As filed with the Securities and Exchange Commission on April 10, 1997
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. 4 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 5 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 & Frankel
919 Third Avenue, New York, NY 10022
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It is proposed that this filing will become effective
April 30, 1997 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, 1997 was filed on February 26, 1997.
<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 2
4. General Description of Registrant 2
5. Management of the Fund 6
6. Capital Stock and Other Securities 9
7. Purchase of Securities Being Offered 7
8. Redemption or Repurchase 7
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 9 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 6
15. Control Persons and Principal Holders 8
of Securities
16. Investment Advisory and Other Services 8
17. Brokerage Allocation and Other Practices 9
18. Capital Stock and Other Securities 9 (Part A)
19. Purchase, Redemption and Pricing of 7 (Part A)
securities being offered
20. Tax Status 10
21. Underwriters 6 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 12
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 30, 1997
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 30, 1997 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
1
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FINANCIAL HIGHLIGHTS
The following Per Share Income and Capital Changes Information for the two
year period ended December 31, 1996 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 DECEMBER 31, OPERATIONS) TO
Selected per share data for a share outstanding throughout the period: 1996 1995 DECEMBER 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................. $ 9.38 $ 9.86 $10.00
------ ------ ------
Income from investment operations:
Net investment income .......................................... 0.02 0.09 0.03
Net realized and unrealized gain (loss) on investments ......... 0.71 (0.48) 0.04
------ ------ ------
Total income (loss) from investment operations ....... 0.73 (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 ................................... $10.11 $ 9.38 $ 9.86
====== ====== ======
Total return ..................................................... 7.46% (3.93%) 0.76%*
Ratio to average net assets:
Expenses, before reimbursement or waivers ...................... 2.23% 4.09% 6.28%*
Expenses, net of reimbursement or waivers ...................... 1.64% 1.32% 1.30%*
Net investment income (loss), before reimbursement or waivers .. (0.39%) (1.45%) (4.29)%*
Net investment income .......................................... 0.20% 1.33% 0.70%*
Portfolio turnover ............................................... 95.18% 88.92% 71.21
Average commissions paid on equity security transactions** ....... -- -- --
Net assets at end of period (000's omitted) ...................... $21,678 $ 7,815 $ 4,624
*Annualized
</TABLE>
**The average commission paid on equity security transactions for the year ended
December 31, 1996 is less than $0.005 per share of securities purchased and
sold. In accordance with recent SEC disclosure guidelines, the average
commissions are calculated for the current period, but not for prior periods.
DESCRIPTION OF THE FUND
Lexington Emerging Markets Fund, Inc. 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.
2
<PAGE>
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, 1996 was 95.18%. 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 currency rates. The Fund may
incur costs in connection with the conversion or transfer of foreign currencies.
In addition, there may be less publicly available information about foreign
companies than United States companies. Foreign companies may not be subject to
accounting, auditing, and financial reporting standards, practices and
requirements comparable to those applicable to United States companies. Foreign
securities markets, while growing in volume, have for the most part
substantially less volume than United States securities markets and securities
of foreign companies are generally less liquid and at times their prices may be
more volatile than securities of comparable United States companies. Foreign
stock exchanges, brokers and listed companies are generally subject to less
government supervision and regulation than in the United States. The customary
settlement time for foreign securities may be longer than the 5 day customary
settlement time for United States securities. Although the Fund will try to
invest in companies and governments of countries having stable political
environments, there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization or foreign government restrictions or other
adverse political, social or diplomatic developments that could affect
investment in these nations. (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. 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.
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.
6
<PAGE>
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 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 $3.3
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 eleven
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.
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.
7
<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, as
amended (the "Code"), concerning the diversification of assets, distribution of
income, and sources of income. When a 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 a Fund does not qualify as a
regulated investment company, then all of its taxable income will be subject to
tax at regular corporate rates (without any deduction for distributions to the
separate accounts of the Participating Insurance Companies), and the receipt of
such distributions will be taxable to the extent that the distributing 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 and 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 in the owners of the shares and
that 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 and 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 and 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, & 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 31,1997.
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 GAIN 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.
9
<PAGE>
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<PAGE>
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 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
LEXINGTON
- --------------------------------------------------------------------------------
LEXINGTON
EMERGING
MARKETS
FUND, INC.
- --------------------------------------------------------------------------------
PROSPECTUS
APRIL 30, 1997
<PAGE>
LEXINGTON EMERGING MARKETS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1997
This Statement of Additional Information which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Emerging Markets
Fund, Inc. (the "Fund"), dated April 30, 1997 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
1
<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.
2
<PAGE>
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 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 judgment 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 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.
4
<PAGE>
(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 addition 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.
5
<PAGE>
(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 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:
+S.M.S. CHADHA (59), DIRECTOR. 3/16 Shanti Niketan, New Delhi 21, India.
Secretary, Ministry of External Affairs, New Delhi, India; Head of Foreign
Service Institute, New Delhi, India; Special Envoy of the Government of India;
Director, Special Unit for Technical Cooperation among Developing Countries,
United Nations Development Program, New York.
*+ROBERT M. DEMICHELE (52), PRESIDENT AND CHAIRMAN. P.O. Box 1515, Saddle Brook,
N.J. 07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; President and Director, Lexington Global Asset Managers, Inc.;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.;
Chairman of the Board, Market Systems Research, Inc. and Market Systems
Research Advisors, Inc.; Director, Chartwell Re Corporation, Claredon National
Insurance Company, The Navigator's Group, Inc., Unione Italiana Reinsurance,
Vanguard Cellular Systems, Inc. and Weeden & Co.; Vice Chairman of the Board
of Trustees, Union College and Trustee, Smith Richardson Foundation.
+BEVERLY C. DUER (67), DIRECTOR. 340 East 72nd Street, New York, N.Y. 10021.
Private Investor. Formerly, Manager of Operations Research Department--CPC
International, Inc.
*+BARBARA R. EVANS (36), DIRECTOR. 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May, 1989, Assistant Vice President and Securities Analyst,
Lexington Management Corporation.
*+LAWRENCE KANTOR (50), 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.
+JERARD F. MAHER (50), DIRECTOR. 300 Raritan Center Parkway,Edison, N.J. 08818.
General Counsel, Federal Business Center; Counsel, Ribis, Graham & Curtin.
+ANDREW M. MCCOSH (56), DIRECTOR. 12 Wyvern Park, Edinburgh EH 92 JY, Scotland,
U.K. Professor of the Organisation of Industry and Commerce, Department of
Business Studies, The University of Edinburgh, Scotland.
+DONALD B. MILLER (70), 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 (64), DIRECTOR. 3 Woodfield Road, Wellesley, Massachusetts
02181. Associate Professor of Finance, Boston College, Boston, Massachusetts.
+MARGARET RUSSELL (76), DIRECTOR. 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor. Formerly, Community Affairs Director, Union Camp
Corporation.
*+LISA CURCIO (37), 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 (35), 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.
6
<PAGE>
*+RICHARD M. HISEY (38), 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.
*+RICHARD LAVERY, CLU CHFC (42), 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 (37), VICE PRESIDENT. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+CHRISTIE CARR (29), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.
*+SIOBHAN GILFILLAN (33), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS (34), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to November 1993, Supervisor of Investment Accounting, Alliance
Capital Management.
*+SHERI MOSCA (33), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+PETER CORNIOTES (35), 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 (36), 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.
+Messrs. Chadha, Corniotes, DeMichele, Duer, Hisey,Faust, Kantor, Lavery,
Luehs, Maher, McCosh, Miller, and Preston and Mmes. Carnicelli, Carr, Curcio,
Evans, Gilfillan, Mosca and Russell hold similar offices with some or all of
the other registered investment companies advised and/or distributed by
Lexington Management Corporation or Lexington Funds Distributor, Inc. or
Market Systems Research Advisers,Inc.
The Board of Directors met 5 times during the twelve months ended December
31, 1996, and each of the Directors attended at least 75% of those meetings.
REMUNERATION OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS:
Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof. Each Director 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 Director also serves as a
Director of other investment companies advised by LMC. Each Director receives a
fee, allocated among all investment companies for which the Director serves.
Effective September 12, 1995 each Director receives annual compensation of
$24,000. Prior to September 12, 1995, the Directors who were not employed by the
Fund or its affiliates received annual compensation of $16,000.
Set forth below is information regarding compensation paid or accrued
during the period January 1, 1996 to December 31, 1996 for each Director:
AGGREGATE TOTAL COMPENSATION NUMBER OF
NAME OF DIRECTOR COMPENSATION FROM FROM FUND AND DIRECTORSHIPS IN
FUND FUND COMPLEX FUND COMPLEX
S.M.S. Chadha $ 856 $13,696 16
Robert M. DeMichele 0 0 17
Beverley C. Duer $ 1,712 $29,110 17
Barbara R. Evans 0 0 16
Lawrence Kantor 0 0 16
Jerard F. Maher $ 856 $16,046 17
Andrew M. McCosh $ 856 $13,696 16
Donald B. Miller $ 1,712 $26,760 16
Francis Olmsted* $ 1,068 $16,800 N/A
John G. Preston $ 1,712 $26,760 16
Margaret W. Russell $ 1,712 $25,048 16
Philip Smith* $ 1,600 $25,080 16
Francis A. Sunderland* $ 744 $10,528 N/A
*Retired
7
<PAGE>
RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Effective September 12, 1995, the Directors instituted a Retirement Plan
for Eligible Directors/Trustees (the "Plan") pursuant to which each
Director/Trustee (who is not an employee of any of the Funds, the Advisor,
Administrator or Distributor or any of their affiliates) may be entitled to
certain benefits upon retirement from the Board. Pursuant to the Plan, the
normal retirement date is the date on which the eligible Director/Trustee has
attained age 65 and has completed at least ten years of continuous and
non-forfeited service with one or more of the investment companies advised by
LMC (or its affiliates) (collectively, the "Covered Funds"). Each eligible
Director/Trustee is entitled to receive from the Covered Fund an annual benefit
commencing on the first day of the calendar quarter coincident with or next
following his date of retirement equal to 5% of his compensation multiplied by
the number of such Director/Trustee's years of service (not in excess of 15
years) completed with respect to any of the Covered Portfolios. Such benefit is
payable to each eligible Director 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 Directors will be eligible to serve as Honorary Directors 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 Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1996, the estimated credited years
of service for Directors,Chadha, Duer, Maher, McCosh, Miller, Preston and
Russell, and are 1, 18, 1, 1, 22, 18 and 15, 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.
8
<PAGE>
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 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, 1996, the Fund paid LMC $146,299 in investment advisory fees
and reimbursed the Fund $101,886. 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 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 ("soft dollars") 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.
9
<PAGE>
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 and
broker-dealers than in the United States. For the year ended December 31, 1994,
the Fund paid $34,699 in brokerage commissions and the Fund's portfolio turnover
rate was 71.21%. For the year ended December 31, 1995, the Fund paid $86,090 in
brokerage commisions the Fund's portfolio turnover rate was 88.92%. For the year
ended December 31, 1996, the Fund's portfolio turnover rate was 95.18% and the
Fund paid $228,649 in brokerage commissions and of that amount, $16,695 was paid
for with soft dollars.
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.
10
<PAGE>
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).
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, 1996 was 7.46% and 1.44%.
OTHER INFORMATION
As of March 31, 1997, Lexington Management Corporation, Park 80 West Plaza
Two, Saddle Brook, N.J. 07663 owned benefically 10,319 shares of the Fund (0.4%
of the Fund's outstanding shares). The balance of the outstanding shares of the
Fund (99.6%) are owned by Transamerica Occidental Life Insurance Company; Aetna
Life Insurance and Annuity Company and Kemper Investors Life Insurance Company
and are allocated to separate accounts which are used for funding variable
annuity contracts and variable life insurance policies.
11
<PAGE>
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1996 was filed
electronically on February 27, 1997 (as form type N-30D). Financial
statements from this 1996 Annual Report have been included in the Statement
of Additional Information.
Page No. in the Statement
(a) Financial statements: of Additional Information
--------------------- -----------------------------
Report of Independent Auditors 16
dated February 10, 1996
Statement of Net Assets (Including 17
the Portfolio of Investments) as of
December 31, 1996 (1)
Statement of Assets and Liabilities 18
as of December 31, 1996
Statement of Operations - for the year ended 19
December 31, 1996 (2)
Statements of Changes in Net Assets - 20
for the years ended December 31, 1995 and 1996
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 on
April 29, 1996 - Incorporated by refernce
2. By-Laws - Filed electronically
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
on April 29, 1996 - Incorporated by reference
6. Distribution Agreement between Registrant and
Lexington Funds Distributor, Inc. - Filed electronically
7. Not Applicable
8a.Custodian Agreement between Registrant and State
Street Bank and Trust Company - Filed electronically on
April 29, 1996 - Incorporated by reference
8b.Transfer Agency Agreement between the Registrant
and State Street Bank and Trust Company - Filed electronically
on April 29, 1996 - Incorporated by reference
9. Form of Administrative Services Agreement
between Registrant and Lexington Management
Corporation - Filed electronically on April 29,1996 -
Incorporated by reference
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 31, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Capital Stock 19
($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.
Lexington Troika Dialog Russia Fund, Inc.
<PAGE>
29 (b)
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ -------------------- ------------
Peter Corniotes* Assistant Secretary 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.
The Registrant will hold a meeting of its public shareholders, if
requested to do so by the holders of at least 10 percent of the
Registrant's outstanding shares, to call a meeting of shareholders for
the purpose of voting upon the question of removal of a director or
directors and to assist in communications with other shareholders.
<PAGE>
Registration No. 33-73520
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
<PAGE>
LEXINGTON EMERGING MARKETS FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to this
filing:
Form of By-Laws
Form of Distribution Agreement
Consent of Kramer, Levin, Naftalis, & 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 10th day of April, 1997.
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 10, 1997
Robert M. DeMichele Principal Executive
Officer
/s/ Richard M. Hisey
__________________________ Principal Financial April 10, 1997
Richard M. Hisey and Accounting Officer
/s/ Lisa Curcio
__________________________ Principal Compliance April 10, 1997
Lisa Curcio Officer
*SMS Chadha Director April 10, 1997
__________________________
SMS Chadha
*Beverley C. Duer, P.E. Director April 10, 1997
__________________________
Beverley C. Duer, P.E.
*Barbara M. Evans Director April 10, 1997
__________________________
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director April 10, 1997
__________________________
Lawrence Kantor
*Jerard F. Maher Director April 10, 1997
__________________________
Jerard F. Maher
*Andrew M. McCosh Director April 10, 1997
__________________________
Andrew M. McCosh
*Donald B. Miller Director April 10, 1997
__________________________
Donald B. Miller
*John G. Preston Director April 10, 1997
__________________________
John G. Preston
*Margaret W. Russell Director April 10, 1997
__________________________
Margaret W. Russell
/s/ Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
EMERGING MARKETS FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ S.M.S. Chadha
_____________________________
S.M.S. Chadha
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
EMERGING MARKETS FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ Jerard F. Maher
_____________________________
Jerard F. Maher
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Lawrence Kantor, Lisa Curcio or Jay Baris, and each of them, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all his or her capacities as a director of LEXINGTON
EMERGING MARKETS FUND, INC., a Maryland corporation, to sign on his or
her or its behalf any and all Registration Statements (including any post-
effective amendments to Registration Statements) under the Securities Act
of 1933, the Investment Company Act of 1940 and any amendments and
supplements thereto, and other documents in connection thereunder, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and this requisite and necessary to
be done in and about the premises, as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, may lawfully do or
cause to be done by virtue hereof.
DATED this 27th day of February, 1997.
/s/ Andrew M. McCosh
_____________________________
Andrew M. McCosh
BY-LAWS
OF
LEXINGTON EMERGING MARKETS FUND,INC.
(A Maryland Corporation)
______________________________
ARTICLE I
STOCKHOLDERS
1. Certificates Representing Stock. Certificates
representing shares of stock shall set forth thereon the statements
prescribed by Section 2-211 of the Maryland General Corporation Law
("General Corporation Law") and by any other applicable provision of law
and shall be signed by the Chairman of the Board or the President or a Vice
President and countersigned by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and may be sealed with the
corporate seal. The signatures of any such officers may be either manual
or facsimile signatures and the corporate seal may be either facsimile or
any other form of seal. In case any such officer who has signed manually
or by facsimile any such certificate ceases to be such officer before the
certificate is issued, it nevertheless may be issued by the corporation
with the same effect as if the officer had not ceased to be such officer
as of the date of its issue.
No certificate representing shares of stock shall be issued for
any share of stock until such share is fully paid, except as otherwise
authorized in Section 2-207 of the General Corporation Law.
The corporation may issue a new certificate of stock in place
of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Board of Directors may require, in its
discretion, the owner of any such certificate or his legal representative
to give bond, with sufficient surety, to the corporation to indemnify it
against any loss or claim that may arise by reason of the issuance of a new
certificate.
2. Share Transfers. Upon compliance with provisions
restricting the transferability of shares of stock, if any, transfers of
shares of stock of the corporation shall be made only on the stock transfer
books of the corporation by the record holder thereof or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation or with a transfer agent or a registrar, if
any, and on surrender of the certificate or certificates for such shares
of stock properly endorsed and the payment of all taxes due thereon.
3. Record Date for Stockholders. The Board of Directors may
fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of
stockholders, or stockholders entitled to receive payment of any dividend
or the allotment of any rights or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall
be not more than 90 days, and in case of a meeting of stockholders not less
than 10 days, prior to the date on which the meeting or particular action
requiring such determination of stockholders is to be held or taken. In
lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not to exceed
20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of, or to vote at, a meeting
of stockholders, such books shall be closed for at least 10 days
immediately preceding such meeting. If no record date is fixed and the
stock transfer books are not closed for the determination of stockholders:
(1) The record date for the determination of stockholders entitled to
notice of, or to vote at, a meeting of stockholders shall be at the close
of business on the day on which the notice of meeting is mailed or the day
30 days before the meeting, whichever is the closer date to the meeting;
and (2) The record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any rights shall be at the
close of business on the day on which the resolution of the Board of
Directors declaring the dividend or allotment of rights is adopted,
provided that the payment or allotment date shall not be more than 60 days
after the date on which the resolution is adopted.
4. Meaning of Certain Terms. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of
a meeting, as the case may be, the term "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share
or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class
of shares of stock and said reference also is intended to include any
outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class or series upon which or upon
whom the Charter confers such rights where there are two or more classes
or series of shares or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the Charter may provide for more
than one class or series of shares of stock, one or more of which are
limited or denied such rights thereunder.
5. Stockholder Meetings.
Annual Meetings. If a meeting of the stockholders of the
corporation is required by the Investment Company Act of 1940, as amended,
to elect the directors, then there shall be submitted to the stockholders
at such meeting the question of the election of directors, and a meeting
called for that purpose shall be designated the annual meeting of
stockholders for that year. In other years in which no action by
stockholders is required for the aforesaid election of directors, no annual
meeting need be held.
Special Meetings. Special stockholder meetings for any purpose
may be called by the Chairman of the Board of Directors, if any, Board of
Directors or the President and shall be called by the Secretary for the
purpose of removing a Director and for all other purposes whenever the
holders of shares entitled to at least twenty five percent (25%) of all the
votes entitled to be cast at such meeting shall make a duly authorized
request that such meeting be called. Such request shall state the purpose
of such meeting and the matters proposed to be acted on thereat, and no
other business shall be transacted at any such special meeting.
Notwithstanding the foregoing, unless requested by stockholders entitled
to cast a majority of the votes entitled to be cast at the meeting, a
special meeting of the stockholders need not be called at the request of
stockholders to consider any matter that is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding twelve (12) months. 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 ten percent (10%) of the Company's
outstanding shares.
Place and Time. Stockholder meetings shall be held at such
place, either within the State of Maryland or at such other place within
the United States, and at such date or dates as the directors from time to
time may fix.
Notice or Actual or Constructive Waiver of Notice. Written
or printed notice of all meetings shall be given by the Secretary and shall
state the time and place of the meeting. The notice of a special meeting
shall state in all instances the purpose or purposes for which the meeting
is called. Written or printed notice of any meeting shall be given to each
stockholder either by mail or by presenting it to him personally or by
leaving it at his residence or usual place of business not less than ten
days and not more than ninety days before the date of the meeting, unless
any provisions of the General Corporation Law shall prescribe a different
elapsed period of time, to each stockholder at his address appearing on the
books of the corporation or the address supplied by him for the purpose of
notice. If mailed, notice shall be deemed to be given when deposited in
the United States mail addressed to the stockholder at his post office
address as it appears on the records of the corporation with postage
thereon prepaid. Whenever any notice of the time, place or purpose of any
meeting of stockholders is required to be given under the provisions of
these by-laws or of the General Corporation Law, a waiver thereof in
writing, signed by the stockholder and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance
or representation at the meeting shall be deemed equivalent to the giving
of such notice to such stockholder. The foregoing requirements of notice
also shall apply, whenever the corporation shall have any class of stock
which is not entitled to vote, to holders of stock who are not entitled to
vote at the meeting, but who are entitled to notice thereof and to dissent
from any action taken thereat.
Statement of Affairs. The President of the corporation or, if
the Board of Directors shall determine otherwise, some other executive
officer thereof, shall prepare or cause to be prepared annually a full and
correct statement of the affairs of the corporation, including a balance
sheet and a financial statement of operations for the preceding fiscal
year, which shall be filed at the principal office of the corporation in
the State of Maryland.
Conduct of Meeting. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority
and if present and acting: the Chairman of the Board, the President, a Vice
President or, if none of the foregoing is in office and present and acting,
by a chairman to be chosen by the stockholders. The Secretary of the
corporation or, in his absence, an Assistant Secretary, shall act as
secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the chairman of the meeting shall appoint a secretary
of the meeting.
Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether for the purposes of
determining his presence at a meeting, or whether by waiving notice of any
meeting, voting or participating at a meeting, expressing consent or
dissent without a meeting or otherwise. Every proxy shall be executed in
writing by the stockholder or by his duly authorized attorney-in-fact and
filed with the Secretary of the corporation. No unrevoked proxy shall be
valid after eleven months from the date of its execution, unless a longer
time is expressly provided therein.
Inspectors of Election. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors. In case any person who may be appointed as an
inspector fails to appear or act, the vacancy may be filled by appointment
made by the directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall
determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots
or consents, determine the result and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On request of the
person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge,
question or matter determined by him or them and execute a certificate of
any fact found by him or them.
Voting. Each share of stock shall entitle the holder thereof
to one vote with respect to each matter on which he is entitled to vote
under the Articles of Incorporation, except in the election of directors,
at which each said vote may be cast for as many persons as there are
directors to be elected. Except for election of directors, a majority of
the votes cast at a meeting of stockholders, duly called and at which a
quorum is present, shall be sufficient to take or authorize action upon any
matter which may come before a meeting, unless more than a majority of
votes cast is required by the corporation's Articles of Incorporation or
by law. A plurality of all the votes cast at a meeting at which a quorum
is present shall be sufficient to elect a director.
6. Informal Action. Any action required or permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders (but not to
vote thereat) have waived in writing any rights which they may have to
dissent from such action and such consent and waiver are filed with the
records of the corporation.
ARTICLE II
BOARD OF DIRECTORS
1. Functions and Definition. The business and affairs of
the corporation shall be managed under the direction of a Board of
Directors. The use of the phrase "entire board" herein refers to the total
number of directors which the corporation would have if there were no
vacancies.
2. Qualifications and Number. Each director shall be a
natural person being at least eighteen years of age. A director need not
be a stockholder, a citizen of the United States or a resident of the State
of Maryland. The initial Board of Directors shall consist of three
persons. Thereafter, the number of directors constituting the entire board
shall never be less than three or the number of stockholders, whichever is
less. At any regular meeting or at any special meeting called for that
purpose, a majority of the entire Board of Directors may increase or
decrease the number of directors, provided that the number thereof shall
never be less than three or the number of stockholders, whichever is less,
nor more than twenty and further provided that the tenure of office of a
director shall not be affected by any decrease in the number of directors.
3. Election and Term. The first Board of Directors shall
consist of the directors named in the Articles of Incorporation and shall
hold office until the first meeting of stockholders or until their
successors have been elected and qualified. Thereafter, directors who are
elected at a meeting of stockholders, and directors who are elected in the
interim to fill vacancies and newly created directorships, shall hold
office until their successors have been elected and qualified. Newly
created directorships and any vacancies in the Board of Directors, other
than vacancies resulting from the removal of directors by the stockholders,
may be filled by the Board of Directors, subject to the provisions of the
Investment Company Act of 1940. Newly created directorships filled by the
Board of Directors shall be by action of a majority of the entire Board of
Directors then in office. All vacancies to be filled by the Board of
Directors may be filled by a majority of the remaining members of the Board
of Directors, although such majority is less than a quorum thereof.
4. Meetings.
Time. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors conveniently may assemble.
Place. Meetings shall be held at such place within or without
the State of Maryland as shall be fixed by the Board.
Call. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or
at the direction of the President or of a majority of the directors in
office.
Notice or Actual or Constructive Waiver. Whenever any notice
of the time, place or purpose of any meeting of directors or any committee
thereof is required to be given under the provisions of the General
Corporation Law or of these by-laws, a waiver thereof in writing, signed
by the director or committee member entitled to such notice and filed with
the records of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting shall be deemed equivalent to the
giving of such notice to such director or such committee member.
Quorum and Action. One third of the Directors then in office
(but in no event less than two Directors) shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as otherwise
specifically provided by the Articles of Incorporation, the General
Corporation Law or these by-laws, the action of a majority of the directors
present at a meeting at which a quorum is present shall be the action of
the Board of Directors.
Chairman of the Meeting. The Chairman of the Board, if any and
if present and acting, or the President or any other director chosen by the
Board, shall preside at all meetings.
5. Removal of Directors. Any or all of the directors may
be removed for cause or without cause by the stockholders, who may elect
a successor or successors to fill any resulting vacancy or vacancies for
the unexpired term of the removed director or directors.
6. Committees. The Board of Directors may appoint from
among its members an Executive Committee and other committees composed of
two or more directors and may delegate to such committee or committees, in
the intervals between meetings of the Board of Directors, any or all of the
powers of the Board of Directors in the management of the business and
affairs of the corporation to the extent permitted by law. In the absence
of any member of any such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such absent member.
7. Informal Action. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is
signed by all members of the Board of Directors or any such committee, as
the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or any such committee.
8. Telephone Meeting. Members of the Board of Directors or
any committee designated thereby may participate in a meeting of such Board
or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
ARTICLE III
OFFICERS
The corporation may have a Chairman of the Board and shall have
a President, a Secretary and a Treasurer, who shall be elected by the Board
of Directors, and may have such other officers, assistant officers and
agents as the Board of Directors shall authorize from time to time. Any
two or more offices, except those of President and Vice President, may be
held by the same person, but no person shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is required
by law to be executed, acknowledged or verified by two or more officers.
Any officer or agent may be removed by the Board of Directors
whenever, in its judgment, the best interests of the corporation will be
served thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation in the
State of Maryland is 100 Light Street, c/o The Corporation Service Company,
Baltimore, Maryland 21202. The name and address of the resident agent in
the State of Maryland are: Joseph M. Roulhac, Esq., The Corporation Service
Company, 100 Light Street, Baltimore, Maryland 21202.
The corporation shall maintain, at its principal office in the
State of Maryland prescribed by the General Corporation Law or at the
business office or an agency of the corporation, an original or duplicate
stock ledger containing the names and addresses of all stockholders and the
number of shares of each class held by each stockholder. Such stock ledger
may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
The corporation shall keep at said principal office in the
State of Maryland the original or a certified copy of the by-laws,
including all amendments thereto, and shall duly file thereat the annual
statement of affairs of the corporation prescribed by Section 2-314 of the
General Corporation Law.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide a suitable corporate seal.
The corporate seal shall have inscribed thereon the name of the corporation
and shall be in such form and contain such other words and/or figures as
the Board of Directors shall determine or the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws is
vested in the Board of Directors of the corporation.
ARTICLE VIII
INDEMNIFICATION
1. Indemnification of Directors and Officers. The
corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the law. The corporation
shall indemnify its officers to the same extent as its directors and to
such further extent as is consistent with law. The corporation 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 this Article shall continue
as to a person who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of such a person.
This Article 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").
2. Advances. Any current or former director or officer of
the corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the corporation for payment of the
reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the General Corporation Law. The person seeking
indemnification shall provide to the corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the corporation has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to
the corporation for his undertaking; (b) the corporation is insured against
losses arising by reason of the advance; or (c) a majority of a quorum of
directors of the corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the corporation
at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found
to be entitled to indemnification.
3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
disabling conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by the Investment Company Act
of 1940, as amended.
5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advance of expenses
to directors, officers, employees and agents by resolution, agreement or
otherwise. The indemnification provided by this Article shall not be
deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of stockholders or disinterested
non-party directors or otherwise.
6. Amendments. References in this Article are to the
General Corporation Law and to the Investment Company Act of 1940 as from
time to time amended. No amendment of the by-laws shall affect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
Dated: December 23, 1993
DISTRIBUTION AGREEMENT
between
LEXINGTON EMERGING MARKETS FUND, INC.
and
LEXINGTON FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT made this 25th day of January, 1994 by and between
LEXINGTON EMERGING MARKETS FUND, INC., a Maryland Corporation (hereinafter
referred to as the "Fund"), and LEXINGTON FUNDS DISTRIBUTOR, INC., a
Delaware Corporation (hereinafter referred to as the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Fund hereby appoints the Distributor as its exclusive
underwriter to promote the sale and to arrange for the sale of shares of
common stock of the Fund in jurisdictions wherein shares may legally be
offered for sale.
The Fund agrees to sell and deliver its unissued shares, as from time
to time shall be effectively registered under the Securities Act of 1933,
upon the terms hereinafter set forth.
SECOND: The Fund hereby authorizes the Distributor, subject to law
and the Articles of Incorporation of the Fund, to accept, for the account
of the Fund, orders for the purchase of its shares, satisfactory to the
Distributor, as of the time of receipt of such orders or as otherwise
described in the then current prospectus of the Fund.
THIRD: The public offering price of such shares shall be based on the
net asset value per share (as determined by the Fund) of the outstanding
shares of the Fund. The net asset value shall be regularly determined on
every business day as of the time of closing of the New York Stock Exchange.
It is expected that the New York Stock Exchange will be closed on Saturdays
and Sundays and on New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The
public offering price shall become effective as set forth from time to time
in the Fund's current prospectus; such net asset value shall also be
regularly determined, and the public offering price based thereon shall
become effective, as of such other times for the regular determination of
net asset value as may be required or permitted by rules of the National
Association of Securities Dealers, Inc. or of the Securities and Exchange
Commission. The Fund shall furnish the Distributor, with all possible
promptness, a statement of each computation of net asset value, and of the
details entering into such computation.
The Distributor may, and when requested by the Fund shall, suspend its
efforts to effectuate sales of the shares of common stock at any time when
in the opinion of the Distributor or of the Fund no sales should be made
because of market or other economic considerations or abnormal circumstances
of any kind.
The Fund may withdraw the offering of its common stock (i) at any time
with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or
regulation of any governmental body or securities exchange having
jurisdiction. It is mutually understood and agreed that the Distributor
does not undertake to sell all or any specific portion of the shares of
common stock of the Fund.
FOURTH: The Distributor agrees that it will use its best efforts with
reasonable promptness to promote and sell shares of the Fund; but so long
as it does so, nothing herein contained shall prevent the Distributor from
entering into similar arrangements with other funds and to engage in other
activities. The Fund reserves the right to issue shares in connection with
any merger or consolidation of the Fund with any other investment company
or any personal holding company or in connection with offers of exchange
exempted from Section 11(a) of the Investment Company Act of 1940.
FIFTH: Upon a receipt by the Fund at its principal place of business
or other place designated by the Fund of an order from the Distributor,
together with delivery instructions, the Fund shall, as promptly as
practicable, cause the shareholder's account or certificates for the shares
called for in such order to be credited or delivered in such amount and in
such names as shall be specified by the Distributor, against payment
therefor in such manner as may be acceptable to the Fund.
SIXTH: All sales literature and advertisements used by the
Distributor in connection with sales of the shares of the Fund shall be
subject to the approval of the Fund. The Fund authorizes the Distributor
in connection with the sale or arranging for the sales of its shares to give
only such information and to make only such statements or representations
as are contained in the current prospectus and statement of additional
information or in sales literature or advertisements approved by the Fund
or in such financial statements and reports as are furnished to the
Distributor pursuant to this Agreement. The Fund shall not be responsible
in any way for any information, statements or representatives given or made
by the Distributor or its representatives or agents other than such
information, statements or representations contained in the then current
prospectus and statement of additional information or other financial
statements of the Fund.
SEVENTH: The Distributor as agent of the Fund is authorized, subject
to the direction of the Fund, to accept shares for redemption at their net
asset value, determined as prescribed in the then current prospectus of the
Fund. The Fund shall reimburse the Distributor monthly for its out-of-
pocket expenses reasonably incurred for carrying out the foregoing
authorization, but the Distributor shall not be entitled to any commissions
or other compensation in respect to such redemptions.
EIGHTH: The Fund shall bear:
(A) the expenses of qualification of the shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor and of continuing the qualification continued; and
(B) all legal expenses in connection with the foregoing.
NINTH: The Distributor shall bear:
(A) the expenses of printing and distributing prospectuses and
statements of additional information (other than those prospectuses and
statements of additional information required by applicable laws and
regulations to be distributed to the Fund's shareholders by the Fund) and
any other promotional or sales literature which are used by the Distributor
or furnished by the Distributor to purchasers or dealers in connection with
the Distributor's activities pursuant to this Agreement;
(B) expenses of any advertising used by the Distributor in connection
with such public offering; and
(C) all legal expenses in connection with the foregoing.
TENTH: The Distributor will accept orders for shares of the Fund only
to the extent of purchase orders actually received and not in excess of such
orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders.
ELEVENTH: The Fund shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy
of all financial statements, and a signed copy of each report, prepared by
independent public accountants, and with such reasonable number of printed
copies of each semi-annual and annual report of the Fund as the Distributor
may request, and shall cooperate fully in the efforts of the Distributor to
sell and arrange for the sale of its shares and in the performance by the
Distributor of all its duties under the Agreement.
TWELFTH: The Fund agrees to register, from time to time as necessary,
additional shares with the Securities and Exchange Commission, state and
other regulatory bodies and to pay the related filing fees therefor and to
file such amendments, reports and other documents as may be necessary in
order that there may be no untrue statement of a material fact in the
Registration Statement or prospectus or necessary in order that there may
be no omission to state a material fact therein necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. As used in this Agreement, the term "Registration
Statement" shall mean from time to time the Registration Statement most
recently filed by the Fund with the Securities and Exchange Commission and
effective under the Securities Act of 1933, as amended, as such Registration
Statement is amended at such time, and the terms "Prospectus" shall mean for
the purposes of this Agreement from time to time the form of prospectus and
statement of additional information authorized by the Fund for use by
Distributor and by dealers.
THIRTEENTH:
(A) The Fund and Distributor shall each comply with all applicable
provisions of the Investment Company Act of 1940, the Securities Act of
1933, and the rules and regulations of the National Association of
Securities Dealers, Inc. and of all other Federal and State laws, rules and
regulations governing the issuance and sale of shares of the Fund.
(B) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Fund agrees to indemnify the Distributor and any
controlling person of the Distributor against any and all claims, demands,
liabilities and expenses including reasonable costs of any alleged
litigation which the Distributor may incur under the Securities Act of 1933,
or common law on otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement,
statement of additional information or prospectus of the Fund, or any
omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission
was made in reliance upon, and in conformity with written information
furnished to the Fund in connection with written information furnished to
the Fund in connection therewith by or on behalf of the Distributor. The
Distributor agrees to indemnify the Fund against any and all claims,
demands, liabilities and expenses which the Fund may incur arising out of
or based upon any act or deed of sales representatives of the Distributor
which is outside the scope of their authority under this Agreement.
(C) The Distributor agrees to indemnify the Fund against any and all
claims, demands, liabilities and expenses which the Fund may incur under the
Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of material fact contained in any
registration statement, statement of additional information or prospectus
of the Fund, relating to the Fund, or any omission to state a material fact
therein if such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Fund in connection
therewith by or on behalf of the Distributor.
FOURTEENTH: Nothing herein contained shall require the Fund to take
any action contrary to any provision of its Declaration of Trust or to any
applicable statute or regulation.
FIFTEENTH: This Agreement has been approved by the Directors of the
Fund and shall become effective at the close of business on the date hereof.
This Agreement shall continue in force and effect for successive annual
periods, provided that such continuance is specifically approved at least
annually (a) (i) by the Board of Directors of the Fund, or (ii) by vote of
a majority of the Fund's outstanding voting securities (as defined in
Section 2 (a) (42) of the Investment Company Act of 1940), and (b) by vote
of majority of the Fund's Directors who are not interested persons (as
defined in Section 2 (a) (19) of the Investment Company Act of 1940) of the
Distributor by votes cast in person at a meeting called for such purposes.
SIXTEENTH: The Distributor, as the owner of the registered service
mark "Lexington" (registration number 836-088), hereby sublicenses and
authorizes the Fund to include the word "Lexington" as part of its corporate
name, subject, however, to revocation by the Distributor in the event that
the Fund ceases to engage the Distributor or affiliates of the Distributor
as investment advisor or distributor. The Fund agrees upon demand of the
Distributor to change its corporate name to delete the word "Lexington"
therefrom.
SEVENTEENTH
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Fund or by vote of
a majority of the outstanding voting securities of the Fund, or by the
Distributor, on sixty (60) days written notice of the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
EIGHTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at such
address as such other party may designate for the receipt of such notices.
Until further notice to the other party, it is agreed that the address of
the Fund shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey and
Distributor shall be Park 80 West, Plaza Two, Saddle Brook, New Jersey.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
LEXINGTON EMERGING MARKETS FUND, INC.
Attest: By:
__________________________________
LEXINGTON FUNDS DISTRIBUTOR, INC.
Attest: By:
___________________________________
Kramer, Levin, Naftalis & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT NUMBER
(212) 715-9100
April 9, 1997
Lexington Emerging Markets Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07662
Re: Lexington Emerging Markets Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07662
Gentlemen:
We hereby consent to the reference to our firm as counsel in the
Post-Effective Amendment to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Consent
To the Board of Directors and Shareholders
Lexington Emerging Markets Fund, Inc.:
We consent to the use of our report dated February 10, 1997 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 10, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from year-end
audited financial statements dated December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 21,648,092
<INVESTMENTS-AT-VALUE> 22,065,385
<RECEIVABLES> 362,981
<ASSETS-OTHER> 267,843
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,696,209
<PAYABLE-FOR-SECURITIES> 945,914
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,305
<TOTAL-LIABILITIES> 1,018,219
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,880,084
<SHARES-COMMON-STOCK> 2,144,069
<SHARES-COMMON-PRIOR> 832,893
<ACCUMULATED-NII-CURRENT> 14,089
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (633,464)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 417,281
<NET-ASSETS> 21,677,990
<DIVIDEND-INCOME> 269,160
<INTEREST-INCOME> 78,745
<OTHER-INCOME> (30,766)
<EXPENSES-NET> 282,314
<NET-INVESTMENT-INCOME> 34,825
<REALIZED-GAINS-CURRENT> (157,362)
<APPREC-INCREASE-CURRENT> 483,796
<NET-CHANGE-FROM-OPS> 361,259
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,264,743
<NUMBER-OF-SHARES-REDEEMED> (953,567)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,502,070
<ACCUMULATED-NII-PRIOR> 1,876
<ACCUMULATED-GAINS-PRIOR> (511,559)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 146,299
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 384,200
<AVERAGE-NET-ASSETS> 17,215,511
<PER-SHARE-NAV-BEGIN> 9.38
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .71
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
