipated appreciation in the price of the
underlying security, up to the exercise price of the call, will be greater than
the appreciation in the price of the security. The Fund intends to limit
transactions as described in this paragraph to less than 5% of total Fund
assets. The Fund will not purchase put and call options written by others. Also,
the Fund will not write any put options.
RISK CONSIDERATIONS
Investors should recognize that investing in securities of companies in
emerging markets and emerging countries involves certain risk considerations,
including those set forth below, which are not typically associated with
investing in securities of U.S.
companies.
Foreign Currency Considerations
The Fund's assets will be invested in securities of companies in emerging
markets and emerging countries and substantially all income will be received by
the Fund in foreign currencies. However, the Fund will compute and distribute
its income in dollars, and the computation of income will be made on the date of
its receipt by the Fund at the foreign exchange rate in effect on that date.
Therefore, if the value of the foreign currencies in which the Fund receives its
income falls relative to the dollar between receipt of the income and the making
of Fund distributions, the Fund will be required to liquidate securities in
order to make distributions if the Fund has insufficient cash in dollars to meet
distribution requirements.
The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward or futures contracts to purchase or
sell foreign currencies.
Investment and Repatriation Restrictions
Some emerging countries have laws and regulations which currently preclude
direct foreign investment in the securities of their companies. However,
indirect foreign investment in the securities of companies listed and traded on
the stock exchanges in these countries is permitted by certain emerging
countries through investment funds which have been specifically authorized. The
Fund may invest in these investment funds subject to the provisions of the 1940
Act as discussed below under "Investment Restrictions". If the Fund invests in
such investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the Investment Manager), but also will bear indirectly similar
expenses of the underlying investment funds.
In addition to the foregoing investment restrictions, prior governmental
approval for foreign investments may be required under certain circumstances in
some emerging countries, while the extent of foreign investment in domestic
companies may be subject to limitation in other emerging countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies in emerging countries to prevent, among other concerns, violation of
foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
emerging countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.
Emerging Country and Emerging Market Securities Markets
Trading volume on emerging country stock exchanges is substantially less
than that on the New York Stock Exchange. Further, securities of some emerging
country or emerging market companies are less liquid and more volatile than
securities of comparable U.S. companies. Similarly, volume and liquidity in most
emerging country bond markets is substantially less than in the U.S. and,
consequently, volatility of price can be greater than in the U.S. Fixed
commissions on emerging country stock or emerging market exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Fund
endeavors to achieve the most favorable net results on its portfolio
transactions and may be able to purchase the securities in which the Fund may
invest on other stock exchanges where commissions are negotiable.
3
<PAGE>
Companies in emerging countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about an emerging country
company than about a U.S. company. Further, there is generally less governmental
supervision and regulation of foreign stock exchanges, brokers and listed
companies than in the U.S.
Economic and Political Risks
The economies of individual emerging countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. Further, the economies of developing countries
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by trade barriers, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Fund's
investments in those countries. In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.
INVESTMENT RESTRICTIONS
The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters or fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:
(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including
reverse repurchase agreements, foreign exchange contracts, delayed
delivery and when-issued securities, which may be considered the
issuance of senior securities; (b) the Fund may engage in transactions
that may result in the issuance of a senior security to the extent
permitted under applicable regulations, interpretation of the 1940 Act
or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related
options shall not be considered to involve the issuance of senior
securities; and (e) subject to fundamental restrictions, the Fund may
borrow money as authorized by the 1940 Act.
(2) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (c) for temporary
emergency purposes, the Fund may borrow money in amounts not exceeding
5% of the value of its total assets at the time when the loan is made;
(d) The Fund may pledge its portfolio securities or receivables or
transfer or assign or otherwise encumber them in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test. The
Fund will only invest up to 5% of its total assets in reverse repurchase
agreements.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities
by the Fund, the Fund may be deemed to be an underwriter under the
provisions of the 1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or real
estate limited partnership interests except that, to the extent
appropriate under its investment program, the Fund may invest in
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which deal in real
estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into
4
<PAGE>
repurchase transactions and (c) lend portfolio securities provided that
the value of such loaned securities does not exceed one-third of the
Fund's total assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase
securities of companies engaged in such activities, may enter into
transactions in financial and index futures contracts and related
options, may engage in transactions on a when-issued or forward
commitment basis, and may enter into forward currency contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in
securities issued by companies principally engaged in any one industry.
The Fund considers foreign government securities and supranational
organizations to be industries for the purposes of this restriction.
This limitation, however, will not apply to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
(8) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction
shall not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities or, with respect to 25%
of the Fund's total assets, to securities issued or guaranteed by the
government of any country other than the United States which is a member
of the Organization for Economic Cooperation and Development ("OECD").
The member countries of OECD are at present: Australia, Austria,
Belgium, Canada, Denmark, Germany, Finland, France, Greece, Iceland,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more
than 10% of the outstanding voting securities of such issuer being held
by the Fund.
In additional to the above fundamental restrictions, the Fund has undertaken
the following non fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under
the management of the investment adviser to save commissions or to
average prices among them is not deemed to result in a securities
trading account.
(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.
(3) The Fund will not make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment
programs of the Fund.
(4) The Fund will not purchase securities of an issuer if to the Fund's
knowledge, one or more of the Directors or officers of the Fund or LMC
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer nor will the
Fund hold the securities of such issuer.
(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(6) The Fund will not, except for investments which, in the aggregate, do
not exceed 5% of the Fund's total assets taken at market value, purchase
securities unless the issuer thereof or any company on whose credit the
purchase was based has a record of at least three years continuous
operations prior to the purchase.
(7) The Fund will not invest for the purpose of exercising control over or
management of any company.
(8) The Fund will not purchase warrants except in units with other
securities in original issuance thereof or attached to other securities,
if at the time of the purchase, the Fund's investment in warrants,
valued at the lower of cost or market, would exceed 5% of the Fund's
total assets. Warrants which are not listed on a United States
securities exchange shall not exceed 2% of the Fund's net assets. For
these purposes, warrants attached to units or other securities shall be
deemed to be without value.
(9) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of
5
<PAGE>
business without taking a materially reduced price. Such securities
include, but are not limited to, time deposits and repurchase agreements
with maturities longer than seven days. Securities that may be resold
under Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended, shall not be deemed illiquid solely
by reason of being unregistered. The Investment Adviser shall determine
whether a particular security is deemed to be liquid based on the
trading markets for the specific security and other factors.
(10) The Fund will not purchase interests in oil, gas, mineral leases or
other exploration programs; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas or other materials.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
MANAGEMENT OF THE FUND
The Directors and executive officers of the Fund and their principal
occupations are set forth below:
*+ROBERT M. DEMICHELE, President and Director. P.O. Box 1515, Saddle Brook, N.J.
07663. Chairman and Chief Executive Officer, Lexington Management Corporation;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.;
President and Director, Lexington Global Asset Managers, Inc.; Director,
Unione Italiana Reinsurance; Vice Chairman of the Board of Trustees, Union
College; Director, The Navigator's Group, Inc.; Chairman, Lexington Capital
Management, Inc.; Chairman, LCM Financial Services, Inc.; Director, Vanguard
Cellular Systems, Inc.; Chairman of the Board, Market System Research, Inc.
and Market Systems Research Advisors, Inc. (registered investment advisers);
Trustee, Smith Richardson Foundation.
+BEVERLEY C. DUER, Director. 340 East 72nd Street, New York, N.Y. 10021.
Private Investor. Formerly, Manager of Operations Research Department-CPC
International, Inc.
*+BARBARA R. EVANS, Director. 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May, 1989, Assistant Vice President and Securities Analyst,
Lexington Management Corporation; prior to March 1987, Vice
President-Institutional Equity Sales, L.F. Rothschild, Unterberg, Towbin.
*+LAWRENCE KANTOR, Vice President and Director. P.O. Box 1515, Saddle Brook,
N.J. 07663. Managing Director, Executive Vice President and Director,
Lexington Management Corporation; Executive Vice President and Director,
Lexington Funds Distributor, Inc.; Executive Vice President and General
Manager-Mutual Funds, Lexington Global Asset Managers, Inc.
+DONALD B. MILLER, Director. 10725 Quail Covey Road, Boynton Beach, FL 33436.
Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds; Director, Maguire Group
of Connecticut; prior to January 1989, President, Director and C.E.O., Media
General Broadcast Services (advertising firm).
+JOHN G. PRESTON, Director. 3 Woodfield Road, Wellesley, Massachusetts 02181.
Associate Professor of Finance, Boston College, Boston, Massachusetts.
+MARGARET RUSSELL, Director. 55 North Mountain Avenue, Montclair, N.J. 07042.
Private Investor. Formerly, Community Affairs Director, Union Camp
Corporation.
+PHILIP C. SMITH, Director. 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor; Director, Southwest Investors Income Fund, Inc., Government
Income Fund, Inc., U.S. Trend Fund, Inc., Investors Cash Reserve and Plimony
Fund, Inc. (registered investment companies).
+FRANCIS A. SUNDERLAND, Director. 309 Quito Place, Castle Pines, Castle Rock,
Colorado. 80104. Private Investor.
*+LISA CURCIO, Vice President and Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President and Secretary, Lexington Management Corporation;
Vice President and Secretary, Lexington Funds Distributor, Inc.; Secretary,
Lexington Global Asset Managers, Inc.
*+RICHARD T. SALER, Vice President and Portfolio Manager. P.O. Box 1515, Saddle
Brook, N.J. 07663. Senior Vice President, Director International Investment
Strategy, Lexington Management Corporation. Prior to July, 1992, Securities
Analyst, Nomura Securities, Inc. Prior to November, 1991, Vice President,
Lexington Management Corporation.
*+RICHARD M. HISEY, Vice President and Treasurer. P.O. Box 1515, Saddle Brook,
N.J. 07663. Managing Director, Director and Chief Financial Officer, Lexington
Management Corporation; Chief Financial Officer, Vice President and Director,
Lexington Funds Distributor, Inc.; Chief Financial Officer, Market Systems
Research Advisors, Inc.; Executive Vice President and Chief Financial Officer,
Lexington Global Asset Managers, Inc.
6
<PAGE>
*+RICHARD LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.
*+JANICE CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+CHRISTIE CARR, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.
*+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November 1993, Supervisor of Investment Accounting, Alliance Capital
Management.
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to May 1994, Supervising Senior Accountant, NY Life Securities. Prior to
December 1990, Senior Accountant, Dreyfus Corporation.
*+SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+PETER CORNIOTES, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J. 07663,
Assistant Vice President and Assistant Secretary, Lexington Management
Corporation. Assistant Secretary, Lexington Funds Distributor, Inc.
*+ENRIQUE J. FAUST, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator, Lexington Group
of Investment Companies.
*"Interested person" and/or "Affiliated person" of LMC as defined in the
Investment Company Act of 1940, as amended.
The Board of Trustees met 5 times during the twelve months ended December
31, 1995, and each of the Trustees attended at least 75% of those meetings.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisor is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by LMC. Each Trustee receives a
fee, allocated among all investment companies for which the Trustee serves.
Effective September 12, 1995 each Trustee receives annual compensation of
$24,000. Prior to September 12, 1995, the trustees who were not employed by the
Fund or its affiliates received annual compensation of $16,000.
Set forth below is information regarding compensation paid or accrued during
the period January 1, 1995 to December 31, 1995 for each Trustee:
Directors not employed by the Fund or its affiliates receive an annual fee
of $800 and a fee of $160 for each meeting attended plus reimbursement of
expenses for attendance at regular meetings. The Board does not have any audit,
nominating or compensation committees. For the year ended December 31, 1995, the
aggregate remuneration paid by the Fund to seven such directors was $13,220.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Aggregate Total Compensation Number of
Name of Director Compensation from From Fund and Directorships in
Fund Fund Complex Fund Complex
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert M. DeMichele 0 0 15
- -----------------------------------------------------------------------------------------
Beverely C. Duer $1,456 $22,616 15
- -----------------------------------------------------------------------------------------
Barbara R. Evans 0 0 14
- -----------------------------------------------------------------------------------------
Lawrence Kantor 0 0 15
- -----------------------------------------------------------------------------------------
Donald B. Miller $1,456 $20,616 14
- -----------------------------------------------------------------------------------------
John G. Preston $1,456 $20,616 14
- -----------------------------------------------------------------------------------------
Margaret Russell $1,456 $19,560 13
- -----------------------------------------------------------------------------------------
Philip C. Smith $1,456 $20,616 14
- -----------------------------------------------------------------------------------------
Francis A. Sunderland $1,456 $19,560 13
- -----------------------------------------------------------------------------------------
</TABLE>
Retirement Plan for Eligible Directors/Trustees
Effective September 12, 1995, the Trustees instituted a Retirement Plan for
Eligible Directors/Trustees (the "Plan") pursuant to which each Director/Trustee
(who is not an employee of any of the Funds, the Advisor, Administrator or
7
<PAGE>
Distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Director/Trustee has attained age 65 and has
completed at least ten years of continuous and non-forfeited service with one or
more of the investment companies advised by LMC (or its affiliates)
(collectively, the "Covered Funds"). Each eligible Director/Trustee is entitled
to receive from the Covered Fund an annual benefit commencing on the first day
of the calendar quarter coincident with or next following his date of retirement
equal to 5% of his compensation multiplied by the number of such
Director/Trustee's years of service (not in excess of 15 years) completed with
respect to any of the Covered Portfolios. Such benefit is payable to each
eligible Trustee in quarterly installments for ten years following the date of
retirement or the life of the Director/Trustee. The Plan establishes age 72 as a
mandatory retirement age for Directors/Trustees; however, Director/Trustees
serving the Funds as of September 12, 1995 are not subject to such mandatory
retirement. Directors/Trustees serving the Funds as of September 12, 1995 who
elect retirement under the Plan prior to September 12, 1996 will receive an
annual retirement benefit at any increased compensation level if compensation is
increased prior to September 12, 1997 and receive spousal benefits (i.e., in the
event the Director/Trustee dies prior to receiving full benefits under the Plan,
the Director/Trustee's spouse (if any) will be entitled to receive the
retirement benefit within the 10 year period.)
Retiring Trustees will be eligible to serve as Honorary Trustees for one
year after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.
Set forth in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, the estimated credited years
of service for Messrs. Duer, Miller, Preston, Smith and Sunderland are 18, 22,
18, 26 and 36, respectively.
Highest Annual Compensation Paid by All Funds
20,000 25,000 30,000 35,000
Years of
Service Estimated Annual Benefit Upon Retirement
------- ----------------------------------------
15 15,000 18,750 22,500 26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation ("LMC"), P.O. Box 1515, Saddle Brook, New
Jersey 07663 is the investment adviser to the Fund pursuant to an Investment
Advisory Agreement dated January 25, 1994, (the "Advisory Agreement"). Lexington
Funds Distributor, Inc. ("LFD") is the distributor of Fund shares pursuant to a
Distribution Agreement dated December 5, 1994 (the "Distribution Agreement").
Both of these agreements were approved by the Fund's Board of Directors
(including a majority of the Directors who were not parties to either the
Advisory Agreement or the Distribution Agreement or "interested persons" of any
such party) on December 6, 1994. LMC makes recommendations to the Fund with
respect to its investments and investment policies.
LMC also acts as administrator to the Fund and performs certain
administrative and accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semi-annual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
For its investment management services to the Fund, under its Advisory
Agreement, LMC will receive a monthly fee at the annual rate of 0.85% of the
Fund's average daily net assets. LMC has voluntarily agreed to limit the total
expenses of the Fund (excluding interest, taxes, brokerage, and extraordinary
expenses but including management fee and operating expenses) to an annual rate
of 1.75% of the Fund's average net assets through April 30, 1997. Currently, the
most restrictive of expense limitations imposed by the securities laws or
regulations of those states or other jurisdictions in which the Fund's shares
are registered or qualified for sale would require LMC to reduce its fee so that
ordinary expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) for any fiscal year
8
<PAGE>
do not exceed 2.5% of the first $30 million of the Fund's average daily net
assets, plus 2.0% of the next $70 million, plus 1.5% of the Fund's average daily
net assets in excess of $100 million. LFD pays the advertising and sales
expenses of the continuous offering of Fund shares, including the cost of
printing prospectuses, proxies and shareholder reports for persons other than
existing shareholders. The Fund furnishes LFD, at printer's overrun cost paid by
LFD, such copies of its prospectus and annual, semi-annual and other reports and
shareholder communications as may reasonably be required for sales purposes. For
the year ended December 31, 1995, the Fund paid LMC $53,143 in investment
advisory fees and LMC reimbursed the Fund $173,670. For the year ended December
31, 1994, the Fund paid LMC $17,532 in investment advisory fees and LMC
reimbursed the Fund $102,954.
The Advisory Agreement, the Distribution Agreement and the Administrative
Services Agreement are subject to annual approval by the Fund's Board of
Directors and by the affirmative vote, cast in person at a meeting called for
such purpose, of a majority of the Directors who are not parties either to the
Advisory Agreement or the Distribution Agreement, as the case may be, or
"interested persons" of any such party. Either the Fund or LMC may terminate the
Advisory Agreement and the Fund or LFD may terminate the Distribution Agreement
on 60 days' written notice without penalty. The Advisory Agreement terminates
automatically in the event of assignment, as defined in the Investment Company
Act of 1940.
LMC shall not be liable to the Fund or its shareholders for any act or
omission by LMC, its officers, directors or employees or any loss sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.
LMC and LFD are wholly owned subsidiaries of Lexington Global Asset
Managers, Inc., a publicly traded corporation. Descendants of Lunsford
Richardson, Sr., their spouses, trusts and other related entities have a
majority voting control of outstanding shares of Lexington Global Asset
Managers, Inc.
Of the directors, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Lavery, Luehs, Petruski and
Saler and Mmes. Carnicelli, Carr, Curcio, Gilfillan and Mosca (see "Management
of the Fund"), may also be deemed affiliates of LMC and LFD by virtue of being
officers, directors or employees thereof.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with this policy, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and such other
policies as the Directors may determine, LMC may consider sales of shares of the
Fund and of the other Lexington Funds as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. However, pursuant
to the Fund's investment management agreement, management consideration may be
given in the selection of broker-dealers to research provided and payment may be
made of a commission higher than that charged by another broker-dealer which
does not furnish research services or which furnishes research services deemed
to be a lesser value, so long as the criteria of Section 28(e) of the Securities
Exchange Act of 1934 are met. Section 28 (e) of the Securities Exchange Act of
1934 was adopted in 1975 and specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a fiduciary
duty" solely because such person has caused the account to pay higher commission
than the lowest available under certain circumstances, provided that the person
so exercising investment discretion makes a good faith determination that the
commissions paid are "reasonable in the relation to the value of the brokerage
and research services provided...viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion."
Currently, it is not possible to determine the extent to which
commissions that reflect an element of value for research services might exceed
commissions that would be payable for executions services alone, nor generally
can the value of research services to the Fund be measured. Research services
furnished might be useful and of value to LMC and its affiliates, in serving
other clients as well as the Fund. On the other hand, any research services
obtained by LMC or its affiliates from the placement of portfolio brokerage of
other clients might be useful and of value to LMC in carrying out its
obligations to the Fund.
The Fund anticipates that its brokerage transactions involving securities of
companies domiciled in countries other than the United States will normally be
conducted on the principal stock exchanges of those countries. Fixed commissions
of foreign stock exchange transactions are generally higher than the negotiated
commission rates available in the United States. There is generally less
government supervision and regulation of foreign stock exchanges
9
<PAGE>
and broker-dealers than in the United States. For the year ended December 31,
1994, the Fund paid $34,699 in brokerage commissions. For the year ended
December 31, 1994 the Fund's portfolio turnover rate was 71.21%. For the year
ended December 31, 1995, the Fund paid $86,090 in brokerage commisions. For the
year ended December 31, 1995, the Fund's portfolio turnover rate was 88.92%.
DETERMINATION OF NET ASSET VALUE
The Fund calculates net asset value as of the close of normal trading on the
New York Stock Exchange (currently 4:00 p.m. Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on
each business day. It is expected that the New York Stock Exchange will be
closed on Saturdays and Sundays and on New Year's day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. See the Prospectus for the further discussion of net asset value.
TAX MATTERS
The following is only a summary of certain additional tax considerations
that are not described in the Prospectus and generally affect each Fund and its
shareholders. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualifications as a Regulated Investment Company. The Fund intends to qualify to
be treated as a "regulated investment company" ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code"). If so qualified, the Fund will
not be subject to federal income tax on its investment company taxable income
and net capital gains to the extent that such investment company taxable income
and net capital gains are distributed in each taxable year to the separate
accounts of the Participating Insurance Companies. In addition, if the Fund
distributes annually to the separate accounts its ordinary income and capital
gain net income, in the manner prescribed in the Code, it will also not be
subject to the 4% federal excise tax otherwise applicable to the undistributed
income or gain of a RIC. Distributions of net investment income and net
short-term capital gains will be treated as ordinary income and distributions of
net long-term capital gains will be treated as long-term capital gain in the
hands of the Participating Insurance Companies. Under current tax law, capital
gains or dividends from the Fund are not currently taxable when left to
accumulate within a variable annuity or variable life insurance contract.
Section 817(h) of the Code requires that investments of a segregated asset
account of an insurance company be "adequately diversified," in accordance with
Treasury Regulations promulgated thereunder, in order for the holders of the
variable annuity contracts or variable life insurance policies investing in the
account to receive the tax-deferred or tax-free treatment generally afforded
holders of annuities or life insurance policies under the Code. The Department
of the Treasury has issued Regulations under section 817(h) which, among other
things, provide the manner in which a segregated asset account will treat
investments in a RIC for purposes of the applicable diversification
requirements. Under the Regulations, if a RIC satisfies certain conditions, that
RIC will not be treated as a single investment for these purposes, but rather
the segregated asset account will be treated as owning its proportionate share
of each of the assets of the RIC. The Fund plans to satisfy these conditions at
all times so that each segregated asset account of a Participating Insurance
Company investing in the Fund will be treated as adequately diversified under
the Code and Regulations.
For information concerning the federal income tax consequences to the
holders of variable annuity contracts and variable rate insurance policies, such
holders should consult the prospectuses used in connection with the issuance of
their particular contracts or policies.
PERFORMANCE CALCULATION
For the purpose of quoting and comparing the performance of the Fund to that
of other mutual funds and to other relevant market indices in advertisements or
in reports to shareholders, performance may be stated in terms of total return.
Under the rules of the Securities and Exchange Commission ("SEC rules"), funds
advertising performance must include total return quotes calculated according to
the following formula:
P(l+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods
or at the end of the 1, 5 or 10 year periods
(or fractional portion thereof).
10
<PAGE>
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the effectiveness
of the Fund's Registration Statement. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectus on the reinvestment
dates during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5 and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.
The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or with the performance of
the Standard and Poor's 500 Stock Index, the Dow Jones Industrial Average or the
Morgan Stanley Capital International World Index, the Fund calculates its
aggregate total return for the specified periods of time assuming the investment
of $10,000 in Fund shares and assuming the reinvestment of each dividend or
other distribution at net asset value on the reinvestment date. Percentage
increases are determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the beginning value. The
Fund's total return for the one year and since commencement (3/30/94) period as
of December 31, 1995 was -3.93% and -1.85%.
OTHER INFORMATION
As of March 8, 1996, Lexington Management Corporation, Park 80 West Plaza
Two, Saddle Brook, N.J. 07663 owned benefically 10,319 shares of the Fund. The
balance of the outstanding shares of the Fund are owned by Transamerica
Occidental Life Insurance Company (37%); Aetna Life Insurance and Annuity
Company (38%) and Kemper Investors Life Insurance Company (18%) and are
allocated to separate accounts which are used for funding variable annuity
contracts. Independent Auditors' Report The Board of Directors and Shareholders
11
<PAGE>
Independent Auditors' Report
The Board of Directors and Sahreholders
Lexington Emerging Markets Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Emerging
Markets Fund, Inc. as of December 31, 1995, the related statements of operations
for the year then ended, and the statement of changes in net assets, and the
financial highlights for the year then ended and for the period from March 30,
1994 (commencement of operations) to December 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Emerging Markets Fund, Inc. as of December 31, 1995, the results of
its operations for the year then ended and the changes in its net assets and the
financial highlights for the year then ended and for the period from March 30,
1994 to December 31, 1994, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
January 29, 1996
12
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995
<TABLE>
<CAPTION>
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS: 95.8%
Brazil: 7.3%
310,000 Coteminas ............................................................. $ 103,685
13,894,500 Cia Acos Especiais Itabir (Preferred shares) .......................... 80,790
3,100 Compania Vale Do Rio Doce (ADR) (Preferred shares) .................... 127,100
1,787,000 Telecomunicacoes Brasileiras S.A. ..................................... 86,067
500,000 Telecomunicacoes de Sao Paulo S.A. .................................... 73,582
120,365,000 Usinas Siderurgicas de Minas Gerais S.A. .............................. 97,858
----------
569,082
----------
Chile: 5.0%
5,000 Banco O'Higgins (ADR) ................................................. 115,000
7,500 Banco Osorno y La Union (ADR) ......................................... 104,063
2,000 Chile Fund, Inc. ...................................................... 52,000
4,550 Madeco, S.A. (ADR) .................................................... 122,850
----------
393,913
----------
Greece: 3.8%
3,400 AEGEK ................................................................. 29,225
4,950 Delta Dairy S.A. (Preferred shares) ................................... 73,000
5,300 Michaniki S.A. ........................................................ 68,112
3,100 Titan Cement Company .................................................. 129,967
----------
300,304
----------
Hong Kong: 4.6%
33,000 Dao Heng Bank Group, Ltd. ............................................. 118,650
13,000 Henderson Land Development Company, Ltd. .............................. 78,350
10,800 HSBC Holdings Plc ..................................................... 163,425
----------
360,425
----------
Hungary: 1.1%
2,220 Pick Szeged ........................................................... 84,522
India: 3.3%
14,000 India Fund, Inc. ...................................................... 124,250
2,500 Bajaj Auto, Ltd.2 ..................................................... 65,300
2,100 Hindalco Industries, Ltd.2 ............................................ 71,400
----------
260,950
----------
Indonesia: 7.0%
500 PT Bank Bali .......................................................... 985
9,500 PT Hanjaya Mandala Sampoerna .......................................... 98,993
28,000 PT Hero Supermarket ................................................... 60,070
56,234 PT Indah Kiat Pulp & Paper Corporation ................................ 41,240
1,000 PT Indosat (ADR) ...................................................... 36,500
12,000 PT Modern Photo Film Company .......................................... 69,615
53,000 PT Semen Cibinong ..................................................... 132,268
27,000 PT Semen Gresik ....................................................... 75,657
54,000 PT Sinar Mas Agro Resources Agricultural Production and
Technology Corporation .............................................. 30,144
----------
545,472
----------
Israel: 6.3%
10 Africa-Israel Investments, Ltd.2 ...................................... 12,058
54,936 Bank Hapoalim, Ltd. ................................................... 90,682
400 First International Bank of Israel .................................... 46,782
8,200 First Israel Fund, Inc. ............................................... 95,325
1,060 Koor Industries, Ltd. ................................................. 105,244
8,832 Osem Investment, Ltd. ................................................. 52,816
1,300 Teva Pharmaceutical Industries, Ltd. (ADR) ............................ 60,206
9,000 The Israel Land Developement Company .................................. 26,036
----------
489,149
----------
</TABLE>
13
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995 (continued)
<TABLE>
<CAPTION>
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Malaysia: 8.4%
6,000 Arab Malaysian Merchant Bank Holdings Bhd ............................. $ 68,544
----------
16,000 Berjaya Singer Bhd .................................................... 19,917
25,000 Cement Industries of Malaysia Bhd ..................................... 81,003
5,000 Genting Bhd ........................................................... 41,757
20,000 IOI Properties Bhd .................................................... 50,030
8,000 Malayan Banking Bhd ................................................... 67,441
32,000 New Straits Times Press Bhd ........................................... 107,150
25,000 Sime Darby Bhd ........................................................ 66,476
31,000 Sungei Way Holdings Bhd ............................................... 111,739
9,000 Tanjong Plc ........................................................... 26,236
3,000 Tenaga Nasional Bhd ................................................... 11,818
----------
652,111
----------
Mexico: 8.2%
22,020 Corporacion Industrial San Luis S.A. .................................. 113,254
6,000 Grupo Casa Autrey, S.A. de C.V. (ADR) ................................. 80,250
171,000 Grupo Industrial Maseco S.A. de C.V. .................................. 104,648
6,700 Grupo Televisa S.A. (ADR) ............................................. 150,750
9,000 Transportacion Maritima Mexicana S.A. de C.V. "L" (ADR) ............... 75,375
16,800 Tubos De Acero De Mexico S.A. (ADR)2 .................................. 117,600
----------
641,877
----------
Pakistan: 0.5%
7,700 Pakistan Investment Fund, Inc. ........................................ 40,425
----------
Philippines: 6.4%
120,750 Ayala Land, Inc. "B" .................................................. 147,425
444,250 Filinvest Land Inc.2 .................................................. 142,377
92,750 International Container Terminal Service, Inc. ........................ 48,657
3,000 Manila Electric Company ............................................... 24,495
4,800 Philippine Commercial International Bank1 ............................. 44,319
6,500 San Miguel Corporation "B" ............................................ 22,196
140,200 Universal Robina Corporation .......................................... 69,538
----------
499,007
----------
Poland: 6.7%
7,400 Bank Rozwoju Eksportu S.A. ............................................ 112,622
500 Bank Slaski S.A. ...................................................... 29,119
2,900 Debica S.A. ........................................................... 43,782
32,300 Elektrim Towarzystwo Handlowe S.A. .................................... 109,458
14,400 Polifarb Cieszyn Wroclaw S.A. ......................................... 54,643
8,900 Stomil Olsztyn S.A. ................................................... 83,076
2,500 Universal S.A. ........................................................ 7,102
520 Wedel S.A. ............................................................ 17,200
920 Zaklady Piwowarski W Zylocu S.A. ...................................... 63,475
----------
520,477
----------
Portugal: 1.9%
7,464 Portugal Telecom S.A. (ADR)2 .......................................... 140,261
600 Unicer - Uniao Cervejeira S.A. ........................................ 10,013
----------
150,274
----------
Singapore: 7.0%
9,000 Development Bank of Singapore, Ltd. ................................... 112,038
6,000 Fraser & Neave, Ltd. .................................................. 76,390
5,000 Jurong Engineering, Ltd. .............................................. 29,177
9,000 Keppel Corporation, Ltd. .............................................. 80,209
11,000 Oversea-Chinese Banking Corporation, Ltd. ............................. 137,714
16,000 Overseas Union Bank, Ltd. ............................................. 110,341
----------
545,869
----------
</TABLE>
14
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995 (continued)
<TABLE>
<CAPTION>
Number of
Shares
or Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
South Africa: 7.4%
300 Anglo American Corporation of South Africa, Ltd. (ADR) ................ $ 18,169
4,442 Anglo American Platinum (ADR)2 ........................................ 25,284
7,500 Barlow, Ltd. (ADR) .................................................... 106,415
1,500 Liberty Life Association of Africa, Ltd. .............................. 46,508
3,100 Liberty Life Association of Africa, Ltd. (ADR) ........................ 95,499
5,300 Malbak, Ltd.1 ......................................................... 36,720
5,400 Malbak, Ltd. .......................................................... 37,413
6,710 Rustenburg Platinum Holdings, Ltd. (ADR) .............................. 110,439
1,400 South African Breweries, Ltd. ......................................... 51,283
1,422 South African Breweries, Ltd. (ADR) ................................... 52,081
----------
579,811
----------
South Korea: 1.1%
1,200 Pohang Iron & Steel Company, Ltd. ..................................... 78,432
400 Pohang Iron & Steel Company, Ltd. (ADR) ............................... 8,750
----------
87,182
----------
Taiwan: 1.2%
4,537 Taiwan Fund, Inc. ..................................................... 93,009
----------
Thailand: 6.7%
4,600 Advanced Information Service Plc ...................................... 81,478
8,000 Bangkok Bank, Ltd. .................................................... 97,220
6,000 Matichon Public Company, Ltd. ......................................... 35,980
5,500 Phatra Thanakit Company, Ltd. ......................................... 47,180
1,900 Saha Pathanapibul Company, Ltd. ....................................... 3,545
4,600 Siam City Cement Company, Ltd. ........................................ 71,978
8,000 Thai Farmers Bank Public Company, Ltd. ................................ 80,699
1,300 The Siam Cement Company, Ltd. ......................................... 72,072
5,400 Total Access Communication Plc1 ....................................... 35,100
----------
525,252
----------
United Kingdom: 1.2%
21,300 Antofagasta Holdings Plc .............................................. 96,569
----------
United States: 0.1%
300 Freeport McMoran Copper & Gold (Preferred shares) ..................... 8,400
----------
Venezuela: 0.6%
3,240 Ceramanic Carobobo ADR ................................................ 3,467
5,520 Mantex S.A.C.A. (ADR)2 ................................................ 26,220
1,845 Mavesa S.A. (ADR)1,2 .................................................. 6,919
2,050 Mavesa, S.A. (ADR)2 ................................................... 7,688
----------
44,294
----------
TOTAL COMMON STOCKS (cost $7,554,923) ................................. 7,488,374
----------
SHORT-TERM INVESTMENTS:
U.S. Government Obligations: 11.4%
$400,000 U.S. Treasury Bill 4.92%, due 03/14/96 ................................ 396,009
100,000 U.S. Treasury Bill 5.30%, due 01/04/96 ................................ 99,956
300,000 U.S. Treasury Bill 5.25%, due 01/18/96 ................................ 299,256
100,000 U.S. Treasury Bill 5.295%, due 05/09/96 ............................... 98,103
----------
TOTAL SHORT-TERM INVESTMENTS (cost $893,324) .......................... 893,324
----------
TOTAL INVESTMENTS: 107.2% (cost $8,448,247+)(Note 1) .................. 8,381,698
Liabilities in excess of other assets: (7.2%) ......................... (567,037)
----------
TOTAL NET ASSETS: 100.0%
(equivalent to $9.38 per share on 832,893 shares outstanding) ....... $7,814,661
==========
</TABLE>
15
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995 (continued)
Notes to Statement of Net Assets
1The following securities were purchased under Rule 144A of the Securities Act
of 1933 and, unless registered under the Act or exempted from registration, may
be sold only to qualified institutional investors.
<TABLE>
<CAPTION>
Acquisition Average Cost Percent of
Issuer Date Per Share Market Value Net Assets
- ------------------------------ ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Malbak, Ltd. ................. 07/25/95 $5.75 $ 36,720 .47%
Mavesa S.A. (ADR) ............ 03/30/95 8.86 6,919 .09%
Philippine Commercial
International Bank ......... 08/04/95 8.47 44,319 .57%
Total Access Communication Plc 09/19/95 6.31 35,100 .45%
-------- ----
$123,058 1.58%
-------- ----
</TABLE>
Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities have been deemed to be illiquid. The Fund currently
limits investment in illiquid securities to 15% of the Fund's net assets, at
market value, at the time of purchase.
2Non-income producing securities.
ADR-American Depository Receipt.
+Aggregate cost for Federal income tax purposes is identical.
------------------
At December 31, 1995, the composition of the Fund's net assets by industry
concentration was as follows:
Banking ..................... 18.6%
Capital Equipment .......... 4.1
Construction & Housing ..... 1.7
Consumer Durable ............ 3.7
Consumer NonDurable ........ 11.1
Financial Services .......... 3.3
Health Care ................. 1.8
Materials ................... 19.5
Merchandising ............... 0.8
Multi-Industry .............. 11.8%
Real Estate ................ 5.6
Services .................... 7.7
Telecommunications .......... 4.2
Trade ....................... 1.6
U.S.Government obligations .. 11.4
Utilities ................... 0.3
Other liabilities .......... (7.2)
----
Total Net Assets ....... 100.0%
=====
The Notes to Financial Statements are an integral part of this statement.
16
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<S> <C>
Assets
Investments, at value (cost $8,448,247) (Note 1) ............................................ $8,381,698
Cash ........................................................................................ 70,001
Receivable for shares sold .................................................................. 44,538
Dividends and interest receivable ........................................................... 12,289
Foreign taxes recoverable ................................................................... 12
Deferred organization expenses, net (Note 1) ................................................ 14,502
Due from Lexington Management Corporation (Note 2) .......................................... 8,927
----------
Total Assets ........................................................................ 8,531,967
----------
Liabilities
Payable for shares redeemed ................................................................. 45,410
Payable for investment securities purchased ................................................. 596,373
Accrued expenses ............................................................................ 75,523
----------
Total Liabilities ................................................................... 717,306
----------
Net Assets (equivalent to $9.38 per share
on 832,893 shares outstanding) (Note 3) ................................................... $7,814,661
==========
Net Assets consist of:
Capital stock-authorized 500,000,000 shares, $.001 par value per share ...................... $ 833
Additional paid-in capital .................................................................. 8,390,026
Undistributed net investment income (Note 1) ................................................ 1,876
Accumulated net realized loss on investments and foreign currency holdings (Notes 1 and 6) .. (511,559)
Net unrealized depreciation of investments and foreign currency holdings .................... (66,515)
Net Assets .......................................................................... $7,814,661
==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
17
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Operations
December 31, 1995
<TABLE>
<S> <C> <C>
Investment Income
Interest Income ........................................................ $ 57,145
Dividend Income ........................................................ 123,399
---------
180,544
Less: Foreign tax expense .............................................. 15,380
---------
Total investment income ........................................ $ 165,164
Expenses
Investment advisory fee (Note 2) ....................................... 53,143
Accounting and shareholder services fees (Note 2) ...................... 13,314
Custodian and transfer agent fees ...................................... 81,142
Printing and mailing ................................................... 41,370
Registration fees ...................................................... 7,088
Directors' fees ........................................................ 13,220
Amortization of deferred organization expenses (Note 1) ................ 4,440
Audit and legal fees ................................................... 22,100
Computer processing fees ............................................... 14,165
Other expenses ......................................................... 5,936
---------
Total expenses ..................................................... 255,918
Less: expenses recovered under contract with investment
adviser (Note 2) ................................................. 173,670 82,248
--------- ---------
Net investment income .......................................... 82,916
Realized and Unrealized Loss on Investments (Note 4)
Realized loss on:
Investments ........................................................ (425,641)
Foreign currency transactions ...................................... (4,821)
---------
Net realized loss .............................................. (430,462)
Net change in unrealized depreciation on:
Investments ........................................................ (161,277
Foreign currency translations of other assets and liabilities ...... 63
---------
Net unrealized change in depreciation 161,340
---------
Net realized and unrealized loss ............................... (269,122)
---------
Decrease in Net Assets Resulting from Operations ........................... $(186,206)
=========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
18
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
March 30, 1994
(Commencement
Year Ended of Operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Net investment income ........................................... $ 82,916 $ 14,482
Net realized loss from investment transactions .................. (430,462) (2,132)
Unrealized appreciation (depreciation) of investments ........... 161,340 (227,855)
---------- ----------
Net decrease in net assets resulting from operations ........ (186,206) (215,505)
Distributions to shareholders from net investment income ........ (76,219) (10,100)
Distributions to shareholders in excess of net realized
gain on investments (Note 1) .................................. - (88,168)
Increase in net assets from capital share transactions (Note 3) . 3,453,270 4,937,589
---------- ----------
Net increase in net assets .............................. 3,190,845 4,623,816
Net Assets
Beginning of period ............................................. 4,623,816 -
---------- ----------
End of period (including undistributed net investment income of
$1,876 and $346, respectively) ................................ $7,814,661 $4,623,816
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Notes to Financial Statements
December 31, 1995 and 1994
Note 1-Significant Accounting Policies
Lexington Emerging Markets Fund, Inc. (the "Fund") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek long-term growth of
capital primarily through investment in equity securities of companies domiciled
in, or doing business in emerging countries and emerging markets. With the
exception of shares held in connection with initial capital of the Fund, shares
of the Fund are currently being offered to participating insurance companies for
allocation to certain accounts for the purpose of funding variable annuity
contracts issued by the participating insurance companies. The Fund commenced
operations on March 30, 1994. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements:
Securities: Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Investments are stated at market value based on closing
prices reported by the exchange on which the securities are traded, on the last
business day of the period or, for over-the-counter securities, at the average
between bid and asked prices. Securities for which market quotations are not
readily available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Directors. Short-term
securities are stated at amortized cost, which approximates market value. All
investments quoted in foreign currency are valued in U.S. dollars on the basis
of the foreign currency exchange rate prevailing at the close of business.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Interest income is accrued as earned.
Foreign Currency Transactions: Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk. These contracts are marked to market daily,
by recognizing the difference between the contract exchange rate and the current
market rate as unrealized gains or losses. Realized gains or losses are
recognized when contracts are closed.
Distributions: In accordance with Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain and
Return of Capital Distributions by Investment Companies, as of December 31,1995
and 1994, book and tax basis differences amounting to $5,167 and $4,036
respectively, have been reclassified from accumulated net realized loss on
investments to undistributed net investment income. Accumulated net realized
loss on investments reflects temporary book-tax differences arising from losses
resulting from wash sales and Internal Revenue Code Excise Tax distribution
requirements and associated post-October loss deferral provisions, which
effectively allow the deferral of net realized capital losses to the next tax
year.
Federal income Taxes: It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
19
<PAGE>
Lexington Emerging Markets Fund, Inc.
Notes to Financial Statements
December 31, 1995 and 1994 (continued)
Note 1-Significant Accounting Policies (continued)
Deferred Organization Expenses: Organization expenses aggregating $22,290
have been deferred and are being amortized on a straight-line basis over five
years.
Note 2-Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at the rate of .85% of average daily net assets. LMC has agreed to
voluntarily limit the total expenses of the Fund (excluding interest, taxes,
brokerage commissions and extraordinary expenses but including management fee
and operating expenses) to an annual rate of 1.30% of the Fund's average net
assets. For the year ended December 31, 1995 expense reimbursement amounted to
$173,670 and is set forth in the statement of operations.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund, but paid by LMC.
Note 3-Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
March 30, 1994
(commencement of
Year ended operations) to
December 31, 1995 December 31, 1994
---------------------- ---------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ..................................... 845,934 $7,996,657 497,613 $5,246,882
Shares issued on reinvestment of dividends ...... 8,108 76,218 9,946 98,265
-------- ---------- ------- --------
854,042 8,072,875 507,559 5,345,147
Shares redeemed ................................. (490,164) (4,619,605) (38,544) (407,558)
-------- ---------- ------- --------
Net increase ............................ 363,878 $3,453,270 469,015 $4,937,589
======== ========== ======= ==========
</TABLE>
Note 4-Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the year ended
December 31,1995, excluding short-term securities, were $10,411,784 and
$4,689,910, respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all
securities and foreign currency holdings (including foreign currency receivables
and payables) in which there is an excess of value over tax cost amounted to
$474,489 and aggregate gross unrealized depreciation for which there is an
excess of tax cost over value amounted to $541,004.
Note 5-Investment and Concentration Risks
The Fund's investment in foreign securities may involve risks not present in
domestic investments. Since foreign securities may be denominated in a foreign
currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
In addition to the risks described above, risks may arise from forward
foreign currency contracts from the potential inability of counterparties to
meet the terms of their contracts.
Note 6-Federal Income Taxes-Capital Loss Carryforwards
Capital loss carryforwards available for federal income tax purposes as of
December 31, 1995 are approximately $447,839 expiring in 2003.
To the extent any future capital gains are offset by these losses, such
gains would not be distributed to shareholders.
Treasury regulations were issued in early 1990 which provide that capital
losses incurred after October 31 of a Fund's taxable year can be deemed to have
occurred on the first day of the following taxable year (i.e., January 1). The
regulations indicate that a fund may elect to retroactively apply these rules
for purposes of computing taxable income. Accordingly, the 1995 post-October
losses of $63,720 has been deemed to have occurred in 1996 for federal income
tax purposes.
20
<PAGE>
Lexington Emerging Markets Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
March 30, 1994
(commencement
Year Ended of operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ............................. $ 9.86 $10.00
------ ------
Income (loss) from investment operations:
Net investment income ........................................ 0.09 0.03
Net realized and unrealized gain (loss) on investments ....... (0.48) 0.04
------ ------
Total income (loss) from investment operations ........... (0.39) 0.07
------ ------
Less distributions:
Dividend from net investment income .......................... (0.09) (0.02)
Distributions in excess of net realized capital gains
(temporary book-tax difference) ............................ - (0.19)
------ ------
Total distributions ...................................... (0.09) (0.21)
------ ------
Net asset value, end of period ................................... $ 9.38 $ 9.86
====== ======
Total return ............................................. (3.93%) 0.76%
Ratio to average net assets:
Expenses, before reimbursement ............................... 4.09% 6.28%*
Expenses, net of reimbursement ............................... 1.32% 1.30%*
Net investment loss, before reimbursement .................... (1.45%) (4.29%)*
Net investment income ........................................ 1.33% 0.70%*
Portfolio turnover ............................................... 88.92% 71.21%*
Net assets at end of period (000's omitted) ...................... $7,815 $4,624
</TABLE>
- ----------
*Annualized
21
<PAGE>
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1995 was filed
electronically on February 21, 1996 (as form type N-30D). Financial
statements from this 1995 Annual Report have been included in the Statement
of Additional Information.
Page No. in the Statement
(a) Financial statements: of Additional Information
--------------------- -----------------------------
Report of Independent Auditors 16
dated January 30, 1995
Statement of Net Assets (Including 17
the Portfolio of Investments) as of
December 31, 1995 (1)
Statement of Assets and Liabilities 18
as of December 31, 1995
Statement of Operations - for the year ended 19
December 31, 1995 (2)
Statements of Changes in Net Assets - 20
March 30, 1994 (commencement of operations)
to December 31, 1994 and for the year ended
December 31, 1995
Notes to Financial Statements 20
Schedules II-VII and other Financial Statements, for which
provisions are made in the applicable accounting regulations of the
Securities and Exchange Commission, are omitted because they are
not required under the related instructions, they are inapplicable,
or the required information is presented in the financial
statements or notes thereto.
(1) Includes the information required by Schedule I.
(2) Includes the information required by the Statement of Realized
Gain or Loss on Investments
<PAGE>
ITEM 24. Financial Statements and Exhibits - List
(b) Exhibits:
1. Articles of Incorporation - Filed electronically
2. By-Laws - Incorporated by reference - Filed 12/29/93
3. Not Applicable
4. Stock Certificate Specimen - Incorporated by reference -
Filed 12/29/93
5. Investment Advisory Agreement between Registrant
and Lexington Management Corporation - Filed electronically
6. Distribution Agreement between Registrant and
Lexington Funds Distributor, Inc. - Incorporated
by reference - Filed 12/29/93
7. Not Applicable
8a.Custodian Agreement between Registrant and State
Street Bank and Trust Company - Filed electronically
8b.Transfer Agency Agreement between the Registrant
and State Street Bank and Trust Company - Filed electronically
9. Form of Administrative Services Agreement
between Registrant and Lexington Management
Corporation - Filed electronically
10.Opinion of Counsel as to Legality of Securities being
registered - Incorporated by reference - Filed 1/6/94
11.Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically
12.Not Applicable
13.Not Applicable
14.Not Applicable
15.Not Applicable
16.Performance Calculation - Incorporated by Reference - Filed 3/1/95
<PAGE>
25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant and as to each such person
indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
See "Management of the Fund" in the Prospectus and Statement of Additional
Information.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a specified date
within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
The following information is given as of March 1, 1996:
Title of Class Number of Record Holders
-------------- ------------------------
Capital Stock 15
($0.001 par value)
Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified in any manner against any liability
which may be incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own
protection.
Under the terms of the Maryland General Corporation Law, and the Company's
By-Laws, the Company shall indemnify its officers to the same extent as
its directors and to such further extent as the Company's Articles of
Incorporation is consistent with law. The Company shall indemnify its
directors and officers who while serving as directors or officers also
serve at the request of the corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation, partnership,
joint venture, trust, other enterprise or employee benefit plan to the
same extent as its directors and, in the case of officers, to such further
extent as is consistent with law. The indemnification and other rights
provided by the By-Laws shall continue as to a person who has ceased
to be a director or officer and shall insure to the benefit of the heirs,
executors and administrators of such a person. The By-Laws shall not
protect any such person against any liability to the corporation
or any stockholder thereof to which such person 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 ("disabling
conduct").
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment adviser of the Registrant, and
each director, officer or partner of any such investment adviser, is or
has been, at any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or
trustee.
See Prospectus Part A and Statement of Additional Information Part B
("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington Corporate Leaders Trust Fund
Lexington Natural Resources Trust
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington Convertible Securities Fund
Lexington International Fund, Inc.
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Lexington Smallcap Value Fund, Inc.
<PAGE>
29 (b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ -------------------- ------------
Peter Corniotes* Assistant Secretary Assistant Secretary
Lisa Curcio* Vice President and Vice President and
Secretary Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer, Vice President and
Vice President & Director Treasurer
Lawrence Kantor* Executive Vice President Director & Vice
and Director President
Richard Lavery* Vice President Vice President
Janice Violette* Assistant Treasurer None
(c)
Not Applicable.
*P.O. Box 1515
Saddle Brook, New Jersey 07663
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR
270, 31a-1 to 31a-3) promulgated thereunder, furnish the name and
address of each person maintaining physical possession of each such
account, book or other document.
The Registrant, Lexington Emerging Markets Fund, Inc. Park 80 West
Plaza Two, Saddle Brook, New Jersey 07663 will maintain physical
possession of each such account, book or other document of the
Company, except for those maintained by the Registrant's Custodian,
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 or Transfer Agent, State Street Bank and Trust
Company, c/o National Financial Data Services, City Center Square,
1100 Main, Kansas City, Missouri 64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any management-
related service contract not discussed in Part A or B of this Form
(because the contract was not believed to be material to a purchaser
of securities of the Registrant) under which services are provided to
the Registrant, indicating the parties to the contract, the total
dollars paid and by whom for the last three fiscal years.
None.
Item 32. Undertakings
------------
The Registrant, Lexington Emerging Markets Fund, Inc., undertakes to
furnish a copy of the Fund's latest annual report, upon request and
without charge, to every person to whom a prospectus is delivered.
<PAGE>
Registration No. 33-73520
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON EMERGING MARKETS FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to this
filing:
Form of Articles of Incorporation
Form of Investment Advisory Agreement
Form of Custodian Agreement
Form of Transfer Agency Agreement
Form of Administrative Services Agreement
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
Consent of independent auditors for the inclusion of their
report therein.
Article 6 Financial Data Schedule.
Cover.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets
all of the requirements for effectiveness of this amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this amendment to be signed on its
behalf by the Undersigned, thereunto duly authorized, in the City of
Saddle Brook and State of New Jersey, on the 17th day of April, 1996.
LEXINGTON EMERGING MARKETS FUND, INC.
/s/ Robert M. DeMichele
________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
amended to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert M. DeMichele
__________________________ Chairman of the Board April 17, 1996
Robert M. DeMichele Principal Executive
Officer
/s/ Richard M. Hisey
__________________________ Principal Financial April 17, 1996
Richard M. Hisey and Accounting Officer
/s/ Lisa Curcio
__________________________ Principal Compliance April 17, 1996
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director April 17, 1996
__________________________
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 17, 1996
__________________________
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 17, 1996
__________________________
Lawrence Kantor
*Donald B. Miller Director April 17, 1996
__________________________
Donald B. Miller
*John G. Preston Director April 17, 1996
__________________________
John G. Preston
*Margaret W. Russell Director April 17, 1996
__________________________
Margaret W. Russell
*Philip C. Smith Director April 17, 1996
__________________________
Philip C. Smith
*Francis A. Sunderland Director April 17, 1996
__________________________
Francis A. Sunderland
/s/ Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
ARTICLES OF INCORPORATION
OF
LEXINGTON EMERGING MARKETS FUND, INC.
FIRST: The undersigned, Peter O'Rourke, whose address is 40
West 57th Street, New York, New York, being at least eighteen years of
age, hereby forms a corporation under the Maryland General Corporation
Law.
SECOND: The name of the corporation is LEXINGTON EMERGING
MARKETS FUND, INC. (hereinafter called the "corporation").
THIRD: The corporation is formed for the following purpose
or purposes:
(a) to conduct, operate and carry on the business of
an investment company;
(b) to subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, lend, write options on, exchange, distribute or
otherwise dispose of and deal in and with securities of
every nature, kind, character, type and form, including
without limitation of the generality of the foregoing, all
types of stocks, shares, futures contracts, bonds,
debentures, notes, bills and other negotiable or
non-negotiable instruments, obligations, evidences of
interest, certificates of interest, certificates of
participation, certificates, interests, evidences of
ownership, guarantees, warrants, options or evidences of
indebtedness issued or created by or guaranteed as to
principal and interest by any state or local government or
any agency or instrumentality thereof, by the United States
Government or any agency, instrumentality, territory,
district or possession thereof, by any foreign government or
any agency, instrumentality, territory, district or
possession thereof, by any corporation organized under the
laws of any state, the United States or any territory or
possession thereof or under the laws of any foreign country,
bank certificates of deposit, bank time deposits, bankers'
acceptances and commercial paper; to pay for the same in
cash or by the issue of stock, including treasury stock,
bonds or notes of the corporation or otherwise; and to
exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such
investments of every kind and description, including without
limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any
of said rights, powers and privileges in respect of any said
instruments;
(c) to borrow money or otherwise obtain credit and
to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the corporation;
(d) to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in, shares of stock of the
corporation, including shares of stock of the corporation in
fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or
acquisition of shares of stock of the corporation any funds
or property of the corporation whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by
the laws of the State of Maryland;
(e) to conduct its business, promote its purposes
and carry on its operations in any and all of its branches
and maintain offices both within and without the State of
Maryland, in any States of the United States of America, in
the District of Columbia and in any other parts of the
world; and
(f) to do all and everything necessary, suitable,
convenient, or proper for the conduct, promotion and
attainment of any of the businesses and purposes herein
specified or which at any time may be incidental thereto or
may appear conducive to or expedient for the accomplishment
of any of such businesses and purposes and which might be
engaged in or carried on by a corporation incorporated or
organized under the Maryland General Corporation Law, and to
have and exercise all of the powers conferred by the laws of
the State of Maryland upon corporations incorporated or
organized under the Maryland General Corporation Law.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent purpose
and power. The foregoing enumeration of specific purposes and powers
shall not be held to limit or restrict in any manner the purposes and
powers of the corporation, and the purposes and powers herein specified
shall, except when otherwise provided in this Article THIRD, be in no
wise limited or restricted by reference to, or inference from, the terms
of any provision of this or any other Article of these Articles of
Incorporation; provided, that the corporation shall not conduct any
business, promote any purpose, or exercise any power or privilege within
or without the State of Maryland which, under the laws thereof, the
corporation may not lawfully conduct, promote, or exercise.
FOURTH: The post office address of the principal office of
the corporation within the State of Maryland is c/o The Corporation
Service Company, 100 Light Street, Baltimore, Maryland 21202. The name
and address of the resident agent of the corporation within the State of
Maryland is Joseph M. Roulhac, Esq., 100 Light Street, 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 of which five hundred million
(500,000,000) shares are designated "Lexington Emerging Markets Fund
Series", and of which five hundred million (500,000,000) shares are
unclassified. 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.
(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.
(5) Subject to the power of the Board of Directors to
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 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 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 class may be invested with one or more other classes
in a common investment portfolio. Notwithstanding the provisions
of paragraph (5)(a) of this Article Fifth, if two or more classes
are invested in a common investment portfolio, 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 invested in a different investment portfolio,
shall also be subject to the provisions of paragraph (5)(a) of
this Article Fifth at the portfolio level as if the classes
invested in the common investment portfolio were one class:
(i) The income and expenses of the investment
portfolio shall be allocated among the classes invested in
the investment portfolio in accordance with the number of
shares outstanding of each such class or as otherwise
determined by the Board of Directors.
(ii) As more fully set forth in this paragraph
(5)(b) of Article Fifth, the liabilities and expenses of the
classes invested in the same investment portfolio shall be
determined 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 invested in the same investment
portfolio. Except for these differences and certain other
differences set forth in this paragraph (5) of Article
Fifth, the classes invested in the same investment portfolio
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 invested in the same investment portfolio 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 invested in the same investment
portfolio to reflect differing allocations of the expenses
of the corporation among the classes and any resultant
differences between 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 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) 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
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 of stock, in which case
only the holders of shares of the class or classes affected
shall be entitled to vote.
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 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 or transferred
if the same have been reacquired and have treasury status, 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 three (3) and the names of those who will serve as such
until the first annual meeting of the shareholders and until their
successors are elected and qualify are as follows:
Robert M. DeMichele
Lawrence Kantor
William S. Stack
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 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
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: 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 class invested
in a common investment portfolio with other
classes, such class' proportionate share of the
total value of the assets of the common
investment portfolio, 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'
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 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 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.
(e) Redemption of shares of stock by the corporation
is conditional upon the corporation having funds or property
legally available therefor.
(f) 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 a charge not to
exceed five percent (5%) of such net asset value, if and as
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.
(g) The corporation may cause the redemption, upon
the terms set forth in subsections (a) through (e) and
subsection (h) 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.
(h) 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.
(i) 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: December 23, 1993
Peter O'Rourke
________________________
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of January, 1994 by and between
LEXINGTON EMERGING MARKETS FUND, INC., a Maryland corporation (the "Fund"),
and LEXINGTON MANAGEMENT CORPORATION, a Delaware corporation (the
"Manager"), with respect to the following recital of fact:
RECITALS
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and the rules and regulations promulgated thereunder; and
WHEREAS, the Manager is registered as an investment advisor under the
investment Advisers Act of 1940, as amended, and engages in the business
of acting as an investment advisor; and
WHEREAS, the Fund and the Manager desire to enter into an agreement
to provide for management services for the Fund on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Management. The Manager shall act as investment advisor for
the Fund and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising the
Fund's assets subject at all times to the policies and control of the
Fund's Board of Directors. The Manager shall give the Fund the benefit of
its best judgment, efforts and facilities in rendering its services as
investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligation under paragraph 1 hereof, the Manager shall:
(a) determine which issuers and securities shall be
represented in the Fund and regularly report thereof to the Fund's Board
of Directors;
(b) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly report
thereon to the Fund's Board of Directors;
(c) continuously review the portfolio security holdings, the
investment programs and the investment policies of the Fund; and
(d) take, on behalf of the Fund, all actions which appear to
the Fund necessary to carry into effect such purchase and sale programs and
supervisory functions aforesaid, including the placing of orders for the
purchase and sale of portfolio securities.
3. Broker-Dealer Relationships. The Manager's primary policy is
to execute all purchases and sales of portfolio instruments at the most
favorable prices consistent with the best execution, considering all of the
costs of the transaction including brokerage commissions. This policy
governs the selection of brokers and dealers and the market in which a
transaction is executed. Consistent with this policy, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and such
other policies and the Directors may determine, the Manager may consider
sales of shares of the Fund and of the other funds advised by the Manager
as a factor in the selection of broker-dealers to execute the Fund's
portfolio transactions. However, in selecting a broker-dealer to execute
each transaction, the Manager may consider research provided and payment
may be made of the commission higher than that charged by another broker-
dealer which does not furnish research services or which furnishes research
services deemed to be of lesser value, in accordance with Section 28(e) of
the Securities Exchange Act of 1934. Section 28(e) of the Securities
Exchange Act of 1934 specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay
a higher commission than the lowest available under certain circumstances,
provided that the person so exercising investment discretion makes a good
faith determination that the commissions paid are "reasonable in relation
to the value of the brokerage and research services provided...viewed in
terms of either that particular transaction or his overall responsibilities
with respect to the accounts as to which he exercises investment
discretion."
The Manager cannot determine the extent to which commissions that
reflect an element of value for research services might exceed commissions
that would be payable for execution services alone. Research services
furnished may be useful and of value to the Manager and its affiliates, in
serving other clients as well as the Fund. Similarly, any research
services obtained by the Manager or its affiliates from the placement of
portfolio brokerage of other clients might be useful and of value to the
Manager in carrying out its obligations to the Fund.
Brokerage transactions involving securities of companies domiciled
in countries other than the United States will be normally conducted on the
principal stock exchanges of those countries.
4. Control by Board of Directors. Any investment program
undertaken by the Manager pursuant to this Agreement, as well as any other
activities undertaken by the Manager on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Manager shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted hereunder as amended; and
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933, as amended, and the 1940 Act; and
(c) the provisions of the Articles of Incorporation of the
Fund; and
(d) the provisions of the By-Laws of the Fund; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and the Manager as follows:
(a) The Manager shall maintain, at its expense and without
cost to the Fund, a trading function in order to carry out its obligations
under subparagraph (d) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
(b) The Manager shall pay the Fund's expenses for office rent,
utilities, telephone, furniture and supplies utilized at the fund's
principal office.
(c) The Manager shall pay the salaries and payroll expenses
of persons serving as officers or Directors of the Fund who are also
employees of the Manager of any of its affiliates in carrying out its
duties under the Investment Advisory Agreement.
(d) Nothing in subparagraph (a) through (e) hereof shall be
construed to require the Manager to bear other expenses.
(e) Any of the other expenses incurred in the operation of the
Fund shall be borne by the Fund, including, among other things, fees of its
custodian, transfer and shareholder servicing agent; cost of pricing and
calculating its daily net asset value and of maintaining its books and
accounts required by the 1940 Act; expenditures in connection with meetings
of the Fund's Directors and shareholders, except those called to
accommodate the Manager; fees and expenses of Directors who are not
affiliated with or interested persons of the Manager; in maintaining
registration of its shares under state securities laws or in providing
shareholder and dealer services; insurance premiums on property or
personnel of the Fund which inure to its benefit; costs of preparing and
printing reports, proxy statements and prospectuses of the Fund which inure
to its benefit; costs of preparing and printing reports, proxy statements
and prospectuses of the Fund for distribution to its shareholders; legal,
auditing and accounting fees; fees and expenses of registering and
maintaining registration of its shares for sale under Federal and
applicable state securities laws; and all other expenses in connection with
issuance, registration and transfer of its shares.
7. Delegation of Responsibilities. Upon the request of the Fund's
Board of Directors, the Manager may perform services on behalf of the Fund
which are not required by this Agreement. Such services will be performed
on behalf of the Fund and the Manager's cost in rendering such services may
be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Manager of any Fund
expense that the Manager is not required to pay or assume under this
Agreement shall not relieve the Manager of any of its obligations to the
Fund nor obligate the Manager to pay or assume any similar Fund expense on
any subsequent occasions.
8. Compensation. The Fund shall pay the Manager in full
compensation for services rendered hereunder an annual investment advisory
fee payable monthly equal to 0.85% of the Fund's average daily net assets
after deduction of the Funds' expenses, if any, in excess of the expense
limitations set forth below. The average daily net asset value of the Fund
shall be determined in the manner set forth in the Articles of
Incorporation and Prospectus of the Fund.
9. Expense Limitation. If, for any fiscal year, the total of all
ordinary business expenses of the Fund, including all investment advisory
fees but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses such as litigation, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority
of any jurisdiction in which shares of the Fund are offered for sale, the
investment advisory fee shall be reduced by the amount of such excess. The
amount of any such reduction to be borne by the Manager shall be deducted
from the monthly investment advisory fee otherwise payable to the Manager
during such fiscal year; and if such amount should exceed such monthly fee,
the Manager agrees to pay to the Fund such expenses no later than the last
day of the first month of the next succeeding fiscal year. For purposes
of this paragraph, the term "fiscal year" shall exclude the portion of the
current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
10. Non-Exclusivity. The services of the Manager to the Fund are
not to be deemed to be exclusive, and the Manager shall be free to render
investment advisory and corporate administrative or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers and Directors of the
Manager may serve as officers or Directors of the Fund, and that officers
or Directors of the Fund may serve as officers or Directors of the Manager
to the extent permitted by law; and that the officers and directors of the
Manager are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, trustees or directors of any other firm or corporation, including
other investment companies.
11. Term and Approval. This Agreement shall become effective at
the close of business on the date hereof and shall thereunder continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
(a) (i) by the Fund's Board of Directors; or (ii) by the vote
of a majority of the Fund's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act, and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or interested persons of a party to this
Agreement (other than as a Director of the Fund), by votes cast in person
at a meeting specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities or by the Manager, on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for the purposes having the meaning
defined in Section 2(a)(4) of the 1940 Act, as amended.
13. Liability of Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Manager or any of its
officers, directors or employees, it shall not be subject to liability to
the Fund or to any shareholder of the Fund for any omission in the course
of, or connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security.
14. Notices. Any notices under this agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice.
Until further notice of the other party, it is agreed that the address of
the Manager shall be park 80 West, Plaza Two, Saddle Brook, New Jersey
07663.
15. Questions of Interpretation. Any question of interpretation
of any term of provision of this agreement having a counterpart in or
otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or in the
absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and exchange Commission issued
pursuant to said Act. In addition, where the effect of a requirement of
the 1940 Act reflected in any provision of this agreement is revised by
rules, regulations or order of the Securities and Exchange Commission, such
provisions shall be deemed to incorporate the effect of such rule,
regulation or order.
In witness whereof, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the day and year
first above written.
Attest: LEXINGTON EMERGING MARKETS FUND, INC.
_____________________ By: ______________________________
President
Attest: LEXINGTON MANAGEMENT CORPORATION
____________________ By: __________________________________
Executive Vice President
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective April 10, 1995, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and LEXINGTON EMERGING MARKETS FUND, INC.
(the "Customer").
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes,
mortgages or other obligations for the payment of money, bullion, coin and
any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar
property whether certificated or uncertificated as may be received by the
Bank or its Subcustodian (as defined in Section 3) for the account of the
Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the Bank or its
Subcustodian for the account of the Customer, which cash shall not be
subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable
to the Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where
such Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular
currency. To the extent Instructions are issued and the Bank can comply
with such Instructions, the Bank is authorized to maintain cash balances on
deposit for the Customer with itself or one of its affiliates at such
reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Customer may direct, if
acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody
of an institution other than the established Subcustodians as defined in
Section 3 (or their securities depositories), such arrangement must be
authorized by a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and Subcustodians
are authorized to hold any of the Securities in their account with any
securities depository in which they participate.
The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of
any amendment to Schedule A. Upon request by the Customer, the Bank will
identify the name, address and principal place of business of any
Subcustodian of the Customer's Assets and the name and address of the
governmental agency or other regulatory authority that supervises or
regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to
the Customer.
(b) A Subcustodian will hold such Assets together with assets
belonging to other customers of the Bank in accounts identified on such
Subcustodian's books as special custody accounts for the exclusive benefit
of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be
subject only to the instructions of the Bank or its agent. Any Securities
held in a securities depository for the account of a Subcustodian will be
subject only to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for
holding its customer's assets shall provide that such assets will not be
subject to any right, charge, security interest, lien or claim of any kind
in favor of such Subcustodian except for safe custody or administration, and
that the beneficial ownership of such assets will be freely transferable
without the payment of money or value other than for safe custody or
administration. The foregoing shall not apply to the extent of any special
agreement or arrangement made by the Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the
Deposit Account upon receipt of Instructions which include all information
required by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be
deemed a loan payable on demand, bearing interest at the rate customarily
charged by the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If
the Customer does not promptly return any amount upon such notification, the
Bank shall be entitled, upon oral or written notification to the Customer,
to reverse such credit by debiting the Deposit Account for the amount
previously credited. The Bank or its Subcustodian shall have no duty or
obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for the Customer upon Instructions
after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the
Bank or its Subcustodian upon receipt by the Bank of Instructions which
include all information required by the Bank. Settlement and payment for
Securities received for, and delivery of Securities out of, the Custody
Account may be made in accordance with the customary or established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of Securities to a purchaser, dealer or their agents
against a receipt with the expectation of receiving later payment and free
delivery. Delivery of Securities out of the Custody Account may also be
made in any manner specifically required by Instructions acceptable to the
Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on
a contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions will
be credited or debited to the Accounts on the date cash or Securities are
actually received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to
settle within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of
the Assets. Unless the Customer sends the Bank a written exception or
objection to any Bank statement within sixty (60) days of receipt, the
Customer shall be deemed to have approved such statement. In such event, or
where the Customer has otherwise approved any such statement, the Bank
shall, to the extent permitted by law, be released, relieved and discharged
with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where the Customer and all persons
having or claiming an interest in the Customer or the Customer's Accounts
were parties.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of
the Customer. The Bank shall have no liability for any loss occasioned by
delay in the actual receipt of notice by the Bank or by its Subcustodians of
any payment, redemption or other transaction regarding Securities in the
Custody Account in respect of which the Bank has agreed to take any action
under this Agreement.
8. Corporate Actions; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities
(other than a proxy), such as subscription rights, bonus issues, stock
repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to the extent
that the Bank's central corporate actions department has actual knowledge of
a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person, but if Instructions
are not received in time for the Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek Instructions,
the Bank is authorized to sell such rights entitlement or fractional
interest and to credit the Deposit Account with the proceeds or take any
other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and
where bearer Securities are involved, proxies will be delivered in
accordance with Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial
redemption by the issuer, the Bank may allot the called portion to the
respective beneficial holders of such class of security in any manner the
Bank deems to be fair and equitable. The Customer agrees to hold the Bank,
Subcustodians, and their respective nominees harmless from any liability
arising directly or indirectly from their status as a mere record holder of
Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means
employees or agents including investment managers as have been designated by
written notice from the Customer or its designated agent to act on behalf of
the Customer under this Agreement. Such persons shall continue to be
Authorized Persons until such time as the Bank receives Instructions from
the Customer or its designated agent that any such employee or agent is no
longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission,
bank wire or other teleprocess or electronic instruction or trade
information system acceptable to the Bank which the Bank believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized Person
to send such confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. The Customer
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which the Bank shall make available to the Customer
or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets.
The Bank shall be liable to the Customer for any loss which
shall occur as the result of the failure of a Subcustodian to
exercise reasonable care with respect to the safekeeping of such
Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In
the event of any loss to the Customer by reason of the failure
of the Bank or its Subcustodian to utilize reasonable care, the
Bank shall be liable to the Customer only to the extent of the
Customer's direct damages, to be determined based on the market
value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any
special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or
a Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability
to the Customer for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the scope
of this Agreement if such act or omission was in good faith,
without negligence. In performing its obligations under this
Agreement, the Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless
from any liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and any
related expenses with respect to income from or Assets in the
Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit
of the Customer.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market
conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any
loss due to forces beyond their control including, but not
limited to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation,
or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the
Customer or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made
pursuant to this Agreement;
(v) review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in
Section 10) issuing Instructions shall bear any responsibility
to review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have
a material interest in a transaction, or circumstances are such that the
Bank may have a potential conflict of duty or interest including the fact
that the Bank or any of its affiliates may provide brokerage services to
other customers, act as financial advisor to the issuer of Securities, act
as a lender to the issuer of Securities, act in the same transaction as
agent for more than one customer, have a material interest in the issue of
Securities, or earn profits from any of the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to, legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration
of the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or
an Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such
contracts but the Bank may establish rules or limitations concerning any
foreign exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it
is a resident of the United States and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the
Bank's obligations under this Agreement. The Customer will indemnify the
Bank against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) Access to Records. The Bank shall allow the Customer's
independent public accountant reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination
of books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking
to permit the Customer's independent public accountants reasonable access to
the records of any Subcustodian which has physical possession of any Assets
as may be required in connection with the examination of the Customer's
books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with
Schedule A, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
X MUTUAL FUND
X SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or
right under this Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further
exercise, or the exercise of any other power or right. No waiver by a party
of any provision of this Agreement, or waiver of any breach or default, is
effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Notices. All notices under this Agreement shall be effective
when actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the following
addresses or such other addresses as may subsequently be given to the other
party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
Customer: Richard Hisey
Lexington Management Corp.
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
or telex:
(i) Termination. This Agreement may be terminated by the Customer
or the Bank by giving sixty (60) days written notice to the other, provided
that such notice to the Bank shall specify the names of the persons to whom
the Bank shall deliver the Assets in the Accounts. If notice of termination
is given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case
the Bank will deliver the Assets to the persons so specified, after
deducting any amounts which the Bank determines in good faith to be owed to
it under Section 13. If within sixty (60) days following receipt of a
notice of termination by the Bank, the Bank does not receive Instructions
from the Customer specifying the names of the persons to whom the Bank shall
deliver the Assets, the Bank, at its election, may deliver the Assets to a
bank or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold the Assets until Instructions are provided
to the Bank.
LEXINGTON EMERGING MARKETS FUND, INC.
By:____________________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By:____________________________________________
Title
STATE OF )
: ss.
COUNTY OF )
On this day of , 19 , before me personally
came , to me known, who being by me duly
sworn, did depose and say that he/she resides in at
;
that he/she is of
, the entity described in and which executed the
foregoing instrument; that he/she knows the seal of said entity, that the
seal affixed to said instrument is such seal, that it was so affixed by
order of said entity, and that he/she signed his/her name thereto by like
order.
Sworn to before me this
day of , 19 .
Notary
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of ,19 ,
before me personally came , to me known, who being by
me duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that he/she signed his/her name
thereto by like order.
Sworn to before me this
day of , 19 .
Notary
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Lexington Emerging Markets Fund, Inc.
effective April 10, 1995
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the Act), as the same may
be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation, interpretation promulgated by or
under the authority of the SEC or the Exemptive Order applicable to accounts
of this nature issued to the Bank (Investment Company Act of 1940, Release
No. 12053, November 20, 1981), as amended, or unless the Bank has otherwise
specifically agreed, the Customer shall be solely responsible to assure that
the maintenance of Assets under this Agreement complies with such rules,
regulations, interpretations or exemptive order promulgated by or under the
authority of the Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible
foreign custodian or an eligible foreign securities depository, which
are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country
other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders'
equity in excess of $200 million in U.S. currency (or a foreign
currency equivalent thereof), (ii) a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100
million in U.S. currency (or a foreign currency equivalent thereof)
(iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority
owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a
country other than the United States which has such other
qualifications as shall be specified in Instructions and approved by
the Bank; or (iv) any other entity that shall have been so qualified
by exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the
central system for handling securities or equivalent book-entries in
that country, or (ii) a transnational system for the central handling
of securities or equivalent book-entries.
The Customer represents that its Board of Directors has approved each
of the Subcustodians listed in Schedule A to this Agreement and the terms of
the subcustody agreements between the Bank and each Subcustodian, which are
attached as Exhibits I through of Schedule A, and further represents
that its Board has determined that the use of each Subcustodian and the
terms of each subcustody agreement are consistent with the best interests of
the Fund(s) and its (their) shareholders. The Bank will supply the Customer
with any amendment to Schedule A for approval. The Customer has supplied or
will supply the Bank with certified copies of its Board of Directors
resolution(s) with respect to the foregoing prior to placing Assets with any
Subcustodian so approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made
pursuant to Section 5 and 6 of this Agreement may be made only for the
purposes listed below. Instructions must specify the purpose for
which any transaction is to be made and Customer shall be solely
responsible to assure that Instructions are in accord with any
limitations or restrictions applicable to the Customer by law or as
may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices
as confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise
become payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of
adequate collateral as specified in Instructions which shall reflect
any restrictions applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the
Bank, its Subcustodian or the Customer's transfer agent, such shares
to be purchased or redeemed;
(j) For the purpose of redeeming in kind shares of the Customer
against delivery to the Bank, its Subcustodian or the Customer's
transfer agent of such shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be
released only upon payment to the Bank of monies for the premium due
and a receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, the Bank will receive from
brokers the Securities previously deposited. The Bank will act
strictly in accordance with Instructions in the delivery of Securities
to be held in escrow and will have no responsibility or liability for
any such Securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related
transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement
of the purpose for which the delivery or payment is to be made, the
amount of the payment or specific Securities to be delivered, the name
of the person or persons to whom delivery or payment is to be made,
and a certification that the purpose is a proper purpose under the
instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section
14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each
of its branches, each branch of a qualified U.S. bank, each eligible
foreign custodian and each eligible foreign securities depository
holding the Customer's Securities pursuant to this Agreement afford
protection for such Securities at least equal to that afforded by the
Bank's established procedures with respect to similar securities held
by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of
internal accounting controls applicable to the Bank's duties under
this Agreement. The Bank shall endeavor to obtain and furnish the
Customer with such similar reports as it may reasonably request with
respect to each Subcustodian and securities depository holding the
Customer's assets.
GLOBAL CUSTODY AGREEMENT
WITH: LEXINGTON EMERGING MARKETS FUND, INC.
DATE: April 10, 1995
SPECIAL TERMS AND CONDITIONS RIDER
The parties have agreed to the following modifications to the Agreement:
Section 7
The last paragraph of Section 7 shall be reworded as follows:
"The collectibility of funds or other property paid or
distributed in respect of Securities, in the Custody
Account shall be made at the risk of the customer.
Subject to the Bank's of exercise of reasonable care the
Bank shall have no liability for any loss occasioned by
delay in the acutal receipt of notice by the Bank or by
its Subcustodians of any payment, redemption or other
transaction regarding Securities in in the Custody Account
in respect of which the Bank has agreed to take any action
under this Agreement."
Section 12(b)(iii)
Following the words: "as provided in Section 5(c)" insert the words:
"and 7(e)".
Section 13
Reword the last sentence as follows:
"Following invoice by the Bank, if any such amount is not
paid by the Customer (and rights with respect to such
amount remains disputed following good faith efforts to
resolve such dispute), the Bank shall have a lien on, and
is authorized to charge any accounts of the Customer for
any amount owing to the Bank under any provision of this
Agreement.
TRANSFER AGENCY AND SERVICE AGREEMENT
between
LEXINGTON EMERGING MARKETS FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Article 1 Terms of Appointment; Duties of the Bank
Article 2 Fees and Expenses
Article 3 Representations and Warranties of the Bank
Article 4 Representations and Warranties of the Fund
Article 5 Data Access and Proprietary Information
Article 6 Indemnification
Article 7 Standard of Care
Article 8 Covenants of the Fund and the Bank
Article 9 Termination of Agreement
Article 10 Assignment
Article 11 Amendment
Article 12 Massachusetts Law to Apply
Article 13 Force Majeure
Article 14 Consequential Damages
Article 15 Merger of Agreement
Article 16 Counterparts
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the __ day of __________, 19__, by and between
Lexington Emerging Markets Fund, Inc., a corporation, having its principal
office and place of business at Park 80 West Plaza Two, Saddle Brook, New
Jersey 07663, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article l Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in
this Agreement, the Fund hereby employs and appoints the Bank to act as, and
the Bank agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $____ par value, ("Shares"), dividend
disbursing agent, custodian of certain retirement plans and agent in
connection with any accumulation, open-account or similar plans provided to
the shareholders of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Fund, including without limitation any periodic investment plan or
periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(viii)Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall:
(i) perform the customary services of a transfer agent, dividend disbursing
agent, custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the
Fund and the Bank per the attached service responsibility schedule. The Bank
may at times perform only a portion of these services and the Fund or its
agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section
2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but
not limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at least
seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases,
computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed Customer Data.
The Fund agrees to treat all Proprietary Information as proprietary to the
Bank and further agrees that it shall not divulge any Proprietary Information
to any person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the
rights of the Bank in Proprietary Information at common law,
under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for
the contents of such data and the Fund agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER
PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
5.03 If the transactions available to the Fund include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the
Fund shall indemnify and hold the Bank harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent
or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or
of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a claim for
which the Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors
unless said errors are caused by its negligence, bad faith, or willful
misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party
upon one hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, the Bank reserves the
right to charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither
this Agreement nor any rights or obligations hereunder may be assigned by
either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Fund for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or failure
to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
Article 16 Counterparts
16.01 This Agreement may be executed by the parties
hereto on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
LEXINGTON EMERGING MARKETS FUND, INC.
BY:
___________________________________
Vice President
ATTEST:
_________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
____________________________________
Senior Vice President
ATTEST:
___________________________________
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
Service Performed Responsibility
----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms.
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
LEXINGTON EMERGING MARKETS FUND, INC.
BY:
__________________________________
Vice President
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:
___________________________________
Vice President
ATTEST:
__________________________________
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made by and between LEXINGTON EMERGING MARKETS FUND,
INC., a Maryland corporation (the "Fund"), and LEXINGTON MANAGEMENT
CORPORATION, a Delaware corporation (the Administrator ), with respect to the
following recital of facts:
RECITAL
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations promulgated thereunder;
WHEREAS, the Administrator is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the " Advisers Act"),
and engages in the business of acting as an investment adviser and an
administrator of investment companies;
WHEREAS, the Fund, and the Administrator desire to enter into an
agreement to provide for administrative services for the Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADMINISTRATOR
The Administrator is hereby appointed to serve as the Administrator
to the Fund, to provide the administrative services described herein and
assume the obligations set forth in Section II, subject to the terms of this
Agreement and the control of the Fund's Board of [Directors/Trustees] (the
"Board"). The administrator shall, for all purposes herein, be deemed an
independent contractor and shall have, unless otherwise expressly provided
or authorized, no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADMINISTRATOR
In carrying out the terms of this Agreement, the Administrator shall:
A. provide office space, equipment and facilities (which may be
the Administrator's or its affiliates) for maintaining the
Fund s organization, for meetings of the Board and the
shareholders, and for performing administrative services
hereunder;
B. supervise and manage all aspects of the Fund's operations
(other than investment advisory activities), and supervise
relations with, and monitor the performance of, custodians,
depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and
other persons in any capacity deemed to be necessary and
desirable by the Board;
C. determine and arrange for the publication of the net asset
value of the Fund;
D. provide non-investment related statistical and research data
and such other reports, evaluations and information as the Fund
may request from time to time;
E. provide internal clerical, accounting and legal services, and
stationery and office supplies;
F. prepare, to the extent requested by the Fund, the Fund's
prospectus, statement of additional information, proxy
statements and annual and semi-annual reports to shareholders;
G. arrange for the printing and mailing (at the Fund's expense) of
proxy statements and other reports or other materials provided
to the Fund's shareholders;
H. prepare for execution and file all the Fund's federal and state
tax returns and required tax filings other than those required
to be made by the Fund's custodian and transfer agent;
I. prepare periodic reports to and filings with the Securities and
Exchange Commission (the "SEC") and state Blue Sky authorities
with the advice of the Fund's counsel;
J. maintain the Fund s existence, and during such times as the
shares of the Fund are publicly offered, maintain the
registration and qualification of the Fund's shares under the
federal and state law;
K. keep and maintain the financial accounts and records of the
Fund;
L. develop and implement, if appropriate, management and
shareholder services designed to enhance the value or
convenience of the Fund as an investment vehicle;
M. provide the Board on a regular basis with reports and analyses
of the Fund's operations and the operations of comparable
investment companies;
N. respond to inquiries from shareholders or participants of
employee benefit plans (for which the administrator or any
affiliate provides recordkeeping) relating to the Fund,
concerning, among other things, exchanges among Funds, or refer
any such inquiries to the Fund's officers or the Fund's
transfer agent;
O. provide participant recordkeeping services for participants in
employee benefit plans for which the Administrator or any
affiliate provides recordkeeping services; and
P. provide such information as may be reasonably requested by a
shareholder representative of or a participant in an employee
benefit plan to comply with applicable federal or state laws.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator hereby represents and warrants to the Fund as
follows:
1. Due Incorporation and Organization. The Administrator is
duly organized and is in good standing under the laws of the
State of Delaware and is fully authorized to enter into this
Agreement and carry out its duties and obligations hereunder.
2. Best Efforts. The Administrator at all times shall provide
its best judgment and effort to the Fund in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund hereby represents and warrants to the Administrator as
follows:
1. Organization. The Fund has been duly organized as a
corporation under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
terms.
2. Registration. The Fund is registered as an investment
company with the SEC under the 1940 Act and shares of the Fund
are registered or qualified for offer and sale to the public
under the Securities Act of 1933, as amended (the 1933 Act ),
and all applicable state securities laws. Such registrations
or qualifications will be kept in effect during the term of
this Agreement.
IV. CONTROL BY THE BOARD
Any activities undertaken by the administrator pursuant to this
Agreement on behalf of the Fund shall at all times be subject to any
directives of the Board.
V. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the
Administrator shall at all times conform to:
A. all applicable provisions of the 1940 Act;
B. the provisions of the registration statement of the Fund under
the 1933 Act and the 1940 Act;
C. the provisions of the Fund s chartering documents, as amended;
D. the provisions of the By-Laws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VI. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement
may be furnished by any directors, officers or employees of the
Administrator or by any affiliates of the Administrator under the
Administrator's supervision.
VII. COMPENSATION
For the services to be rendered, the facilities furnished and the
expenses assumed by the administrator, the Fund shall pay to the
Administrator an annual fee, payable monthly, equal to the pro-rata portion
of the Administrator's actual cost in providing such services, facilities
and expenses.
VIII. NON-EXCLUSIVITY
The services of the Administrator to the Fund are not to be deemed to
be exclusive, and the Administrator shall be free to render administrative
or other services to others (including other investment companies) and to
engage in other activities, so long as its services under this agreement are
not impaired thereby. It is understood and agreed that officers and
directors of the Administrator may serve as officers or [directors/trustees]
of the Fund, and that officers of [directors/trustees] of the Fund may serve
as officers or directors of the Administrator to the extent permitted by
law; and that the officers and directors of the Administrator are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers,
directors or trustees of any other firm or trust, including other investment
companies.
IX. TERM
This Agreement shall become effective at the close of business on the
date hereof and shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund s [directors/trustees] who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, or by
the vote of the holders of a majority (as so defined) of the outstanding
voting securities of the Fund and by such vote of the [directors/trustees].
X. TERMINATION
This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Fund s [directors/trustees] or by vote of a
majority of the Fund s outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), or by the Administrator, on sixty (60) days
written notice to the other party.
XI. LIABILITY OF ADMINISTRATOR AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator or its officers, directors
or employees, or reckless disregard by the Administrator of its duties
under this Agreement, the Administrator shall not be liable to the
Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
looses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder
on the part of the Administrator or any officer, director or employee
of the Administrator, to the extent permitted by applicable law, the
Fund hereby agrees to indemnify and hold the Administrator harmless
from and against all claims, actions, suits and proceedings at law or
in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating
to the sale, purchase, pledge of, advertisement of, or solicitation
of sales or purchases of any security (whether of the Fund or
otherwise) by the Fund, its officers, directors, employees or agents
in alleged violation of applicable federal, state or foreign laws,
rules or regulations.
XII. MATERIALS FOR DISTRIBUTION TO SHAREHOLDERS
During the term of this Agreement, the Fund shall furnish to the
Administrator at its principal office copies of all prospectuses, proxy
statements, reports to shareholders, sales literature and other material
referring to the Administrator that were prepared for distribution to
shareholders of the Fund and to participants in employee benefit plans
owning interests in the Fund (prior to the public distribution of such
materials). The Fund shall not use any such materials that refer to the
Administrator if the Administrator reasonably objects in writing within five
business days (or such other time as the parties may agree) after receipt
thereof, unless prior to such use the material is modified in a manner that
is satisfactory to the Administrator. Subsequent to the termination of this
Agreement, the Fund will continue to furnish to the Administrator copies of
such materials. The Fund shall also furnish or otherwise make available to
the Administrator other information relating to the business affairs of the
Fund as the Administrator reasonably requests from time to time.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the
Administrator and that of the Fund for this purpose shall be Park 80 West,
Plaza Two, Saddle Brook, New Jersey, 07663.
XIV. QUESTIONS OF INTERPRETATIONS
This Agreement shall be governed by the laws of the State of New
Jersey. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to
said Act. In addition, where the effect of a requirement of the 1940 Act
reflected in the provisions of this Agreement is revised by rule, regulation
or order of the SEC, such provisions shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers on the 28th day of
February, 1995.
LEXINGTON EMERGING MARKETS FUND, INC.
Attest: By: _______________________________
Name Title
________________________
LEXINGTON MANAGEMENT CORPORATION
Attest: By: ______________________________
Name Title
________________________
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
April 15, 1996
Lexington Emerging Markets Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, N.J. 07663
Gentlemen:
We hereby consent to the reference of this Firm as counsel in the
Registration Statement on Form N-1A of the Lexington Emerging Markets Fund,
Inc.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen, Kamin
& Frankel
KPMG Peat Marwick LLP
345 Park Avenue Telephone 212 758 9700 Telefax 212 758 9819
New York, NY 10154 Telex 428038
Independent Auditors' Consent
The Board of Directors and Shareholders
Lexington Emerging Markets Fund, Inc.:
We consent to the use of our report dated January 29, 1996, included in the
Registration Statement on form N-1A and to the references to our firm under the
headings Financial Highlights and Counsel and Independent Auditors in the
Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
April 17, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-
end audited financial statements dated December 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8,448,240
<INVESTMENTS-AT-VALUE> 8,381,698
<RECEIVABLES> 56,827
<ASSETS-OTHER> 93,442
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,531,967
<PAYABLE-FOR-SECURITIES> 596,373
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120,933
<TOTAL-LIABILITIES> 717,306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,390,859
<SHARES-COMMON-STOCK> 832,893
<SHARES-COMMON-PRIOR> 469,015
<ACCUMULATED-NII-CURRENT> 1,876
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (511,559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (66,515)
<NET-ASSETS> 7,814,661
<DIVIDEND-INCOME> 123,399
<INTEREST-INCOME> 57,145
<OTHER-INCOME> (15,380)
<EXPENSES-NET> 82,248
<NET-INVESTMENT-INCOME> 82,916
<REALIZED-GAINS-CURRENT> (430,462)
<APPREC-INCREASE-CURRENT> 161,340
<NET-CHANGE-FROM-OPS> (262,425)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (76,219)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 845,934
<NUMBER-OF-SHARES-REDEEMED> (490,164)
<SHARES-REINVESTED> 8,108
<NET-CHANGE-IN-ASSETS> 3,453,270
<ACCUMULATED-NII-PRIOR> 346
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (86,264)
<GROSS-ADVISORY-FEES> 53,143
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 255,918
<AVERAGE-NET-ASSETS> 6,252,289
<PER-SHARE-NAV-BEGIN> 9.86
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> (.48)
<PER-SHARE-DIVIDEND> (.09)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.38
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
