Securities Act File No. 333-294491

Investment Company Act File No. 811-24168

 

 

 

U.S.

SECURITIES AND

Washington, D.C. 20549

 

FORM

REGISTRATION STATEMENT

Post-Effective Amendment No.

REGISTRATION STATEMENT

 

(Exact name of Registrant as specified in Charter)

 

c/o Franklin Templeton

One Madison Avenue

New York, 10010

(Address of principal executive offices)

(888)

(Registrant’s telephone number)

Franklin Templeton

One Madison Avenue

New York, New York 10010

(Name and address of agent for service)

 

Rajib Chanda, Esq.

David W. Blass, Esq.

Ryan P. Brizek, Esq.

Debra Sutter, Esq.

Simpson Thacher & Bartlett LLP

900 G Street, N.W.

Washington, D.C. 20001

 

: As soon as practicable after the effective date of this Registration Statement.

 

 

 

 

 

It is proposed that this filing will become effective (check appropriate box)

 

If appropriate, check the following box:

 

 

 

 

Check each box that appropriately characterizes the Registrant:

 

 

 

 

 

 

 

 

 

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

 

Subject to Completion, dated September 1, 2026

VENTURE

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The Fund may be subject to risks related to Direct Investments. The market for direct investments may be very limited and competitive, and the direct investments to which the Fund wishes to allocate capital may not be available at any given time. Direct Investments may be heavily negotiated and may create additional transaction costs for the Fund. Direct Investments are more concentrated than investments in Portfolio Funds, which hold multiple portfolio companies.

 

 

 

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The Fund’s ability to dispose of may be severely limited, both by the fact that the securities are expected to be unregistered and illiquid and by contractual restrictions that may limit, preclude or require certain approvals for the Fund to sell such investment. Co-Investments may be heavily negotiated and, therefore, the Fund may incur additional legal and transaction costs in connection therewith.

 

 

 

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The fee table below is intended to assist Shareholders in understanding the various costs and expenses that the Fund expects to incur, and that Shareholders can expect to bear, by investing in the Fund. This fee table is based on estimated expenses of the Fund for the fiscal year ending March 31, 2027, and assumes that the Fund has net assets of $750,000,000 as of such date.

 

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THE FUND

The Fund is a newly organized Delaware statutory trust formed on February 13, 2026 and is registered under the 1940 Act as a management investment company. The Fund has no operating history. The Fund’s term is perpetual unless the Fund is otherwise terminated under the terms of the Declaration of Trust. The Fund’s principal executive office is located at One Madison Avenue, 17th Floor, New York, New York 10010, and its telephone number is

Additional information about the Fund’s investments will be available in the Fund’s annual and semi-annual reports when they are prepared.

 

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USE OF PROCEEDS

The proceeds from the sale of Shares of the Fund, not including the amount of the Fund’s fees and expenses (including, without limitation, offering expenses), will be invested by the Fund in accordance with the Fund’s investment objective and strategies within three months after receipt of such proceeds, however, the Fund may be delayed up to an additional three months depending on market conditions, the timing and availability of suitable investments and capital inflows into the Fund. The Fund anticipates that it will take a longer period of time to allocate proceeds of its continuous offering, primarily after the inception date, to certain investments, principally certain Venture and Growth Assets, due to the nature of those investments. Delays in investing the Fund’s assets may occur (i) because of the time typically required to complete private markets transactions (which may be considerable), (ii) because certain Venture and Growth Assets selected by Lexington may provide infrequent opportunities to purchase their securities, and/or (iii) because of the time required for Venture and Growth Assets to invest the amounts committed by the Fund. Accordingly, during this period, the Fund may not achieve its investment objective or be able to fully pursue its investment strategies and policies.

Pending the investment of the proceeds pursuant to the Fund’s investment objective and policies, the Fund may invest a portion of the proceeds of the offering, which may be a substantial portion, in short-term debt securities, affiliated and unaffiliated money market funds, cash or cash equivalents. In addition, the Fund may maintain a portion of the proceeds of the continuous offering in cash to meet operational needs. The Fund may not achieve its investment objective, or otherwise fully satisfy its investment policies, during such periods in which the Fund’s assets are not able to be substantially invested in accordance with its investment strategies.

 

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LEXINGTON PLATFORM

The Fund seeks to allow individual and institutional investors to benefit from the deal flow Lexington derives from the global platform it has built since its inception.

The Fund’s investments in Secondary Investments seek to offer the ability to negotiate transactions with liquidity discounts and shorter hold periods than traditional private equity fund investments. The Fund’s investments in Direct Investments seeks to offer the ability to participate in new buyout transactions and/or new financing rounds for underlying companies. The Fund seeks to benefit from Lexington’s investment philosophy while serving as a source of liquidity and capital to sellers of private assets across a wide range of markets. The Fund may also consider opportunities to provide capital to private equity owners who would like to retain ownership of their private equity assets.

The Fund’s investment program is led by an experienced portfolio management team with long tenures at Lexington tasked with building a well-constructed portfolio from these opportunities. Lexington has built its business and reputation over 35 years, through patient, disciplined capital deployment by sourcing, negotiating and executing on opportunities across market cycles. Additionally, Lexington has a team of venture and growth-focused investment professionals based in Menlo Park, California, which is complemented by an extended global venture and growth coverage team in key regions of innovation outside of the U.S., and is further supported by the firm’s global team and platform.

The Fund is a long-term investment vehicle intended for experienced investors with long-term investment horizons. Prospective investors should consider that from time to time, the Fund will hold higher level of cash and/or shorter duration investments if projected return levels from new transactions at those times do not meet Lexington’s underwriting targets. The Fund’s performance is therefore expected to differ from other funds managed by Lexington with capital commitments and finite terms. Lexington aims to deliver consistent performance, across market cycles, for the Fund.

Effective April 1, 2022, Franklin Templeton acquired 100% of the equity of Lexington Partners, the parent company of Lexington (the “Transaction”). Franklin Templeton has agreed to irrevocably delegate the authority to manage the business and affairs of Lexington Partners to the Lexington operating committee, currently composed of Lexington’s president and chief financial officer, until March 31, 2033, subject to limited exceptions. However, Franklin Templeton has sole ultimate control of Lexington Partners and may, under certain circumstances, terminate the employment of any or all of the current personnel of Lexington Partners. Such termination(s) may result in adverse consequences to the operations of the Fund.

 

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LEVERAGE

The Fund may use leverage to seek to achieve its investment objective or for liquidity (i.e., to finance the repurchase of Shares and/or bridge the financing of Fund investments pending the acceptance of funds from investor subscriptions). The Fund’s use of leverage may increase or decrease from time to time in its discretion and the Fund may, in the future, determine not to use leverage. Under the 1940 Act, the Fund may borrow in an aggregate amount of up to approximately 33 1/3% of the Fund’s total assets less all liabilities and indebtedness not represented by senior securities (for these purposes, “total net assets”) immediately after such borrowings. Furthermore, the Fund may use leverage through the issuance of preferred shares in an aggregate amount of liquidation preference attributable to the Preferred Shares combined with the aggregate amount of any borrowings of up to approximately 50% of the Fund’s total net assets immediately after such issuance. Currently, the Fund has no intention to issue preferred shares. The use of leverage creates an opportunity for increased investment returns, but also creates risks for the holders of Shares. See “Risks—”

Certain types of leverage used by the Fund may result in the Fund being subject to covenants relating to asset coverage and portfolio composition requirements. The Fund may be subject to certain restrictions on investments imposed by one or more lenders or by guidelines of one or more rating agencies, which may issue ratings for any short-term debt securities or preferred shares issued by the Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act.

Credit Facility

The Fund may establish one or more credit lines to borrow money for a range of purposes, including to provide liquidity for capital calls by Portfolio Funds and to satisfy tender requests, to manage timing issues in connection with the inflows of additional capital, to otherwise satisfy Fund obligations for investment purposes.

 

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POTENTIAL CONFLICTS OF INTEREST

Actual, potential, or apparent conflicts of interest may arise as a result of the relationships between Lexington and its affiliates on the one hand and the Fund and the Shareholders on the other. As Lexington’s business continues to evolve over time, it can be expected that Lexington and its affiliates and Lexington personnel would in the future engage in activities that result in conflicts of interest not addressed below. If any matter arises that Lexington and its affiliates determine in their good faith judgment may constitute an actual or potential conflict of interest, Lexington and its affiliates have the authority to take such actions as they determine in good faith to be necessary or appropriate to address the conflict and, upon taking such actions, Lexington and its affiliates will be relieved of any liability for such conflict to the fullest extent permitted by law and will be deemed to have satisfied their fiduciary duties related thereto to the fullest extent permitted by law. There can be no assurance that Lexington will resolve all conflicts of interest in a manner that is favorable to the Fund. The following discussion enumerates certain potential conflicts of interest, which should be carefully evaluated before making an investment in the Fund.

. The existence of Lexington’s incentive fee may create an incentive for Lexington to make riskier or more speculative investments on behalf of the Fund than would be the case in the absence of this arrangement.

In addition, the manner in which Lexington’s or, since Lexington generally does not control the timing of dispositions of underlying investments by Portfolio Funds, an underlying investment manager’s, entitlement to incentive fees is determined may result in a conflict between its interests and the interests of the Fund or Shareholders with respect to the sequence and timing of disposals of investments. For example, the ultimate beneficial owners of Lexington or such underlying investment manager are generally subject to U.S. federal and local income tax (unlike certain of the Shareholders). Accordingly, Lexington or such underlying investment manager may be incentivized to operate the Fund or a Portfolio Fund, as applicable, including to hold and/or sell investments, in a manner that takes into account the tax treatment of its incentive fee.

. The Fund or other Lexington funds may have the ability to purchase interests in third-party asset managers (i.e., managers not affiliated with Lexington), and such transactions or ownership stakes could present conflicts of interest relevant to the Fund, including, for example, if such managers currently have or in the future make investments in the Fund or other Lexington funds or if the Fund or other Lexington fund were to invest in or alongside a private equity fund managed by such a third-party asset manager. There can be no assurance that such conflicts of interest will not have an adverse impact on the Fund.

Lexington and its affiliates may be entitled to receive certain other fees, subject to the requirements of the 1940 Act. The Fund’s pro rata portion of any such fees received by Lexington or its affiliates will be distributed to the Fund based on the amount the Fund invested or committed, unless otherwise permitted by the 1940 Act. The portions of such fees allocable to other participating Lexington funds or accounts will not result in an offset of the Management Fee and Incentive Fee payable by Shareholders, even if such other funds or accounts provide for lower or no management fees for the investors or participants therein. Similarly, the portions of such fees allocable to third-party will not result in an offset of the fees payable by the Fund. For the avoidance of doubt, compensation for Portfolio Fund Managers does not offset Management Fees or Incentive Fees.

. Lexington is, from time to time, presented with investment opportunities that fall within the investment objectives or strategy of the Fund and other Lexington investment funds and/or managed accounts, and in such circumstances, Lexington will allocate such opportunities among the Fund and such other Lexington funds and/or managed accounts on a basis that Lexington reasonably determines in good faith to be fair and reasonable taking into account the sourcing of the transaction, the nature of the investment focus of each Lexington fund and managed account and applicable

 

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investment limitations and investment periods, risk profile and the relative amounts of capital available for investment, the nature and extent of involvement in the transaction on the part of the respective teams of investment professionals for the Fund and each such other Lexington fund or managed account, the governing agreements of each of the Fund and such other Lexington fund or managed account, projected future capacity for investment of each applicable Lexington fund, diversification needs and prudent concentration levels, including exposure of the applicable Lexington fund(s) to specific portfolio companies and/or sponsors, the composition of each applicable Lexington fund’s portfolio, availability of other suitable investments for each applicable Lexington fund, the applicable Lexington fund(s)’ liquidity, the size of the applicable investment opportunity, the Lexington fund’s targeted rate of return, tax implications applicable to the investment opportunity, cash flow considerations, industry and other allocation targets, lender covenants and other limitations (if applicable), potential conflicts of interest, including whether each applicable Lexington fund has an existing investment in the security in question or the issuer of such security and whether any “right of first refusal” or similar right exists with respect to a specific Lexington fund, whether an investment opportunity requires additional consents or authorizations from each applicable Lexington fund, investors or third parties, the nature of the investment opportunity, including minimum and/or maximum investment amounts, whether an investment opportunity would enable a Lexington fund to qualify for certain programmatic benefits or discounts that are not readily available to other Lexington funds including, but not limited to, the ability to enter into credit arrangements with certain financial or governmental institutions, current and anticipated market conditions, excuse or exclusion rights granted to a limited partner or investor in such applicable Lexington fund(s); underlying sponsors preference for an investor or limited partner; underlying general partners directing investment opportunities exclusively to a particular Lexington fund, and other considerations deemed relevant by Lexington in good faith. Other Lexington funds (including any managed account (or similar arrangement structured through an entity) formed to invest a majority of its capital alongside the Fund or other Lexington investment funds and/or managed accounts (each such managed account (or similar arrangement), a “Special Account”) and vehicles) will have different economic terms than the Fund (which could be more or less favorable to Lexington and its affiliates) or no fees or carry, which may incentivize Lexington and its affiliates to allocate investment opportunities (in whole or in part) to or away from the Fund. Moreover, Lexington has no obligation to allocate investment opportunities to the Fund that are within the investment objectives of other Lexington funds or accounts (including such funds and accounts that are not yet in existence) the primary objective of which is participating in “Sponsor Solutions” or acquiring interests in certain specified industries, sectors or geographies, and such Lexington funds or accounts may be given priority allocation rights with respect to opportunities within their investment objectives. For the avoidance of doubt, notwithstanding the primary objectives of such funds or accounts, such vehicles will likely be established with the purpose of investing a portion of their capital in secondary investments generally, similar to the Fund, and investment opportunities within such a vehicle’s objective (even if such opportunities do not consist solely of Portfolio Funds within, for example, the industry for which such vehicle was primarily established) may be allocated, in whole or in part, to such vehicle in lieu of or alongside the Fund. Lexington or its affiliates may in the future form one or more vehicles with investment objectives of the type described above. Lexington could also determine not to pursue opportunities as discussed herein or, alternatively, could later determine an opportunity is appropriate for the Fund after initially reviewing such opportunity for or on behalf of an other Lexington fund (and vice versa).

Lexington makes good faith determinations for allocation decisions based on expectations that will, in certain circumstances, prove inaccurate and such determinations require it to make subjective judgments regarding application of the guidelines and arrangements described herein. Any such judgments and application involve inherent conflicts and risks that assumptions regarding investment opportunities may not ultimately prove correct. As such, there can be no assurance that the subjective judgments made by Lexington will prove correct in hindsight. Furthermore, in certain circumstances where the Fund is participating alongside one or more other Lexington funds in an investment opportunity, Lexington is expected to be required to make initial investment allocation decisions at the time of the signing of the related agreement. Lexington could change the applicable investment allocations as between the Fund and such other Lexington funds between such signing and/or funding of and the closing of such investment opportunity as it determines appropriate based on a number of factors, including (but not limited to) (i) changes in available capital (taking into account changes in capital

 

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commitment subscriptions, transfers, deployment of capital, reserves for future investments among other factors), (ii) prevailing concentration limits in respect of sector, industry, geographic region or markets in question or (iii) reduced (or increased) capacity at the Portfolio Fund level (e.g., as a result of one or more sponsors of a Secondary Investment failing to approve a secondary sale or the amount of existing investor “roll-over” elections to Portfolio Funds differing from initial expectations). In such circumstances, the Fund’s and such other Lexington funds’ respective obligations related to any commitments (including expenses and broken deal fees and expenses) would be expected to change accordingly, provided that any such adjustments are expected to occur at the time of the closing of the investment and interest or other additional amounts will not be due or payable in respect of any such adjustments. In addition, Lexington could determine at any point prior to the closing of an investment opportunity that any such investment opportunity that was initially allocated to the Fund based on information available to Lexington at the time the allocation decision is made should subsequently be reallocated in whole or in part to one or more other Lexington funds (and vice versa) based on subsequent information received by Lexington in respect of such investment opportunity. In such circumstance, Lexington could determine to reallocate all or any portion of any such investment opportunity from the Fund to such other Lexington fund (or vice versa) (such fund from which an investment opportunity is being reallocated, a “Reallocating Fund”), including in circumstances where such Reallocating Fund has entered into a binding agreement with one or more third parties (any such reallocated investment opportunity, a “Reallocated Investment”). In such cases, if the Fund agrees to pursue the investment, Lexington will determine, in its sole discretion, whether and to what extent the Fund will reimburse the Reallocating Fund for any deferred costs (including or refundable deposits, breakage fees, due diligence costs and other fees and expenses) incurred by the Reallocating Fund relating to such Reallocated Investment, and any such reimbursement would be made without the consent of the Board, the Shareholders, or otherwise, as applicable.

Lexington is considering forming separate investment vehicles with the primary objectives of acquiring interests in venture capital funds, acquiring interests in investment funds established in and/or focusing on investments in Latin America, acquiring interests in real estate funds and acquiring interests in credit funds, respectively. Therefore, the Fund may not always be allocated its pro rata share (or any portion) of certain investment opportunities that would otherwise have been allocated to the Fund. In determining compliance with the Fund’s investment limitations, any fees and expenses that are not included in the Fund’s commitment to a Portfolio Fund, as well as any amounts required to be or are otherwise “recycled” pursuant to the terms of the governing agreement of any Portfolio Fund, shall be disregarded, and Lexington may discount amounts committed to a Portfolio Fund to the extent that Lexington does not believe, in its discretion, such amounts will actually be called by the underlying fund.

There can be no assurances with respect to the amount of any investment opportunity that will be allocated to the Fund. Lexington will determine the “available capital” of the Fund, Special Accounts, vehicles and other Lexington funds or accounts in good faith, based on methodologies it deems appropriate, and which are subject to change from time to time, and which may result in the Fund receiving a greater or lesser portion of Portfolio Funds than would be the case under other methodologies, and such methodologies may be impacted by the use (or lack of use) of a credit facility by the Fund, Special Accounts, vehicles and other Lexington funds and accounts. Lexington expects to determine “available capital” from time to time based in part on the Fund’s “net commitments” to Portfolio Funds (i.e., the commitments of the Fund to Portfolio Funds, less projected proceeds from Portfolio Funds that Lexington expects at such time to ultimately receive and utilize to cover credit facility obligations or obligations to Portfolio Funds).Lexington may adjust such expectations from time to time, and such expectations may ultimately be incorrect (or such projected proceeds may ultimately never be received, in whole or in part).

As a result of opportunities available in the market and other considerations, other Lexington funds may primarily make investments that overlap with those targeted by the Fund, which may result in the Fund participating in certain investment opportunities to a lesser extent than would otherwise be the case (or not at all). Lexington and its affiliates may consider any transaction or series of related transactions as a whole when

 

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allocating investment opportunities between the Fund and other Lexington funds, and therefore Portfolio Funds that are otherwise appropriate for the Fund to invest in may be allocated in whole or in part to other Lexington funds, or allocation decisions may be based on the individual Portfolio Funds within an investment opportunity (and allocated, for example, among the Fund and other Lexington funds on a rata basis as determined by Lexington in good faith).

Lexington may establish investment vehicles or accounts (including “evergreen” vehicles or accounts) in the future for the purpose of aggregating one or more investors’ existing interests in investment funds managed by other sponsors, and such vehicles or accounts may also make new investments, sourced by Lexington. Such Lexington-managed vehicles may participate in investment opportunities in accordance with the foregoing outside of the Fund. Such vehicles may invest in actual or proposed Portfolio Funds of the Fund, and may give rise to conflicts of interest between such vehicles, on the one hand, and the Fund, on the other. Lexington typically expects such vehicles or accounts to be or, in certain cases, be subject to rights. There can be no assurance that such conflicts of interest will be resolved in a manner favorable to the Fund.

For purposes of investments that Lexington intends to make (or hold, if applicable) at the same time and on the same terms by the Fund, Special Accounts, vehicles (including committed vehicles) or any other Lexington funds, Lexington looks to the underlying instrument in which an investment is made (for example, the price thereof), and not any leverage that the Fund, Special Accounts, vehicles or any other Lexington fund may have applied with respect to such investment at any level. It is likely that the Fund will seek to use leverage for an investment as to which Special Accounts, vehicles or other Lexington funds, as applicable, do not seek to do so, or vice versa (e.g., due to the availability of a credit facility (or lack thereof)). As a result of the foregoing, the terms of the Fund’s Portfolio Funds and the investment performance thereof may ultimately be materially different than the same with respect to Special Accounts, vehicles (including committed vehicles) or any other Lexington funds.

Prospective investors should note that Lexington may from time to time, in consideration of the elements or dynamics of a particular transaction or series of transactions, determine in its sole discretion that it believes it is appropriate to involve one or more consortium partners and in such event may do so notwithstanding the foregoing allocation provisions. Consortium partners may include third parties, members of an investment’s or sponsor’s management teams, investors in Lexington’s managed accounts, or Shareholders. Consortium partners typically will invest alongside the Fund directly into an investment and not through a Lexington fund (but may participate through a Lexington-controlled holding vehicle). The allocation of investment opportunities to consortium partners may result in fewer opportunities (or reduced allocations) being made available to the Shareholders.

The Fund is expected to be given the opportunity by underlying managers from time to time in connection with existing investments to “roll over” its interest(s) to new investment vehicles.

. Prospective investors should note that Lexington reserves the right to offer opportunities in its sole discretion, is not expected to offer with respect to all Fund investments and may allocate any such opportunities in its sole discretion to, , Shareholders, other Lexington funds, investors in other Lexington funds or third parties, including for example, on the basis of the size of investor commitments or relationships with Lexington funds, vehicles and accounts or Lexington as a firm. Prospective investors should note as well that Lexington expects to form committed vehicles for certain Shareholders, investors in managed accounts or others, and certain of such vehicles will likely receive priority in alongside the Fund in investment opportunities that Lexington has determined in good faith exceed prudent diversification levels for the Fund, which will reduce the opportunities available and allocated to other investors. In addition, for the avoidance of doubt, Lexington may permit and vehicles to participate in only a portion of the Portfolio Funds that form part of a single transaction. For example, in certain cases, may not participate in one or more “stapled”

 

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Primary Investments that the Fund invests in, in connection with its investment in Secondary Investments in which certain participate, or in specific categories or types of investment funds that form part of a single transaction in which the Fund participates. Lexington will offer opportunities to invest in committed vehicles to investors in its sole discretion. The foregoing also applies to any commitments (whether discretionary or otherwise) by a Special Account investor that are made to such investor’s Special Account as a separate “pool” of capital, as opposed to a separate vehicle. The ability for a Shareholder to participate in such committed vehicles will be determined by Lexington in its sole discretion. For the avoidance of doubt, vehicles investing alongside the Fund (including committed vehicles) may from time to time be allocated a majority of any investment opportunity allocated thereto, alongside the Fund.

. A conflict exists for Lexington and its affiliates in allocating purchase prices to specific underlying investment funds that are purchased in a single transaction or a series of related transactions, and the methodologies utilized by Lexington and its affiliates to determine such allocations and purchase prices may differ amongst Lexington funds and specific underlying investment funds. In certain circumstances, the price allocated to a specific underlying investment fund on the Fund’s books and records may differ significantly from the price allocated to such fund in the applicable purchase agreement. In connection therewith, from time to time, Lexington or its affiliates may allocate (in whole or in part) an investment in one or more underlying investment funds that are part of a portfolio of interests to one or more other Lexington funds instead of the Fund, or other Lexington funds (e.g., vehicles) may participate in some but not all investment funds that form a part of a single transaction. Such determination may be made on an investment fund basis or any other basis determined by Lexington to be appropriate. In all of these situations, the combined purchase price paid to a seller or received from a buyer would be allocated among the multiple investment funds, securities and instruments in the pool and therefore among the Fund, Special Accounts and other Lexington funds acquiring or selling any of the relevant investment funds, securities and instruments, in accordance with the allocation of value in respect of the transaction (e.g., accounting, tax or different manner), although Lexington could, in certain circumstances, allocate value to the Fund, Special Accounts and such other Lexington funds on a different basis than the contractual purchase price, and the portion of the purchase price allocated to such underlying funds may be lower than the portion of the purchase price such underlying fund was allocated in the applicable purchase agreement. Similarly, there will likely be circumstances in which the Fund, Special Accounts and other Lexington funds will sell assets in a single or related transactions to a buyer. In some cases, a counterparty will require an allocation of value in the purchase or sale contract, though Lexington could determine such allocation of value is not appropriate and should not be relied upon. Lexington will generally rely upon the reported value from underlying sponsors to determine the ultimate allocation of value, though it could also rely on internal analysis or obtain third-party valuation reports. See also “Valuation Matters” herein. Regardless of the methodology for allocating value, Lexington will have conflicting duties to the Fund, Special Accounts and/or other Lexington funds when they buy or sell assets together in a portfolio, including as a result of different financial incentives Lexington has with respect to different vehicles, most clearly when the fees and compensation, including performance-based compensation, earned from the different vehicles differ. There can be no assurance that any Portfolio Fund of the Fund will not be valued or allocated a purchase price that is higher than it might otherwise have been allocated if such Portfolio Fund were acquired or sold independently rather than as a component of a portfolio shared with Special Accounts and/or other Lexington funds. The foregoing may result in the Fund bearing a greater portion of the purchase price with respect to any transaction than would otherwise be the case. See also “Allocation of Investment Opportunities with Other Vehicles and Conflicting Fiduciary Duties to Other Collective Investment Vehicles and Managed Accounts” herein.

Subject to compliance with the requirements of the 1940 Act and applicable law, the Fund will from time to time make investments in which the Fund (directly or indirectly) acquires assets owned in whole or part (directly or indirectly) by other Lexington funds and proceeds indirectly flow from the Fund to such other Lexington funds. Other Lexington funds may similarly acquire assets indirectly from the Fund. For example, the Fund may invest in a sponsor’s “continuation vehicle,” which acquires assets from an existing fund of such sponsor, and in which other Lexington funds invest (or vice versa). The Fund may also acquire fund

 

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interests from a in which other Lexington funds invest (or vice versa). Lexington will not be required to solicit third-party bids or obtain a third-party valuation prior to causing the Fund or any of its Portfolio Funds to participate in such transactions. Any resolution to such potential conflicts of interest will take into consideration the interests of the relevant clients, the circumstances giving rise to the conflict and applicable laws.

. Lexington personnel will devote such time as shall be reasonably necessary to conduct the business and operational affairs of the Fund in an appropriate manner. Although it is likely that some Lexington personnel will devote substantially all of their time to the Fund, other Lexington personnel will work on other projects, including Lexington’s other investment funds discussed, vehicles and/or accounts as provided herein and other vehicles. Conflicts may arise as a result of such other activities. The possibility exists that such entities could engage in transactions that would be suitable for the Fund, but in which the Fund might be unable to invest.

. Portfolio Funds (or their managers or underlying portfolio companies) in which the Fund or other Lexington funds have an interest may compete with the Fund or its Portfolio Funds for one or more investment opportunities. It is also possible that certain Portfolio Funds (or their managers or underlying portfolio companies) will engage in activities that may have adverse consequences on the Fund and/or its Portfolio Funds. The foregoing may give rise to conflicts of interest, and there can be no assurance that these matters will be resolved in a manner favorable to the Fund.

. From time to time, Lexington and its affiliates expect, in a variety of circumstances including, without limitation, when Lexington considers a specific direct (or in some cases, indirect) investment opportunity or a Lexington fund sits on the advisory committee of an Portfolio Fund, to come into possession of material and/or price-sensitive information about certain securities. The Lexington funds generally are not free to act upon any such information, and Lexington’s possession of such information typically will limit the ability of the Fund to buy and sell such securities, even if such information was obtained in the context of the investment activities of a different Lexington fund, and even if the relevant information is not known to the Lexington personnel responsible for the investment decisions of the Fund. Additionally, from time to time, Lexington decides for compliance and similar reasons to restrict the Fund’s (and the other Lexington funds’) ability to buy and sell certain securities in light of information that Lexington has received or reasonably expects to receive, or for other reasons including but not limited to contractual obligations in connection with existing or prospective investments of the Fund or other Lexington funds. These restrictions apply to the Fund regardless of whether any sensitive information has actually been disclosed to the Lexington personnel responsible for its investment decisions, and could cause the Fund not to be able to initiate a transaction that it otherwise might have initiated and not to be able to sell an investment that it otherwise might have sold.

. Lexington has engaged Advisors covering key areas of interest. Lexington’s Advisors work in an advisory capacity with Lexington’s professionals to leverage their strong local connections regarding market intelligence and investment-related resources, and from time to time assist Lexington in sourcing investment opportunities. The Fund shall, in Lexington’s discretion, bear its allocable share of the fees, costs, and expenses of such Advisors (including retainer payments). Advisors are not employees of Lexington or the Fund, therefore their compensation is in addition to Management Fees and Incentive Fees paid by the Fund. To the extent any such fees are paid by the Fund, they generally will not be reimbursed. Advisors engaged by Lexington may invest, participate, or engage in (for their own accounts or for the accounts of others), or may possess an interest in, other financial ventures and investment and professional activities of every kind, nature, and description, independently or with others, including but not limited to: management of other investment partnerships; investment in, financing, acquisition, or disposition of securities; investment and management counseling; providing brokerage and investment banking services; or serving as officers, directors, managers, consultants, advisers, or agents of other companies, partners of any partnership, members of any limited liability company or trustees of any trust (and may receive fees, commissions,

 

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remuneration or reimbursement of expenses in connection with these activities), whether or not such activities conflict with any interest of Lexington, the Fund, or their respective investors. Advisors may also serve as or be affiliated with placement agents.

. A conflict exists for Lexington and its affiliates in allocating purchase price deferrals to specific underlying investment funds that are purchased in a single transaction or a series of related transactions. In certain circumstances, the Fund and other Lexington funds and vehicles may be allocated specific underlying investment funds within the same portfolio but with different payment schedules, and therefore other Lexington funds and vehicles may benefit from longer payment schedules than the Fund.

Certain advisors and other service providers, or their affiliates (including accountants, administrators, lenders, bankers, brokers, attorneys, consultants, investment or commercial banking firms, and certain other advisors and agents), to the Fund, Lexington, underlying funds, or any of their affiliates also provide goods or services to or have business, personal, political, financial, or other relationships with Lexington and its affiliates. From time to time such advisors and service providers are expected to include (i) Lexington or a related person or affiliate of Lexington, (ii) an entity with which Lexington or its affiliates or current or former members of their personnel have a relationship or from which Lexington or its affiliates or their personnel otherwise derive financial or other benefit, including for the avoidance of doubt an entity in which Lexington, an affiliate of Lexington or an individual associated with Lexington has an ownership interest; (iii) certain Shareholders or investors in other Lexington funds or their affiliates; (iv) actual or potential sources of investment opportunities; or or transaction counterparties. Additionally, certain employees of Lexington may have family members or relatives employed by such advisors and service providers. These relationships may influence Lexington and its affiliates in deciding whether to select or recommend such a service provider to perform services for the Fund (the cost of which will generally be borne directly or indirectly by the Fund). Notwithstanding the foregoing, investment transactions for the Fund that require the use of a service provider will generally be allocated to service providers on the basis of Lexington’s judgment as to best execution, the evaluation of which includes, among other considerations, such service provider’s provision of certain investment-related services and research that Lexington believes to be of benefit to the Fund. In certain circumstances, advisors and service providers, or their affiliates, may charge different rates or have different arrangements for specific types of services provided to Lexington or its affiliates as compared to services provided to the Fund, which may result in more favorable rates or arrangements than those payable by the Fund.

. The Shareholders and investors in Special Accounts are generally based in a wide variety of jurisdictions and take a wide variety of forms. These investors may have conflicting investment, tax, and other interests with respect to their investments in the Fund or Special Accounts. The conflicting interests of individual investors may relate or arise from, among other things, the nature of investments made by the Fund or Special Accounts, and the structuring or the acquisition of investments. As a consequence, conflicts of interest may arise in connection with decisions made by Lexington, including with respect to the nature or structuring of investments, that may be more beneficial for one investor than for another investor, or more beneficial to the Fund, one or more Special Accounts than for the other investment vehicles participating in an investment, especially with respect to investors’ individual tax situations. For example, Lexington expects to generally underwrite Portfolio Funds by taking into account, inter alia, the financing thereof using the Fund’s credit facility, whereas Special Accounts participating in such Portfolio Funds will likely not benefit from the use of similar facilities. In addition, the Fund may make Portfolio Funds which may have a negative impact on related investments made by the investors in the Fund, Parallel Funds or Special Accounts in separate transactions. In selecting and structuring investments appropriate for the Fund and Special Accounts, Lexington will consider the investment and tax objectives of the Fund and Special Accounts and the investors therein as a whole, and not the investment, tax or other objectives of any Shareholder individually.

. The Fund has the authority to consent to any transfer of all or a portion of a Shareholder’s Interest, including a transfer to Lexington or any of its affiliates. Any such transaction would

 

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present a conflict in that, by virtue of its role as such, Lexington would be expected to possess more information and more detailed information regarding the Fund and its investments and the value thereof than the relevant Shareholder.

There is no guarantee that the Fund will consider (or if it does consider, will consummate) a transfer of all or any portion of Shares from a Shareholder to Lexington or its affiliates, or that any such transfer will be available to Shareholders generally. Shareholders should not expect that any such transfer will be available at any time.

. Franklin Templeton has multiple business lines, which Lexington, the Fund, Portfolio Funds and third parties may, in certain circumstances, engage for services. As a result of these activities, Franklin Templeton is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than if it had one line of business. Franklin Templeton is under no obligation to decline any engagements or investments in order to make an investment opportunity available to the Fund. The Fund may also with clients of Franklin Templeton or other persons with whom Franklin Templeton has a relationship in particular investment opportunities, and other aspects of these Franklin Templeton relationships could influence the decisions made by Lexington with respect to the Fund’s Portfolio Funds and otherwise result in a conflict. See also “Allocation of Investment Opportunities with Other Vehicles and Conflicting Fiduciary Duties to Other Collective Investment Vehicles and Managed Accounts” herein.

The buyers and sellers, directly or indirectly, of Portfolio Funds will often be investors in the Fund and/or other Lexington funds (or affiliates of placement agents, or partial owners of Lexington), and Portfolio Funds may include limited partnership interests in other Lexington funds (whether as part of a broader portfolio, or as a standalone investment). In addition, the Fund will frequently invest in Portfolio Funds in which other Lexington funds (directly or indirectly) have a interest (and ). While Lexington will seek to negotiate transactions in good faith and on an arm’s length basis, the foregoing matters present inherent conflicts of interest and there can be no assurance that there will not be an adverse impact on the Fund. For example, there can be no assurance that any Portfolio Fund or asset acquired by the Fund from an investor in the Fund and/or other Lexington funds will not be valued or allocated a sale price that is higher than might otherwise have been the case if such asset were acquired from another third party (or lower than might otherwise have been the case if the Fund is selling to such an investor). Lexington will not be required to solicit third-party bids or obtain a third-party valuation prior to causing the Fund or any of its Portfolio Funds to participate in such transactions. In the ordinary course of the Fund’s activities it may engage in transactions with affiliates on terms no less favorable to the Fund than are generally afforded to unrelated third parties in comparable transactions, and subject to compliance with the 1940 Act and applicable law. The officers, directors, members, managers, and employees of Lexington and its affiliates (on behalf of themselves or through family investment vehicles or similar accounts that they control or as to which they are the primary beneficiary) may trade in securities for their own accounts, which may differ from those purchased or sold for the Fund, subject to restrictions and reporting requirements as may be required by law or otherwise determined from time to time by Lexington. Lexington personnel may also maintain or make investments in or alongside, or otherwise have exposure to, funds managed by the same sponsor that manages certain assets of Lexington funds, such sponsors themselves and/or the same funds in which Lexington funds are invested. Subject to legal requirements and Lexington’s internal policies, such personnel may trade such securities in a manner inconsistent with the Lexington funds (., such personnel may sell interest in funds that the Lexington funds are also invested in at different times and on different terms and/or at different prices than the Lexington funds). These activities could give rise to potential conflicts of interest and there can be no assurance that such activities will not have a material adverse effect on the Fund.

Other present and future activities of the Manager, Lexington or their affiliates may give rise to additional conflicts of interest. For example, Lexington has the authority to enter into other investment management businesses that could present further conflicts of interest. In the event that a conflict of interest arises, Lexington will attempt to resolve such conflict in a fair and equitable manner.

 

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There can be no assurance that Lexington will identify or resolve all conflicts of interest in a manner that is favorable to the Fund.

The fair value of all Venture and Growth Assets or of property received by the Fund in exchange for any of its Venture and Growth Assets will be determined by the Manager. Accordingly, the carrying value of a Venture and Growth Asset may not reflect the price at which the Venture and Growth Asset could be sold in the market, and the difference between carrying value and the ultimate realized proceeds could be material. The valuation of Venture and Growth Assets can be expected to affect the amount of the Incentive Fee and the amount of Management Fee payable by the Fund. There can be situations in which the Manager is potentially incentivized to influence or adjust the valuation of the Fund’s assets. For example, the Manager could be incentivized to employ valuation methodologies that improve the Fund’s track record and increase the adjusted cost of investments used to determine the amount of Management Fees due. The Manager has adopted valuation policies to address these potential conflicts.

The valuation of Venture and Growth Assets also affects the Fund’s performance and thereby affects the ability of Lexington to raise a successor fund to the Fund or other Lexington funds. As a result, from time to time there may be circumstances where Lexington is incentivized to determine valuations that are higher than the actual fair value, as applicable, of Venture and Growth Assets.

. As is customary in the industry, the Fund may establish holdbacks or reserves, including for estimated accrued expenses, Management Fees, Incentive Fees, pending or anticipated liabilities, investments, claims and contingencies relating to the Fund. Estimating the appropriate amount of such reserves is difficult and inadequate or excessive reserves could impair the investment returns to Shareholders. If the Fund’s reserves are inadequate and Lexington is unable to draw down borrowings from a credit facility, the Fund may be unable to take advantage of attractive investment opportunities, fulfill its obligations to Portfolio Funds or protect its existing investments (., participate in investments, which could cause the Fund’s interest to be diluted, or otherwise provide a Portfolio Fund with necessary capital to preserve the value of the Fund’s existing investment). Further, the allocation of investment opportunities among the Fund and other Lexington funds may depend, in part, on their respective reserves at the time of allocating the relevant opportunity, possibly resulting in different investment allocations if any such reserves are inadequate or excessive.

. Prospective investors should note that Lexington and its affiliates from time to time engage in transactions with prospective and actual investors (including Shareholders) that entail business benefits to such investors. Such transactions may be entered into prior to or coincident with an investor’s admission to the Fund or during the term of their investment. The nature of such transactions can be diverse and may include benefits relating to the Fund, other Lexington funds and their respective portfolio investments. For example, Lexington may consider such business benefits when allocating opportunities.

 

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MANAGEMENT OF THE FUND

Trustees and Officers

The overall management of the business and affairs of the Fund is vested in the Board of Trustees. The Board of Trustees approves all significant agreements between the Fund and persons or companies furnishing services to the Fund. The operation of the Fund is delegated to the officers of the Fund and the Manager, subject always to the investment objectives, restrictions and policies of the Fund and to the general supervision of the Board of Trustees. Certain Trustees and officers of the Fund are affiliated with Franklin Resources, Inc., the parent corporation of the Manager, Lexington and FAV.

Manager

Lexington

Lexington Advisors LLC, located at 399 Park Avenue, 20th Floor, New York, New York 10022, serves as a to the Fund and is responsible for making investment decisions for the Fund’s investments in Venture and Growth Assets. Lexington is registered as an investment adviser under the Advisers Act, and is an indirect, wholly-owned subsidiary of Franklin Resources Inc. Lexington Partners, a Delaware limited partnership that also is registered as an investment adviser with the SEC under the Advisers Act, is the direct owner of Lexington.

Lexington has originated, analyzed, negotiated, and closed over 750 secondary transactions acquiring over 5,200 private investment fund interests managed by over 950 sponsors. Lexington has one of the most experienced and capable teams of investment professionals focused on technology and innovation investing in the private markets (the “Venture & Growth Team”). The Venture & Growth Team consists of 25 professionals, including 14 specialists based in the U.S. (most of which are based in Menlo Park, California) that devote a majority of their time to venture and growth investing, and 11 generalists located in key regions of innovation globally. The Venture and Growth Team leadership has over 85 years of combined experience investing in technology and innovation (including prior roles) and an average tenure of 18 years with Lexington. The Venture and Growth Team has extensive experience investing in technology and innovation through multiple eras of innovation and economic cycles. The Venture and Growth Team is supported by Lexington’s deep global bench of secondary and co-investment investment professionals. Lexington Partners believes that a dedicated team is critical to providing leadership, accountability, and deep domain expertise for the strategy. The Venture and Growth Team’s structure is designed to facilitate the sharing of market intelligence, insights, and best practices across Lexington Partners and to encourage firmwide collaboration that supports disciplined underwriting, informed decision-making, and consistent execution.

Lexington’s secondary investment partners have worked together at Lexington for over 18 years on average and are among the most experienced investment professionals in the secondary market. Lexington’s senior secondary investment professionals are supported by a team of professionals skilled in all aspects of global secondary, direct investment and primary origination, financial analysis, negotiation, monitoring and investor relations. Lexington’s global platform of experienced professionals located in majority centers for private equity and alternative investing—New York, Boston, Menlo Park, London, Hong Kong, Santiago, Sao Paulo and Luxembourg—and senior advisors supporting our professionals globally, facilitates contact with investors and sponsors around the world.

 

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FAV

Franklin Advisers, Inc., located at One Franklin Parkway, San Mateo, California 94403-1906, also serves as a to the Fund and is responsible for making investment decisions for the Fund’s investments in Liquid Assets and allocating assets between the Venture and Growth Asset portion of the portfolio and the Liquid Asset portion of the portfolio. FAV is registered as an investment adviser under the Advisers Act, and is an indirect, wholly-owned subsidiary of Franklin Resources Inc.

Portfolio Management

Additional information about the portfolio managers’ compensation, other accounts managed by them and other information is provided in the SAI.

 

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INVESTMENT MANAGEMENT ARRANGEMENTS

Lexington and FAV manage the Fund’s portfolio. The Manager supervises the management of the Fund’s portfolio by Lexington and FAV and provides administrative and management services necessary for the operation of the Fund.

Investment Management Agreement

Under the Fund’s investment management agreement with the Manager, subject to the supervision and direction of the Board, the Manager is delegated the responsibility of managing the Fund’s portfolio in accordance with the Fund’s stated investment objective and policies, making investment decisions for the Fund and causing the Fund to purchase and sell assets. The Manager has delegated the management of the Fund’s portfolio to Lexington. The Manager supervises the management of the Fund’s portfolio by Lexington and provides administrative and management services necessary for the operation of the Fund, such as (1) supervising the overall administration of the Fund, including negotiation of contracts and fees with and the monitoring of performance and billings of the Fund’s administrator, transfer agent, stockholder servicing agents, custodian and other independent contractors or agents; (2) providing certain compliance, accounting, regulatory reporting and tax reporting services; (3) preparing or participating in the preparation of Board materials, registration statements, reports and other communications to Shareholders; (4) maintaining the Fund’s existence; and (5) maintaining the registration and qualification of the Shares under federal and (if required) state laws.

The Manager also provides the office space, facilities, equipment and personnel necessary to perform the following services for the Fund: SEC compliance, including record keeping, reporting requirements and registration statements and proxy statements; supervision of Fund operations, including coordination of functions of the transfer agent, custodian, administrator, accountants, counsel and other parties performing services or operational functions for the Fund; and certain administrative and clerical services, including certain accounting services and maintenance of certain books and records.

The Fund’s investment management agreement will continue in effect, unless otherwise terminated, until two years from its effective date and then will continue from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) and (b) in either event, by a majority of the trustees of the Fund who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the 1940 Act (the “Independent Trustees”) with such Independent Trustees casting votes in person at a meeting called for such purpose. The Fund’s investment management agreement provides that the Manager may render services to others. The Fund’s investment management agreement is terminable without penalty on not more than 60 days’ nor less than 30 days’ written notice by the Fund when authorized either by a vote of holders of shares representing a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) or by a vote of a majority of the Fund’s trustees, or by the Manager on not less than 90 days’ written notice, and will automatically terminate in the event of its assignment. The Fund’s investment management agreement provides that neither the Manager nor its personnel or affiliates shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution of security transactions for the Fund, except for willful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties.

A discussion regarding the basis for the approval by the Board of the Investment Management Agreement will be available in the Fund’s initial shareholder report once it commences operations.

Agreements

Lexington provides services to the Fund pursuant to an investment agreement between the Manager and Lexington. Under the investment agreement, subject to the supervision and direction of the Board and the Manager, Lexington will manage the Fund’s portfolio in accordance with the Fund’s

 

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investment objective and policies, make investment decisions for the Fund, place trades to purchase and sell Fund assets, and employ professionals who provide research services to the Fund.

The investment agreement between the Manager and Lexington will continue in effect, unless otherwise terminated, until two years from its effective date and then will continue from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Trustees with such Independent Trustees casting votes in person at a meeting called for such purpose. The Board or a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) may terminate the Fund’s investment agreement without penalty, in each case on not more than 60 days’ nor less than 30 days’ written notice to Lexington. Lexington may terminate the investment agreement on 90 days’ written notice to the Fund and the Manager. The Manager and Lexington may terminate the investment agreement upon their mutual written consent. The investment agreement will terminate automatically in the event of its assignment.

FAV provides services to the Fund pursuant to an investment agreement between the Manager and FAV. Under the investment agreement, subject to the supervision and direction of the Board and the Manager, FAV will manage the Fund’s portfolio in accordance with the Fund’s investment objective and policies, make investment decisions for the Fund, place trades to purchase and sell Fund assets, and employ professionals who provide research services to the Fund.

The investment agreement between the Manager and FAV will continue in effect, unless otherwise terminated, until two years from its effective date, and then will continue from year to year provided such continuance is specifically approved at least annually (a) by the Board or by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act), and (b) in either event, by a majority of the Independent Trustees with such Independent Trustees casting votes in person at a meeting called for such purpose. The Board or a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) may terminate the Fund’s investment agreement without penalty, in each case on not more than 60 days’ nor less than 30 days’ written notice to FAV. FAV may terminate the investment agreement on 90 days’ written notice to the Fund and the Manager. The Manager and FAV may terminate the investment agreement upon their mutual written consent. The investment agreement will terminate automatically in the event of its assignment.

A discussion regarding the basis for the approval by the Board of the Agreements will be available in the Fund’s initial shareholder report once it commences operations.

Management Fee

Purchased Shares are incorporated into the beginning of month net asset value and included in the computation of the Management Fee payable. Share repurchases are included in the computation of the Management Fee and Incentive Fee payable through the Valuation Date as described in “Repurchase of Shares.”

The Management Fee and Incentive Fee, if any, is paid to the Manager out of the Fund’s assets, and therefore decreases the net profits or increases the net losses of the Fund. This Management Fee is separate from

 

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the Incentive Fee that the Manager receives in the event that specified investment returns are achieved by the Fund. The Management Fee is payable in cash.

Incentive Fee

“Loss Recovery Account” means a memorandum account maintained by the Fund, which will have an initial balance of zero and will be (i) increased upon the close of each calendar quarter of the Fund by the amount of the net losses of the Fund for the quarter, before giving effect to any repurchases or distributions for such quarter, and (ii) decreased (but not below zero) upon the close of each calendar quarter by the amount of the net profits of the Fund for the quarter. For purposes of the Loss Recovery Account, the term “net losses” shall mean the amount by which (i) the sum of (A) the net asset value of the Fund as of the beginning of such quarter and (B) the aggregate issue price of shares of the Fund issued during such quarter (excluding any Shares of such class issued in connection with the reinvestment of dividends paid, or other distributions made, by the Fund through the DRIP) exceeds (ii) the sum of (X) the net asset value of the Fund as of the end of such quarter, (Y) the aggregate repurchase price of all shares repurchased by the Fund during such quarter and (Z) the amount of dividends and other distributions paid in respect of the Fund during such quarter and not reinvested in additional shares through the DRIP. Shareholders will benefit from the Loss Recovery Account in proportion to their holdings of Shares. For purposes of the “net losses” calculation, the net asset value shall include unrealized appreciation or depreciation of investments and realized income and gains or losses and expenses (including offering and organizational expenses). Incentive Fees are accrued monthly and paid quarterly. For purposes of calculating Incentive Fees, such accruals are not deducted from net asset value.

The Manager does not return to the Fund amounts paid to it on net profits that the Fund has not yet received in cash if such amounts are not ultimately received by the Fund in cash. If the Fund does not ultimately receive amounts in cash, a loss would be recognized, which would increase the amount of the Loss Recovery Account and reduce future Incentive Fee payments.

 

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No Incentive Fee will be paid by the Fund directly to Lexington, unless Lexington elects to receive all or a portion of its Incentive Fee receivable from the Manager under its Agreement in Shares, in which case the Fund could issue such Shares directly to Lexington.

Fee

Lexington receives an annual fee, payable quarterly, from the Manager. FAV receives an annual fee, payable quarterly, from the Manager.

No Fees will be paid by the Fund directly to Lexington or FAV, unless Lexington or FAV elects to receive all or a portion of its Fee receivable from the Manager under its Agreement in Shares, in which case the Fund could issue such Shares directly to Lexington or FAV, as applicable.

Payment of Management Fee, Fee or Incentive Fee in Shares

The Manager has received an exemptive order from the SEC that permits the Fund to pay the Manager, Lexington and/or FAV all or a portion of its Management Fee, Fee and/or Incentive Fee, as applicable, in Shares in lieu of paying the Manager an equivalent amount of such fees in cash. As a condition of any such exemptive relief, the Manager, Lexington and FAV commit not to sell any such Shares received in lieu of a cash payment of its Management Fee, Fee or Incentive Fee, as applicable, for at least 12 months from the date of issuance, except in exceptional circumstances.

 

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FUND EXPENSES

All investment professionals of the Manager, Lexington, FAV and their respective staff, when and to the extent engaged in providing investment advisory services to the Fund, and the compensation and routine overhead expenses of such personnel allocable to such services, will be provided and paid for by the Manager, Lexington or FAV, respectively, and not by the Fund, except as otherwise permitted by the Investment Management Agreement or the Agreements, as applicable, or herein.

The Fund will bear all other expenses to be incurred in its operation (including to the extent such operations are performed by the Manager, Lexington, FAV or their respective affiliates), including, without limitation, advisory fees; incentive fees; distribution fees; fees for administrative services; servicing fees; interest; taxes; governmental fees; voluntary assessments and other expenses incurred in connection with membership in investment company organizations; organization costs of the Fund; the cost (including brokerage commissions, transaction fees or charges, if any) in connection with the purchase or sale of the Fund’s securities and other investments and any losses in connection therewith; fees and expenses of custodians, transfer agents, financial intermediaries, registrars, independent pricing vendors or other agents; acquisition or disposition fees; professional fees relating to investments, including expenses of consultants, investment bankers, attorneys, accountants and other experts; fees and expenses relating to software tools, programs or other technology (including risk management software, fees to risk management services providers, third-party software licensing, implementation, data management and recovery services and custom development costs); research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data); taxes; legal expenses (including in connection with investment activities); loan commitment fees; expenses relating to share certificates; expenses relating to the issuing and redemption or repurchase of Shares and servicing shareholder accounts; any costs and expenses associated with or related to due diligence performed with respect to the Fund’s offering of its shares, including but not limited to costs associated with or related to due diligence activities performed by, on behalf of, or for the benefit of broker-dealers, registered investment advisers, and third-party due diligence providers expenses of registering and qualifying Shares for sale under applicable federal and state law; expenses of preparing, setting in print, printing, mailing and distributing prospectuses and statements of additional information and any supplements thereto, reports, proxy statements, notices and dividends to the Fund’s Shareholders; costs of stationery; website costs; fees and expenses of Trustees not also serving in an officer capacity for the Fund, the Manager, Lexington or FAV; costs of meetings of the Board or any committee thereof, meetings of Shareholders and other meetings of the Fund; Board fees; audit fees; travel expenses of officers, members of the Board and employees of the Fund, if any; costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including compliance with The Sarbanes-Oxley Act of 2002; and the Fund’s pro rata portion of premiums on any fidelity bond and other insurance covering the Fund and its officers, Board members and employees; litigation, arbitration, mediation, or government investigation expenses and any or extraordinary expenses as may arise, including, without limitation, those relating to actions, suits or proceedings to which the Fund is a party and the legal obligation which the Fund may have to indemnify the Fund’s Board members and officers with respect thereto; expenses of the administration of the Fund, including negotiation of contracts and fees with, and the monitoring of performance and billings of, the Fund’s transfer agent, shareholder servicing agents, custodian and other independent contractors or agents; compliance, fund accounting, regulatory reporting, and tax reporting services; expenses related to the engagement of any third-party professionals, consultants, experts or specialists hired to perform work in respect of the Fund; all other expenses incurred by the Fund in connection with administering the Fund’s business, including the Fund’s allocable portion of the cost of the Fund’s chief compliance officer, treasurer, secretary, investor relations personnel and their respective staffs; and such or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Fund is a party and legal obligations that the Fund may have to indemnify the Fund’s trustees, officers and/or employees or agents with respect to these actions, suits or proceedings. It also is understood that if the Manager, Lexington, FAV or any of their respective affiliates provide accounting services to the Fund, the Fund

 

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will reimburse the Manager, Lexington, FAV and their respective affiliates, as applicable, for their costs in providing such accounting services to the Fund.

For the avoidance of doubt, it also is understood and agreed that if persons associated with the Manager, Lexington, FAV or any of their respective affiliates, including persons who are officers of the Fund, provide accounting, legal, clerical, compliance or administrative services to the Fund at the request of the Fund, the Fund may reimburse the Manager, Lexington, FAV and their respective affiliates, as applicable, for their costs in providing such accounting, legal, clerical, compliance or administrative services to the Fund (which costs may include an allocation of overhead including rent and the allocable portion of the salaries and benefits of the relevant persons and their respective staffs, including travel expenses). Nothing contained herein shall be construed to restrict the Fund’s right to hire its own employees or to contract for services to be performed by third parties.

 

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NET ASSET VALUATION

The Fund calculates the net asset value of each class of Shares as of the close of business on the last business day of each month and in connection with the Fund’s offer to purchase Shares, on each date that Shares are to be repurchased, as of the date of any distribution and at such other times as the Board shall determine (each, a “Determination Date”). In determining its net asset value, the Fund values its investments as of the relevant Determination Date. The net asset value of the Fund equals, unless otherwise noted, the value of the total assets of the Fund (including the net asset value of each class of Shares, including interest accrued but not yet received), less all of its liabilities (including accrued fees and expenses, dividends payable and any borrowings of the Fund), each determined as of the relevant Determination Date. The net asset values of Class S Shares, Class D Shares, Class I Shares and Class M Shares are calculated separately based on the fees and expenses applicable to each class. It is expected that the net asset value of Class S Shares, Class D Shares, Class I Shares and Class M Shares will vary over time as a result of the differing fees and expenses applicable to each class. Determination of net asset value is made in accordance with U.S. generally accepted accounting principles.

The Board has approved procedures pursuant to which the Fund values its investments. The Board has designated the Manager to perform these fair value determinations relating to the value of such investments, in accordance with such procedures and Rule under the 1940 Act. The Board oversees the Manager’s implementation of the Valuation Policy and may consult with representatives from the Fund’s outside legal counsel or other third-party consultants in their discussions and deliberations. In its fair valuation process, the Manager may consult with Lexington to seek any unique insights Lexington may have regarding the value of the Fund’s Venture and Growth Assets. However, Lexington will not determine the fair values assigned to the Fund’s assets. The value of the Fund’s assets is based on information reasonably available at the time the valuation is made and that the Manager believes to be reliable. The Manager generally values the Fund’s investments in accordance with Certification Topic ASC 820 of the Financial Accounting Standards Board (“ASC 820”).

Private Market Investments

The Manager generally values the Fund’s investment in Portfolio Funds and certain Direct Investments using the “practical expedient” in accordance with ASC 820. Portfolio Funds are generally valued based on the latest net asset value reported by a Portfolio Fund Manager or general partner, which generally represents the proportionate share of the net assets of the Portfolio Funds as reported by Portfolio Fund Managers. Reported values are increased or decreased for subsequent contributions to or distributions from the Portfolio Fund. Similarly, many Direct Investments are generally valued based on the valuation information provided by the lead or sponsoring private investors. In general, it is anticipated that such valuation information from these Portfolio Fund Managers or from lead or sponsoring private investors will generally not be available until 60 days or more after each quarter-end, especially pending receipt of audited financial information. Therefore, the most recently provided valuation information about these Portfolio Funds and Direct Investments for purposes of calculating the Fund’s monthly net asset value may be adjusted by the Manager pursuant to the Fund’s valuation procedures to estimate the fair value, on a monthly basis, of the interests in such Portfolio Funds or Direct Investments, as described below. To the extent the Manager is either unable to utilize the practical expedient under ASC 820, or where the Manager determines that use of the practical expedient is not appropriate as it will not result in a price that represents the current value of an investment, the Manager will make a fair value determination of the value of the investment. The Manager may consider a number of factors when making a fair value determination, such as:

 

 

 

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Notwithstanding the above, Portfolio Fund Managers may adopt a variety of valuation bases and provide differing levels of information concerning Portfolio Funds and other investments and there will generally be no liquid markets for such investments. Consequently, there are inherent difficulties in determining the fair value that cannot be eliminated. Neither the Board nor the Manager is able to confirm independently the accuracy of valuations provided by the Portfolio Fund Managers (which are generally unaudited).

Determining the fair value of investments for which market values are not readily available is necessarily subject to incomplete information, reporting delays and many subjective judgments; accordingly, fair value

 

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determinations made by the Manager should be considered as estimates. Due to the inherent uncertainty involved in such determinations, the reported fair value of these investments may fluctuate from period to period. In addition, such fair value may differ materially from the values that may have been used had a ready market existed for such investments and may significantly differ from the value ultimately realized by the Fund.

In addition, the Manager conducts a due diligence review of the valuation methodology used by each Portfolio Fund or lead or sponsoring private equity investors, as applicable. To keep abreast of each Portfolio Fund’s activities, the Manager reviews their periodic reports as well as the reports of the underlying portfolio companies in which the Portfolio Funds invest, to the extent which such underlying company reports are made available. The Manager monitors the continuing appropriateness of the valuation methodology being used for the Fund’s investments.

Prospective investors should be aware that there can be no assurance that the valuation of interests in Portfolio Funds or Direct Investments as determined under the procedures described above will in all cases be accurate to the extent that the Fund and the Manager do not generally have access to all necessary financial and other information relating to the Portfolio Funds or Direct Investments to determine independently the net asset value of the Fund’s interests in those Portfolio Funds or Direct Investments. The results of the Manager’s fair valuation of securities whose market value is not readily ascertainable will be based upon the Manager’s assessment of the fair value of such securities and their issuers on the recommendation of the Manager and, therefore, are the result of the Board’s interpretation.

Investments valued at fair value by the Manager are subject to a new valuation determination upon the next monthly valuation of the Fund. The Manager periodically reviews its valuation determinations with the Fund’s auditor and responds to any inquiries by such auditor regarding the Manager’s valuation methodologies.

Liquid Assets

The Fund values portfolio securities for which market quotations are readily available at the last reported sales price or official closing price on the primary market or exchange on which they trade. Fixed income securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in corporate obligations, quotations from corporate bond dealers, market transactions in comparable securities and various other relationships between securities. Under the Fund’s valuation policies and procedures, the Fund’s short-term investments are valued at amortized cost when the security has 60 days or less to maturity.

Generally, trading in U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of business on the NYSE. The values of such securities used in computing the Fund’s net asset value are determined as of such times.

Other Fair Value Considerations

On a monthly basis, for private market investments for which no market quotations are available (other than interests in Portfolio Funds and certain Direct Investments, as described above) and for which independent appraisals of current value can readily be obtained, valuations are based on such appraisals as of the most recently available quarter end information, subject to reviews of investment specific news and financial metrics available for the period since such quarter end. Otherwise, valuation of private market investments (other than interests in Portfolio Funds and certain Direct Investments, as described above) remains at cost except that original cost valuation will be adjusted based on a determination of such investment’s fair value. The Manager may also utilize independent third-party valuation service providers when determining an investment’s fair value.

In instances where there is reason to believe that the valuation of a security or other investment valued pursuant to the procedures described above does not represent the current value of such security or investment, or when a security or investment cannot be valued pursuant to the procedures described above, the fair value of the

 

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Prospective investors should be aware that fair value represents a good faith approximation of the value of an asset or liability. The fair value of one or more assets or liabilities may not, in retrospect, be the price at which those assets or liabilities could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s issuance (including through dividend or distribution reinvestment) or repurchase of Shares through repurchase offers at net asset value at a time when it owns investments that are valued at fair value may have the effect of diluting or increasing the economic interest of existing Shareholders.

 

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ELIGIBLE INVESTORS

Although the Shares are registered under the Securities Act, the Shares in this offering will be sold only to persons or entities that are “qualified clients,” as defined in Rule under the Advisers Act.

In addition, Shares are generally being offered only to investors that are U.S. persons for U.S. federal income tax purposes. The qualifications required to invest in the Fund will appear in subscription documents that must be completed by each prospective investor.

Each prospective investor in the Fund should obtain the advice of his, her or its own legal, accounting, tax and other advisers in reviewing documents pertaining to an investment in the Fund, including, but not limited to, this Prospectus and the Declaration of Trust before deciding to invest in the Fund.

 

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PLAN OF DISTRIBUTION

Distributor

After the initial term of two years, the Distribution Agreement will continue in effect with respect to the Fund for successive periods, provided that each such continuance is specifically approved by a majority of the entire Board cast in person at a meeting called for that purpose or by a majority of the outstanding voting securities of the Fund and, in either case, also by a majority of the Independent Trustees.

The Distributor may retain additional selling agents or other financial intermediaries to place Shares. Such selling agents or other financial intermediaries may impose terms and conditions on investor accounts and investments in the Fund that are in addition to the terms and conditions set forth in this Prospectus. See “Purchasing Shares.”

The Manager, or its affiliates, including the Distributor, may pay additional compensation out of its own resources (i.e., not Fund assets) to certain selling agents or financial intermediaries in connection with the sale of Shares. The additional compensation may differ among selling agents or financial intermediaries in amount or in the amount of calculation. Payments of additional compensation may be fixed dollar amounts or, based on the aggregate value of outstanding Shares held by Shareholders introduced by the broker or dealer, or determined in some other manner. Payments may be payments or may be ongoing payments. As a result of the various payments that financial intermediaries may receive from the Manager or its affiliates, the amount of compensation that a financial intermediary may receive in connection with the sale of Shares may be greater than the compensation it may receive for the distribution of other investment products. The receipt of the additional compensation by a selling broker or dealer may create potential conflicts of interest between an investor and its broker or dealer who is recommending the Fund over other potential investments.

Distribution and Servicing Plan

The Fund has adopted a Distribution and Servicing Plan for its Class S Shares, Class D Shares and Class M Shares to pay to the Distributor a Distribution and Servicing Fee to compensate financial industry professionals for distribution-related expenses, if applicable, and providing ongoing services in respect of Shareholders who own such Shares. These activities include marketing and other activities primarily intended to result in the sale of Class S Shares, Class D Shares and Class M Shares and activities related to administration and servicing of Class S, Class D or Class M accounts (including and other administrative services, as well as shareholder liaison services such as responding to inquiries from Shareholders and providing Shareholders with information about their investments in the Fund). The Distribution and Servicing Plan operates in a manner consistent with Rule under the 1940 Act, which regulates the manner in which an investment company may directly or indirectly bear the expenses of distributing its shares. Although the Fund is not an investment company, it has undertaken to comply with the terms of Rule as required by its exemptive relief, permitting the Fund to, among other things, issue multiple classes of Shares.

 

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Distribution and Servicing Fee is paid out of the Fund’s assets on an basis, over time these fees will increase the cost of a Shareholder’s investment and may cost the Shareholder more than paying other types of sales charges, if applicable. Up to 0.25% per annum of the Distribution and Servicing Fee may qualify as a “service fee” under FINRA rules and therefore will not be limited by FINRA rules which limit distribution fees as a percentage of total new gross sales. “Service fees” are defined for purposes of FINRA rules to mean fees paid for providing shareholder services or the maintenance of shareholder accounts. FINRA rules limit service fees to 0.25% of a fund’s average annual net assets. A portion of the Distribution and Servicing Fee may also be used to pay for agency, and certain other administrative services that are not required to be paid pursuant to a “service fee” under FINRA rules. The remainder is for distribution support and related services.

Class I Shares are not subject to any Distribution and Servicing Fee and do not bear any expenses associated therewith.

Payments to Financial Intermediaries

The Fund may also pay fees to financial intermediaries for agency, and other shareholder services associated with Shareholders whose Shares are held in, as applicable, omnibus accounts, other group accounts or accounts traded through registered securities clearing agents.

The Manager, or its affiliates, including the Distributor, may pay additional compensation out of its own resources (i.e., not Fund assets) to certain selling agents or financial intermediaries in connection with the sale of Shares. The additional compensation may differ among selling agents or financial intermediaries in amount or in the amount of calculation. Payments of additional compensation may be fixed dollar amounts or, based on the aggregate value of outstanding Shares held by Shareholders introduced by the broker or dealer, or determined in some other manner. Payments may be payments or may be ongoing payments. As a result of the various payments that financial intermediaries may receive from the Manager or its affiliates, the amount of compensation that a financial intermediary may receive in connection with the sale of Shares may be greater than the compensation it may receive for the distribution of other investment products. The receipt of the additional compensation by a selling broker or dealer may create potential conflicts of interest between an investor and its broker or dealer who is recommending the Fund over other potential investments.

 

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PURCHASING SHARES

The following section provides basic information about how to purchase Shares of the Fund. The Distributor acts as the distributor of the Shares of the Fund on a reasonable best efforts basis, subject to various conditions, pursuant to the terms of the Distribution Agreement. The Distributor is not obligated to sell any specific amount of Shares of the Fund. The Shares will be continuously offered through the Distributor. Prospective investors who purchase Shares through financial intermediaries will be subject to the procedures of those intermediaries through which they purchase Shares, which may include charges, investment minimums, cutoff times and other restrictions in addition to, or different from, those listed herein. Information concerning any charges or services will be provided to customers by the financial intermediary through which they purchase Shares. Prospective investors purchasing Shares of the Fund through financial intermediaries should acquaint themselves with their financial intermediary’s procedures and should read this Prospectus in conjunction with any materials and information provided by their financial intermediary.

General Purchase Terms

The minimum initial investment in the Fund by any investor is $25,000 with respect to Class S Shares, Class D Shares and Class M Shares, and $1,000,000 with respect to Class I Shares. The minimum additional investment in the Fund by any investor is $10,000, except for additional purchases pursuant to the dividend reinvestment plan. Investors subscribing through a broker/dealer or registered investment adviser may have shares aggregated to meet these minimums, so long as initial investments are not less than $25,000 and incremental contributions are not less than $10,000.

The Board reserves the right to accept lesser amounts below these minimums for employees of the Manager, Lexington, FAV and their affiliates and vehicles controlled by such employees. The purchase price of the Shares is based on the net asset value as of the date such Shares are purchased.

The minimum initial and additional investments may be reduced by either the Fund or the Distributor in the discretion of each for certain investors based on consideration of various factors, including the investor’s overall relationship with the Manager or Distributor, the investor’s holdings in other funds affiliated with the Manager or Distributor, and such other matters as the Manager or Distributor may consider relevant at the time, though Shares will only be sold to investors that satisfy the Fund’s eligibility requirements. The minimum initial and additional investments may also be reduced by either the Fund or the Distributor in the discretion of each for clients of certain registered investment advisers and other financial intermediaries based on consideration of various factors, including the registered investment adviser or other financial intermediary’s overall relationship with the Manager or Distributor, the type of distribution channels offered by the intermediary and such other factors as the Manager or Distributor may consider relevant at the time.

In addition, the Fund may, in the discretion of the Manager or Distributor, aggregate the accounts of clients of registered investment advisers and other financial intermediaries whose clients invest in the Fund for purposes of determining satisfaction of minimum investment amounts. At the discretion of the Manager or the Distributor, the Fund may also aggregate the accounts of clients of certain registered investment advisers and other financial intermediaries across Share classes for purposes of determining satisfaction of minimum investment amounts for a specific Share class. The aggregation of accounts of clients of registered investment advisers and other financial intermediaries for purposes of determining satisfaction of minimum investment amounts for the Fund or for a specific Share class may be based on consideration of various factors, including the registered investment adviser or other financial intermediary’s overall relationship with the Manager or Distributor, the type of distribution channels offered by the intermediary and such other factors as the Manager or Distributor may consider relevant at the time.

All Shares are sold at the public offering price, which is the net asset value of a Class S Share, Class D Share, Class I Share or Class M Share, as applicable.

 

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Following the inception date, Shares will generally be offered for purchase as of the first business day of each calendar month at a price per share equal to the NAV per share for such class, except that Shares may be offered more or less frequently as determined by the Board in its sole discretion. For purposes of this Prospectus, a “business day” means any day other than a Saturday, Sunday or any other day on which banks in New York, New York are required by law to be closed. Subscriptions are generally subject to the receipt of cleared funds on or prior to the acceptance date set by the Fund and notified to prospective investors. An investor who misses the acceptance date will have the acceptance of its investment in the Fund delayed until the following month. Except as otherwise permitted by the Board, initial and subsequent purchases of Shares will be payable in United States dollars.

Each initial or subsequent purchase of Shares will be payable in one installment which will generally be due 3 business days prior to the date of the proposed acceptance of the purchase set by the Fund, which is expected to be the last day of each calendar month, where funds are remitted by wire transfer.

Prospective investors may also purchase Shares by exchanging securities of Portfolio Funds or potential Portfolio Funds for Fund Shares (, an purchase) on any day that the Fund is open for purchases, subject to meeting the conditions below. Each exchange of Portfolio Funds or potential Portfolio Fund shares for Fund Shares is subject to approval by the Manager in accordance with procedures adopted by the Board of Trustees. Share exchanges will be conducted only directly through the Fund. No financial intermediary will be permitted to conduct Share exchanges. Shares purchased in connection with an exchange shall be sold by the Fund at net asset value as calculated by the Fund as of the close of business on the last business day of the month in which the exchange occurs. The Manager shall determine the valuation of such securities and the number of Shares for which such securities may be exchanged. The value of shares of Portfolio Funds or potential Portfolio Funds to be exchanged by prospective investors for Shares will be generally at cost except that original cost valuation will be adjusted based on a determination of such investment’s fair value in accordance with the Fund’s valuation procedures described above in “Net Asset Valuation.” Such an exchange would be expected to cause the exchanging Shareholder to recognize taxable gain (or loss, as the case may be) in an amount equal to the difference between such Shareholder’s basis in the exchanged Portfolio Fund interest and the fair market value of the Shares received in the exchange. The Manager will not receive any payment in connection with the exchange by an investor of Portfolio Fund or potential Portfolio Fund shares for Fund Shares and such exchanges will not be subject to sales loads.

A prospective investor is required to review, complete, and execute a subscription document. The subscription document is designed to provide the Fund with important information about the prospective investor. A prospective investor must submit a completed subscription document at least 5 business days before the acceptance date. The Fund reserves the right to accept or reject, in its sole discretion, any request to purchase Shares at any time. The Fund also reserves the right to suspend or terminate offerings of Shares at any time. Unless otherwise required by applicable law, any amount received in advance of a purchase ultimately rejected by the Fund will be returned promptly to the prospective investor without the deduction of any fees or expenses. Although the Fund may, in its sole discretion, elect to accept a subscription prior to receipt of cleared funds, a prospective investor will not become a Shareholder until cleared funds have been received. In the event that cleared funds and/or a properly completed subscription document are not received from a prospective investor prior to the dates pertaining to a particular offering, the Fund may hold the relevant funds and subscription document for processing in the next offering.

Prior to a purchase date, funds received from prospective investors will be placed in an account with the Fund’s transfer agent. On the purchase date, the balance in the account with respect to each investor whose investment is accepted will be invested in the Fund on behalf of such investor.

Prospective investors whose subscriptions to purchase Shares are accepted by the Fund will become Shareholders by being admitted as Shareholders as of the purchase date. An existing Shareholder generally may subscribe for additional Shares by completing an additional subscription agreement by the acceptance date and funding such amount by the deadline.

 

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Share Class Considerations

When selecting a share class, you should consider the following:

 

 

 

 

Each investor’s financial considerations are different. You should speak with your financial advisor to help you decide which class of Shares of the Fund is best for you. Not all financial intermediaries offer all classes of Shares. In addition, financial intermediaries may vary the actual sale charged, if applicable, as well as impose additional fees and charges on each class of Shares. If your financial intermediary offers more than one class of Shares, you should carefully consider which class of Shares to purchase.

Class S Shares

Eligibility to receive a Distribution and Servicing Fee is conditioned on a broker providing the following ongoing services with respect to the Class S Shares: assistance with recordkeeping, answering investor inquiries regarding us, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive a Distribution and Servicing Fee due to failure to provide these services, the Distribution and Servicing Fees that the broker would have otherwise been eligible to receive will be waived. The Distribution and Servicing Fees are ongoing fees that are not paid at the time of purchase.

Class S Shares are available to any eligible investor through brokerage and transactional-based accounts.

Class D Shares

Eligibility to receive a Distribution and Servicing Fee is conditioned on a broker providing the following ongoing services with respect to the Class D Shares: assistance with recordkeeping, answering investor inquiries regarding us, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive a Distribution and Servicing Fee due to failure to provide these services, the Distribution and Servicing Fees that the broker would have otherwise been eligible to receive will be waived. The Distribution and Servicing Fees are ongoing fees that are not paid at the time of purchase.

 

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Class D Shares are generally available for purchase only (i) through programs, also known as wrap accounts, that provide access to Class D Shares, (ii) through participating broker dealers that have alternative fee arrangements with their clients to provide access to Class D shares, (iii) through investment advisers that are registered under the Advisers Act or applicable state law and direct clients to trade with a broker dealer that offers Class D shares and (iv) through bank trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers.

Class I Shares

Class I Shares are sold at the prevailing net asset value per Class I Share. Financial intermediaries may not charge you transaction-based fees when you buy Class I Shares. Class I Shares are not subject to a Distribution and Servicing Fee.

Class I Shares are available for purchase only (i) through programs, also known as wrap accounts, that provide access to Class I Shares, (ii) by institutional accounts as defined by FINRA Rule 4512(c), (iii) through bank-sponsored collective trusts and bank-sponsored common trusts, (iv) by retirement plans (including a trustee or custodian under any deferred compensation or pension or profit sharing plan or payroll deduction IRA established for the benefit of the employees of any company), foundations or endowments, (v) through certain financial intermediaries that are not otherwise registered with or as a broker dealer and that direct clients to trade with a broker dealer that offers Class I Shares, (vi) through investment advisers registered under the Advisers Act or applicable state law that are also registered with or as a broker dealer, whose broker dealer does not receive any compensation from the Fund or from the Distributor, (vii) by the Fund’s officers and Trustees and their immediate family members, as well as officers and employees and their immediate family members, (viii) by participating broker dealers and their affiliates, including their officers, directors, employees, and registered representatives, as well as the immediate family members of such persons, as defined by FINRA Rule 5130, and (ix) through bank trust departments or any other organization or person authorized to act as a fiduciary for its clients or customers. Before making your investment decision, please consult with your investment adviser regarding your account type and the classes of Shares of the Fund you may be eligible to purchase.

Class M Shares

Eligibility to receive a Distribution and Servicing Fee is conditioned on a broker providing the following ongoing services with respect to the Class M Shares: assistance with recordkeeping, answering investor inquiries regarding us, including regarding distribution payments and reinvestments, helping investors understand their investments upon their request, and assistance with share repurchase requests. If the applicable broker is not eligible to receive a Distribution and Servicing Fee due to failure to provide these services, the Distribution and Servicing Fees that the broker would have otherwise been eligible to receive will be waived. The Distribution and Servicing Fees are ongoing fees that are not paid at the time of purchase. The Fund also may offer Class I Shares to certain feeder vehicles created to hold the Fund’s Class I Shares. The Fund conducts such offerings pursuant to exceptions to registration under the Securities Act and not as a part of this offering.

Class M Shares are available to any eligible investor through brokerage and transactional-based accounts that have entered into a written agreement with the Distributor to offer such shares.

If you are eligible to purchase all three classes of Shares, then you should consider that Class I Shares have no upfront sales charges and no Distribution and Servicing Fees. Such expenses are applicable to Class S,

 

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Class D and Class M Shares and will reduce the net asset value or distributions of the other share classes. If you are eligible to purchase Class S, Class D and Class M Shares but not Class I Shares, then you should consider that Class D Shares have no upfront sales charges and lower annual Distribution and Servicing Fees. Investors should also inquire with their broker dealer or financial representative about what additional fees may be charged with respect to the Share class under consideration or with respect to the type of account in which the Shares will be held.

 

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FUND STRUCTURE; NO RIGHT OF REDEMPTION

The Fund is a management investment company with no operating history. funds differ from funds in that funds do not redeem their shares at the request of an investor. No Shareholder has the right to require the Fund to redeem his, her or its Shares. No public market for the Shares exists, and none is expected to develop in the future. As a result, Shareholders may not be able to liquidate their investment other than through repurchases of Shares by the Fund, as described below. Accordingly, Shareholders should consider that they may not have access to the funds they invested in the Fund for an indefinite period of time.

 

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TRANSFER RESTRICTIONS

No person shall become a substituted Shareholder of the Fund without the consent of the Fund, which consent may be withheld in its sole discretion. Shares held by Shareholders may be transferred only: (i) by operation of law in connection with the death, divorce, bankruptcy, dissolution, insolvency, or adjudicated incompetence of the Shareholder; or (ii) under other limited circumstances, with the consent of the Board (which may be withheld in its sole discretion and is expected to be granted, if at all, only under extenuating circumstances).

Notice to the Fund of any proposed transfer must include evidence satisfactory to the Board that the proposed transferee, at the time of transfer, meets any requirements imposed by the Fund with respect to investor eligibility and suitability. Notice of a proposed transfer of Shares must also be accompanied by a properly completed subscription document in respect of the proposed transferee. In connection with any request to transfer Shares, the Fund may require the Shareholder requesting the transfer to obtain, at the Shareholder’s expense, an opinion of counsel selected by the Fund as to such matters as the Fund may reasonably request. Each transferring Shareholder and transferee may be charged reasonable expenses, including, but not limited to, attorneys’ and accountants’ fees, incurred by the Fund in connection with the transfer.

Any transferee acquiring Shares by operation of law in connection with the death, divorce, bankruptcy, insolvency, dissolution or adjudicated incompetence of the Shareholder, will be entitled to the allocations and distributions allocable to the Shares so acquired, to transfer the Shares in accordance with the terms of the Declaration of Trust and to tender the Shares for repurchase by the Fund, but will not be entitled to the other rights of a Shareholder unless and until the transferee becomes a substituted Shareholder as specified in the Declaration of Trust. If a Shareholder transfers Shares with the approval of the Board, the Fund shall as promptly as practicable take all necessary actions so that each transferee or successor to whom the Shares are transferred is admitted to the Fund as a Shareholder.

By subscribing for Shares, each Shareholder agrees to indemnify and hold harmless the Fund, the Board, the Manager, and each other Shareholder, and any affiliate of the foregoing and any of their employees, officers or directors against all losses, claims, damages, liabilities, costs, and expenses (including legal or other expenses incurred in investigating or defending against any losses, claims, damages, liabilities, costs, and expenses or any judgments, fines, and amounts paid in settlement), joint or several, to which such persons may become subject by reason of or arising from any transfer made by that Shareholder in violation of the Declaration of Trust or any misrepresentation made by that Shareholder in connection with any such transfer.

 

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REPURCHASE OF SHARES

At the sole discretion of the Board, the Fund may from time to time provide Shareholders with a limited degree of liquidity by offering to repurchase Shares pursuant to written tenders by Shareholders. Repurchase offers, if any, will be made to all holders of Shares.

Subject to the considerations described above, the aggregate value of Shares to be repurchased at any time will be determined by the Board in its sole discretion, and such amount may be stated as a percentage of the value of the Fund’s outstanding Shares. Therefore, the Fund may determine not to conduct a repurchase offer at a time that the Fund normally conducts a repurchase offer. The Fund may also elect to repurchase less than the full amount that a Shareholder requests to be repurchased. If a repurchase offer is oversubscribed by Shareholders who tender Shares, the Fund may extend the repurchase offer, repurchase a pro rata portion of the Shares tendered, or take any other action permitted by applicable law. The Fund may cause the repurchase of a Shareholder’s Shares if, among other reasons, the Fund determines that such repurchase would be in the interest of the Fund.

Repurchase of Shares Process

The following is a summary of the process expected to be employed by the Fund in connection with the repurchase of Shares. Additional information with respect to such process will be included in the materials provided by the Fund to Shareholders in connection with each repurchase offer. If the Board determines that the Fund will offer to repurchase Shares, written notice will be provided to Shareholders that describes the commencement date of the repurchase offer, specifies the date on which repurchase requests must be received by the Fund, and contains other terms and information that Shareholders should consider in deciding whether and how to participate in such repurchase opportunity.

 

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The Fund generally expects to repurchase its Shares with cash, although it reserves the ability to issue payment for the repurchase of Shares through a distribution of portfolio securities. The Fund does not generally expect to distribute securities as payment for repurchased Shares except in unusual circumstances, including if making a cash payment would result in a material adverse effect on the Fund or the Shareholders, or if the Fund has received distributions and/or proceeds from its investments in the form of securities that are transferable to Shareholders. Securities which are distributed in connection with a repurchase of Shares may be illiquid. Any distribution of securities will be valued in accordance with the Fund’s valuation procedures and will be distributed to all tendering Shareholders on a proportional basis.

Each Shareholder whose Shares have been accepted for repurchase will continue to be a Shareholder of the Fund until the Repurchase Date (and thereafter if the Shareholder retains Shares following such repurchase) and may exercise its voting rights with respect to the repurchased Shares until the Repurchase Date. Moreover, the account maintained in respect of a Shareholder whose Shares have been accepted for repurchase will be adjusted for the net profits or net losses of the Fund through the Valuation Date, and such Shareholder’s account shall not be adjusted for the amount withdrawn, as a result of the repurchase, prior to the Repurchase Date.

Payments in cash for repurchased Shares may require the Fund to liquidate certain Fund investments earlier than the Manager otherwise would liquidate such holdings, potentially resulting in losses, and may increase the Fund’s portfolio turnover. The Fund also may need to maintain higher levels of cash or borrow money to pay repurchase requests in cash. Such a practice could increase the Fund’s operating expenses and impact the ability of the Fund to achieve its investment objective.

A 2.00% early repurchase fee will be charged by the Fund with respect to any repurchase of Shares from a Shareholder at any time prior to the day immediately preceding the anniversary of the Shareholder’s purchase of the Shares. Shares tendered for repurchase will be treated as having been repurchased on a “first out” basis. Therefore, Shares repurchased will be deemed to have been taken from the earliest purchase of Shares by such Shareholder (adjusted for subsequent net profits and net losses) until all such Shares have been repurchased, and then from each subsequent purchase of Shares by such Shareholder (adjusted for subsequent net profits and net losses) until such Shares are repurchased. An early repurchase fee payable by a Shareholder may be waived by the Fund in circumstances where the Board determines that doing so is in the best interest of the Fund. The early repurchase fee will not apply to Shares acquired through dividend reinvestment, and the Fund may waive the early repurchase fee in its sole discretion under certain circumstances: (i) with respect to repurchase requests submitted by discretionary model portfolio management programs (and similar arrangements); (ii) with respect to repurchase requests from feeder funds (or similar vehicles) primarily created to hold Shares, which are offered to persons, where such funds seek to avoid imposing such a deduction because of administrative or systems limitations; (iii) pursuant to an asset allocation program, wrap fee program or other investment program offered by a financial institution where investment decisions are made on a discretionary basis by investment professionals; and (iv) pursuant to an automatic rebalancing program. To the extent the Fund determines to waive, impose scheduled variations of, or eliminate an early repurchase fee, it will do so consistently with the requirements of Rule under the 1940 Act, and the Fund’s waiver of, scheduled variation in, or elimination of, the early repurchase fee will apply uniformly to all Shareholders regardless of Share class.

Other than the early repurchase fee, the Fund does not presently intend to impose any charges on the repurchase of Shares. However, subject to applicable law, the Fund is permitted to allocate pro rata to all

 

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Shareholders, whose Shares are repurchased, costs and charges imposed by Portfolio Funds or otherwise incurred in connection with the Fund’s investments, if the Manager determines to liquidate such Shares as a result of repurchase tenders by Shareholders and such charges are imposed on the Fund.

A Shareholder who tenders some but not all of its Shares for repurchase will be required to maintain a minimum account balance of $10,000. Such minimum ownership requirement may be waived by the Board, in its sole discretion. If such requirement is not waived by the Board, the Fund may redeem all of the Shareholder’s Shares. To the extent a Shareholder seeks to tender all of the Shares they own and the Fund repurchases less than the full amount of Shares that the Shareholder requests to have repurchased, the Shareholder may maintain a balance of Shares of less than $10,000 following such Share repurchase.

In the event that the Manager or any of its affiliates holds Shares in its capacity as a Shareholder, such Shares may be tendered for repurchase in connection with any repurchase offer made by the Fund, without notice to the other Shareholders.

The repurchase of Shares is subject to regulatory requirements imposed by the SEC. The Fund’s repurchase procedures are intended to comply with such requirements. However, in the event that the Board determines that modification of the repurchase procedures described above is required or appropriate, the Board will adopt revised repurchase procedures as necessary to ensure the Fund’s compliance with applicable regulations or as the Board in its sole discretion deems appropriate.

 

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ERISA CONSIDERATIONS

Employee benefit plans and other plans subject to ERISA or the Code, including corporate savings and 401(k) plans, IRAs and Keogh Plans (each, an “ERISA Plan”) may purchase Shares. ERISA imposes certain general and specific responsibilities on persons who are fiduciaries with respect to an ERISA Plan, including prudence, diversification, prohibited transactions and other standards. Because the Fund is registered as an investment company under the 1940 Act, the underlying assets of the Fund will not be considered to be “plan assets” of any ERISA Plan investing in the Fund for purposes of the fiduciary responsibility and prohibited transaction rules under Title I of ERISA or Section 4975 of the Code. Thus, none of the Fund, the Manager, Lexington or FAV will be a fiduciary within the meaning of ERISA or Section 4975 of the Code with respect to the assets of any ERISA Plan that becomes a Shareholder, solely as a result of the ERISA Plan’s investment in the Fund.

The provisions of ERISA are subject to extensive and continuing administrative and judicial interpretation and review. The discussion of ERISA contained herein is, of necessity, general and may be affected by future publication of regulations and rulings. Potential investors should consult their legal advisers regarding the consequences under ERISA of an investment in the Fund through an ERISA Plan.

 

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DISTRIBUTIONS

Because the Fund intends to qualify annually as a RIC under the Code, the Fund intends to make distributions to Shareholders on an annual basis in aggregate amounts representing at least 90% of the Fund’s “investment company taxable income,” if any, earned during the year. Distributions may also include net capital gains, if any. Each year, a statement on IRS Form identifying the amount and U.S. federal income tax character of the Fund’s distributions will be provided to Shareholders. See “Material U.S. Federal Income Tax Considerations.”

Nevertheless, there can be no assurance that the Fund will make distributions to Shareholders at any particular rate, or that the Fund will make distributions at all. The Fund may finance its cash distributions to Shareholders from any sources of funds available to the Fund, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets (including fund investments), gains proceeds from the sale of assets (including fund investments), dividends or other distributions paid to the Fund on account of preferred and common equity investments by the Fund in Portfolio Funds and/or Direct Investments and expense reimbursements from the Manager. The Fund has not established limits on the amount of funds the Fund may use from available sources to make distributions. The repayment of any amounts owed to the Manager or its affiliates will reduce future distributions to which you would otherwise be entitled.

Unless a Shareholder otherwise elects, all distributions of dividends (including capital gain dividends) with respect to a class of Shares will be automatically reinvested by the Fund in additional Shares of the corresponding class, which will be issued at the NAV per Share determined as of the date. See “Dividend Reinvestment Plan.”

Shareholders will automatically have all distributions reinvested in Shares of the Fund issued by the Fund in accordance with the Fund’s dividend reinvestment plan unless an election is made to receive cash. See “Dividend Reinvestment Plan.”

 

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DIVIDEND REINVESTMENT PLAN

The automatic reinvestment of dividends will not relieve participants of any U.S. federal, state, local or income tax that may be payable (or required to be withheld) on such dividends. The Fund may elect to make distributions to Shareholders. Such distributions are not subject to the DRIP, and all Shareholders, regardless of whether or not they are participants in the DRIP, will receive such distributions in additional Shares of the Fund.

The Fund reserves the right to amend or terminate the DRIP. There is no direct service charge to participants with regard to purchases under the DRIP; however, the Fund reserves the right to amend the DRIP to include a service charge payable by the participants.

 

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DESCRIPTION OF SHARES

The Fund is a newly organized Delaware statutory trust formed on February 13, 2026. The Fund currently offers four classes of Shares: Class S Shares, Class D Shares, Class I Shares and Class M Shares. The Manager has received an exemptive order from the SEC that permits the Fund to offer multiple classes of Shares and to impose asset-based distribution fees and/or shareholder servicing fees and early withdrawal fees, as applicable. An investment in any Share class of the Fund represents an investment in the same assets of the Fund. However, the minimum investment amounts and ongoing fees and expenses for each Share class are expected to be different. The estimated fees and expenses for each class of Shares of the Fund are set forth in “Summary of Fees and Expenses.”

Shares of each class of the Fund represent an equal pro rata interest in the Fund and, generally, have identical voting, distribution, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, except that: (a) each class has a different designation; (b) each class of Shares bears any class-specific expenses; and (c) each class shall have separate voting rights on any matter submitted to Shareholders in which the interests of one class differ from the interests of any other class, and shall have exclusive voting rights on any matter submitted to Shareholders that relates solely to that class.

Any additional offerings of classes of Shares will require approval by the Board. Any additional offering of classes of Shares will also be subject to the requirements of the 1940 Act, which provides that such Shares may not be issued at a price below the then-current net asset value, except in connection with an offering to existing holders of Shares or with the consent of a majority of the Fund’s common Shareholders.

 

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CERTAIN PROVISIONS IN DECLARATION OF TRUST

An investor in the Fund will be a Shareholder of the Fund and his or her rights in the Fund will be established and governed by the Declaration of Trust. A prospective investor and his or her advisers should carefully review the Declaration of Trust as each Shareholder will agree to be bound by its terms and conditions. The following is a summary description of additional items and of select provisions of the Declaration of Trust that may not be described elsewhere in this Prospectus. The description of such items and provisions is not definitive and reference should be made to the complete text of the Declaration of Trust.

Shareholders; Additional Classes of Shares

Persons who purchase Shares will be Shareholders of the Fund. The Manager, Lexington, FAV and their affiliates may invest in the Fund as a Shareholder.

In addition, to the extent permitted by the 1940 Act and subject to the Fund’s exemptive relief from the SEC, the Fund reserves the right to issue additional classes of shares in the future subject to fees, charges, repurchase rights, and other characteristics different from those of the Shares offered in this Prospectus.

Anti-Takeover and Other Provisions

Limitation of Liability; Indemnification

 

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any of them may be liable that arise in connection with the performance of their activities on behalf of the Fund. Persons extending credit to, contracting with or having any claim against the Fund shall look only to the assets of the Fund for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees, nor any of the Trust’s officers, employees or agents, whether past, present or future, shall be personally liable therefor. The rights of indemnification and exculpation provided under the Declaration of Trust shall not be construed so as to limit liability or provide for indemnification of the Trustees and former Trustees of the Board, officers and former officers of the Fund, and the other persons entitled to such indemnification for any liability (including liability under applicable federal or state securities laws which, under certain circumstances, impose liability even on persons that act in good faith), to the extent (but only to the extent) that such indemnification or limitation on liability would be in violation of applicable law, but shall be construed so as to effectuate the applicable provisions of the Declaration of Trust to the fullest extent permitted by law.

Derivative Actions, Direct Actions and Exclusive Jurisdiction

Under the Declaration of Trust, actions by Shareholders against the Fund asserting a claim governed by Delaware law or the Fund’s organizational documents must be brought in the Court of Chancery of the State of Delaware or any other court in the State of Delaware with subject matter jurisdiction. Shareholders also waive the right to jury trial to the fullest extent permitted by law. This exclusive jurisdiction provision may make it more expensive for a Shareholder to bring a suit. Notwithstanding the foregoing, however, such provision shall not apply to any claims arising under U.S. federal securities law.

Amendment of the Declaration of Trust

 

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Term, Dissolution, and Liquidation

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary of certain material U.S. federal income tax considerations applicable to the Fund, to its qualification and taxation as a RIC for U.S. federal income tax purposes under Subchapter M of the Code and to an investment in the Fund’s Shares, and to the acquisition, ownership, and disposition of the Fund’s Shares.

This discussion does not purport to be a complete description of the tax considerations applicable to the Fund or its Shareholders. In particular, this discussion does not address certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including Shareholders subject to the alternative minimum tax, organizations, insurance companies, Shareholders that are treated as partnerships for U.S. federal income tax purposes, dealers in securities, traders in securities that elect to use a method of accounting for securities holdings, pension plans and trusts, financial institutions, persons that hold the Fund’s Shares as part of a straddle or a hedging or conversion transaction, real estate investment trusts (“REITs”), RICs, U.S. persons with a functional currency other than the U.S. dollar, persons who have ceased to be U.S. citizens or to be taxed as residents of the United States, controlled foreign corporations (“CFCs”), and passive foreign investment companies (“PFICs”). This discussion does not discuss any aspects of U.S. estate or gift tax or state, local or tax nor does it discuss the special treatment under U.S. federal income tax laws that could result if the Fund invests in securities or certain other investment assets or realizes such income through investments in Portfolio Funds that are treated as partnerships for U.S. federal income tax purposes (other than certain publicly traded partnerships), or are otherwise treated as disregarded from the Fund for U.S. federal income tax purposes. This discussion is limited to Shareholders that hold the Fund’s Shares as capital assets (within the meaning of the Code), and does not address owners of a Shareholder. This discussion is based upon the Code, its legislative history, existing and proposed U.S. Treasury regulations, published rulings and court decisions, each as of the date of this Prospectus and all of which are subject to change or differing interpretations, possibly retroactively, which could affect the continuing validity of this discussion. The Fund has not sought, and will not seek any ruling from the IRS regarding any matter discussed herein, and this discussion is not binding on the IRS. Accordingly, there can be no assurance that the IRS would not assert, and that a court would not sustain, a position contrary to any of the tax consequences discussed herein.

For purposes of this discussion, a “U.S. Shareholder” is a beneficial owner of the Fund’s Shares that is for U.S. federal income tax purposes:

 

 

 

 

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the Fund’s Shares, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Prospective beneficial owners of the Fund’s Shares that are partnerships or partners in such partnerships should consult their own tax advisers with respect to the purchase, ownership and disposition of the Fund’s Shares.

Tax matters are complicated and the tax consequences to a Shareholder of an investment in the Fund’s Shares will depend on the facts of such Shareholder’s particular situation. Prospective investors are strongly

 

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encouraged to consult their own tax adviser regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition (including by reason of a repurchase) of the Fund’s Shares, as well as the effect of state, local and tax laws, and the effect of any possible changes in tax laws.

Election to be Taxed as a Regulated Investment Company

The Fund intends to elect to be treated, and intends to operate in a manner so as to qualify for treatment in each taxable year, as a RIC under the Code. The Fund intends to make a timely election to be treated as a corporation for U.S. federal income tax purposes in order to make a valid RIC election. As a RIC, the Fund generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that the Fund timely distributes (or is deemed to timely distribute) to Shareholders as dividends. Instead, dividends the Fund distributes (or is deemed to timely distribute) to Shareholders generally will be taxable to Shareholders, and any net operating losses, foreign tax credits and most other tax attributes generally will not pass through to Shareholders. The Fund will be subject to corporate-level U.S. federal income tax on any undistributed income and gains. To qualify as a RIC, the Fund must, among other things, meet certain and asset diversification requirements (as described below). In addition, the Fund must distribute to its Shareholders, for each taxable year, at least 90% of its “investment company taxable income” (which generally is the Fund’s net ordinary taxable income and net short-term capital gains in excess of net long-term capital losses, determined without regard to the dividends paid deduction) (the “Annual Distribution Requirement”) for any taxable year. The following discussion assumes that the Fund qualifies for treatment as a RIC.

Qualification and Taxation as a Regulated Investment Company

If the Fund (1) qualifies as a RIC and (2) satisfies the Annual Distribution Requirement, then the Fund will not be subject to U.S. federal income tax on the portion of its investment company taxable income and net capital gain (which generally is the Fund’s net long-term capital gain in excess of net short-term capital loss) that the Fund timely distributes (or is deemed to timely distribute) to Shareholders. The Fund will be subject to U.S. federal income tax at the regular corporate rate on any of its income or capital gains not distributed (or deemed distributed) to its Shareholders.

If the Fund fails to distribute in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of its net capital gain income (both long-term and short-term) for the period ending on October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding years (to the extent that U.S. federal income tax was not imposed on such amounts) less certain over-distributions in prior years (together, the “Excise Tax Distribution Requirements”), the Fund will be subject to a 4% nondeductible U.S. federal excise tax on the portion of the undistributed amounts of such income that are less than the amounts required to be distributed based on the Excise Tax Distribution Requirements. For this purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate-level U.S. federal income tax for the taxable year ending in that calendar year will be considered to have been distributed by year end (or earlier if estimated taxes are paid). In order to meet the Excise Tax Distribution Requirement for a particular year, the Fund will need to receive certain information from the Portfolio Funds, which it may not timely receive, in which case the Fund will need to estimate the amount of distributions it needs to make to meet the Excise Tax Distribution Requirement. If the Fund underestimates that amount, it will be subject to the excise tax. In addition, the Fund may choose to retain its net capital gains or any investment company taxable income, and pay the associated U.S. federal corporate income tax or U.S. federal excise tax thereon. In either event described in the preceding two sentences, the Fund will owe the excise tax only on the amount by which the Fund does not meet the Excise Tax Distribution Requirements.

To qualify as a RIC for U.S. federal income tax purposes, the Fund generally must, among other things:

 

 

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Each of the aforementioned ongoing requirements for qualification of the Fund as a RIC requires that the Manager, Lexington and FAV obtain information from or about the underlying investments in which the Fund is invested. Portfolio Funds and Portfolio Fund Managers may not provide information sufficient to ensure that the Fund qualifies as a RIC under the Code. If the Fund does not receive sufficient information from Portfolio Funds or Portfolio Fund Managers, the Fund risks failing to satisfy the Subchapter M qualification tests and/or incurring tax, including an excise tax, on undistributed income.

The Fund has an DRIP. The tax consequences to Shareholders of participating in the DRIP are discussed below in “Taxation of U.S. Shareholders.”

The Fund may have investments, either directly or through the Portfolio Funds, that require income to be included in investment company taxable income in a year prior to the year in which the Fund (or the Portfolio Funds) actually receives a corresponding amount of cash in respect of such income. For example, if the Portfolio Funds hold, directly or indirectly, corporate stock with respect to which Section 305 of the Code requires inclusion in income of amounts of deemed dividends even if no cash distribution is made, the Fund must include in its taxable income in each year the full amount of its applicable share of these deemed dividends. Additionally, if the Fund holds, directly or indirectly through the Portfolio Funds, debt obligations that are treated under applicable U.S. federal income tax rules as having original issue discount (“OID”) (such as debt instruments with “payment in kind” interest or, in certain cases, that have increasing interest rates or are issued with warrants), the Fund must include in its taxable income in each year a portion of the OID that accrues over the life of the obligation, regardless of whether the Fund receives cash representing such income in the same taxable year. The Fund may also have to include in its taxable income other amounts that it has not yet received in cash but has been allocated by the Portfolio Funds, including as described below under the heading investments, including PFICs and CFCs” and in certain situations where the Fund owns, directly or indirectly, an interest in a partnership that does not have a Section 754 election in effect.

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If the Fund’s deductible expenses in a given year exceed its investment company taxable income, the Fund will have a net operating loss for that year. A RIC is not able to offset its investment company taxable income with net operating losses on either a carryforward or carryback basis, and net operating losses generally will not pass through to Shareholders. In addition, expenses may be used only to offset investment company taxable income, and may not be used to offset net capital gain. A RIC may not use any net long-term capital losses (i.e., long-term capital losses in excess of short-term capital gains) to offset its investment company taxable income, but may carry forward those losses, and use them to offset future capital gains, indefinitely. Further, a RIC’s

 

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deduction of net business interest expense is limited to 30% of its “adjusted taxable income” plus “floor plan financing interest expense.” It is not expected that any portion of any underwriting or similar fee will be deductible for U.S. federal income tax purposes to the Fund or Shareholders. Due to these limits on the deductibility of expenses, net capital losses and business interest expenses, the Fund may, for U.S. federal income tax purposes, have aggregate taxable income for several years that the Fund is required to distribute and that is taxable to Shareholders even if this income is greater than the aggregate net income the Fund actually earned during those years.

In order to enable the Fund to make distributions to Shareholders that will be sufficient to enable the Fund to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements in the event that the circumstances described in the preceding two paragraphs apply, the Fund may need to liquidate or sell some of its assets at times or at prices that the Fund would not consider advantageous, the Fund may need to raise additional equity or debt capital, the Fund may need to take out loans, or the Fund may need to forgo new investment opportunities or otherwise take actions that are disadvantageous to the Fund’s business (or be unable to take actions that are advantageous to its business). Even if the Fund is authorized to borrow and to sell assets in order to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements, under the 1940 Act, the Fund generally is not permitted to make distributions to Shareholders while its debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met.

If the Fund is unable to obtain cash from other sources to enable the Fund to satisfy the Annual Distribution Requirement, the Fund may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable state and local taxes). Although the Fund expects to operate in a manner so as to qualify continuously as a RIC, the Fund may decide in the future to be taxed as a “C corporation,” even if the Fund would otherwise qualify as a RIC, if the Fund determines that such treatment as a C corporation for a particular year would be in the Fund’s best interest.

An entity that is properly classified as a partnership, rather than an association or publicly traded partnership taxable as a corporation, is not itself subject to U.S. federal income tax. Instead, each partner of the partnership must take into account its distributive share of the partnership’s income, gains, losses, deductions and credits (including all such items allocable to that partnership from investments in other partnerships) for each taxable year of the partnership ending with or within the partner’s taxable year, without regard to whether such partner has received or will receive corresponding cash distributions from the partnership. For the purpose of determining whether the Fund satisfies the 90% Gross Income Test and the Diversification Tests, the character of the Fund’s distributive share of items of income, gain, losses, deductions and credits derived through any investments in companies that are treated as partnerships for U.S. federal income tax purposes (other than certain publicly traded partnerships), such as the Portfolio Funds, or are otherwise treated as disregarded from the Fund for U.S. federal income tax purposes, generally will be determined as if the Fund realized these tax items directly. In order to meet the 90% Gross Income Test, the Fund may structure its investments in a way that could increase the taxes imposed thereon or in respect thereof. For example, the Fund may hold such investments through one or more subsidiary U.S. or corporation(s) (or other entity treated as such for U.S. tax purposes). In such a case, any income from such investments should not adversely affect the Fund’s ability to meet the 90% Gross Income Test, although such income may be subject to U.S. or tax depending on the circumstances, which the Fund would indirectly bear through its ownership of such subsidiary corporation(s). The Fund’s need to hold such investments through such U.S. or corporation(s) in order to satisfy the 90% Gross Income Test may, however, jeopardize its ability to satisfy the Diversification Tests, which may make it difficult for the Fund to qualify as a RIC for U.S. federal income tax purposes.

Further, for purposes of calculating the value of the Fund’s investment in the securities of an issuer for purposes of determining the 25% requirement of the Diversification Tests, the Fund’s proper proportion of any investment in the securities of that issuer that are held by a member of the Fund’s “controlled group” must be aggregated with the Fund’s investment in that issuer. A controlled group is one or more chains of corporations connected through stock ownership with the Fund if (a) at least 20% of the total combined voting power of all

 

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classes of voting stock of each of the corporations is owned directly by one or more of the other corporations, and (b) the Fund directly owns at least 20% or more of the combined voting stock of at least one of the other corporations.

Failure to Qualify as a Regulated Investment Company

If the Fund, otherwise qualifying as a RIC, fails to satisfy the 90% Gross Income Test for any taxable year or the Diversification Tests for any quarter of a taxable year, the Fund may continue to be taxed as a RIC for the relevant taxable year if certain relief provisions of the Code apply (which might, among other things, require the Fund to pay certain corporate-level U.S. federal taxes or to dispose of certain assets). If the Fund fails to qualify as a RIC for more than two consecutive taxable years and then seeks to as a RIC, the Fund would generally be required pay corporate-level U.S. federal income tax on any unrealized gain in its assets, as of the first day of its first taxable year as a RIC, that the Fund recognizes in the subsequent five-taxable-year period unless the Fund elects to recognize gain to the extent of any such unrealized appreciation in a deemed sale.

If the Fund fails to qualify for treatment as a RIC in any taxable year and is not eligible for relief provisions, the Fund would be subject to U.S. federal income tax on all of its taxable income at the regular corporate U.S. federal income tax rate and would be subject to any applicable state and local taxes, regardless of whether the Fund makes any distributions to Shareholders. Additionally, the Fund would not be able to deduct distributions to its Shareholders, nor would distributions to Shareholders be required to be made for U.S. federal income tax purposes. Any distributions the Fund makes generally would be taxable to Shareholders as ordinary dividend income and, subject to certain limitations under the Code, would be eligible for the current maximum rate applicable to qualifying dividend income of individuals and other U.S. Shareholders, to the extent of the Fund’s current or accumulated earnings and profits. Subject to certain limitations under the Code, U.S. Shareholders that are corporations for U.S. federal income tax purposes would be eligible for the dividends-received deduction. Distributions in excess of the Fund’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the holder’s adjusted tax basis in the Fund’s Shares, and any remaining distributions would be treated as capital gain.

The remainder of this discussion assumes that the Fund will continuously qualify for treatment as a RIC for each taxable year.

The Fund’s Investments—General

Certain of the Fund’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as dividend income, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is subject to additional limitations), (5) cause the Fund to recognize income or gain without receipt of a corresponding cash payment, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the tax characterization of certain complex financial transactions and (8) produce income that will not be qualifying income for purposes of the 90% Gross Income Test. The Fund intends to monitor its transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that the Fund will be eligible for any such tax elections or that any elections it makes will fully mitigate the effects of these provisions.

Unless otherwise indicated, references in this discussion to the Fund’s investments, activities, income, gain and loss, include the activities, income, gain and loss of the Fund, as well as those indirectly attributable to the Fund as a result of the Fund’s investment in any Portfolio Fund (or other entity) that is properly classified as a partnership or disregarded entity for U.S. federal income tax purposes (and not an association or publicly traded partnership taxable as a corporation).

 

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A Portfolio Fund in which the Fund invests may face financial difficulties that require the Fund to modify or otherwise restructure its investment in Portfolio Fund. Any such transaction could, depending upon the specific terms of the transaction, cause the Fund to recognize taxable income without a corresponding receipt of cash, which could affect its ability to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements or result in unusable capital losses and future income. Any such transaction could also result in the Fund receiving assets that give rise to income for purposes of the 90% Gross Income Test.

Gain or loss recognized by the Fund from securities and other financial assets acquired by it, as well as any loss attributable to the lapse of options, warrants, or other financial assets taxed as options generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term depending on how long the Fund held a particular security or other financial asset.

The Fund’s investment in securities may be subject to income, withholding and other taxes. In that case, the Fund’s yield on those securities would be decreased. Shareholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to taxes paid by the Fund.

If the Fund purchases shares in a PFIC, the Fund may be subject to U.S. federal income tax on a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if the Fund distributes such income as a taxable dividend to Shareholders. Additional charges in the nature of interest generally will be imposed on the Fund in respect of deferred taxes arising from any such excess distribution or gain. If the Fund invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, the Fund will be required to include in gross income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF. Any inclusions in the Fund’s gross income resulting from the QEF election will be considered qualifying income for the purposes of the 90% Gross Income Test. Alternatively, the Fund may elect to at the end of each taxable year its shares in such PFIC, in which case, the Fund will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in its income. The Fund’s ability to make either election will depend on factors beyond the Fund’s control, and is subject to restrictions which may limit the availability of the benefit of these elections. Under either election, the Fund may be required to recognize in any year income in excess of its distributions from PFICs and its proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether the Fund satisfies the Excise Tax Distribution Requirements. See “—Qualification and Taxation as a Regulated Investment Company” above.

If the Fund holds more than 10% of the shares in a foreign corporation that is treated as a CFC, the Fund may be treated as receiving a deemed distribution (taxable as ordinary income or, if eligible, the preferential rates that apply to “qualified dividend income”) each year from such foreign corporation in an amount equal to its pro rata share of the foreign corporation’s income for the taxable year (including both ordinary earnings and capital gains), whether or not the foreign corporation makes an actual distribution during such year. This deemed distribution is required to be included in the income of a United States shareholder of a CFC. In general, a foreign corporation will be classified as a CFC if more than 50% of the shares of the corporation, measured by reference to combined voting power or value, is owned (directly, indirectly or by attribution) by United States shareholders. A “United States shareholder,” for this purpose, is any U.S. person that possesses (actually or constructively) 10% or more of the combined value or voting power of all classes of shares of a corporation. If the Fund is treated as receiving a deemed distribution from a CFC, the Fund will be required to include such distribution in its investment company taxable income regardless of whether the Fund receives any actual

 

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distributions from such CFC, and the Fund must distribute such income to satisfy the Annual Distribution Requirement and the Excise Tax Distribution Requirement. Income inclusions from a foreign corporation that is a CFC are “good income” for purposes of the 90% Gross Income Test regardless of whether the Fund receives timely distributions of such income from the foreign corporation.

The Fund’s functional currency for U.S. federal income tax purposes is the U.S. dollar. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Fund accrues income, expenses or other liabilities denominated in a currency other than the U.S. dollar and the time it actually collects such income or pay such expenses or liabilities may be treated as ordinary income or loss by the Fund. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency and other financial transactions denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, may also be treated as ordinary income or loss.

Taxation of U.S. Shareholders

The following discussion generally describes certain material U.S. federal income tax consequences of an investment in the Fund’s Shares beneficially owned by U.S. Shareholders (as defined above). If you are not a U.S. Shareholder this section does not apply to you. Whether an investment in the Fund is appropriate for a U.S. Shareholder will depend upon that person’s particular circumstances. An investment in the Fund by a U.S. Shareholder may have adverse tax consequences. Prospective investors should consult their own tax advisers about the U.S. tax consequences of investing in the Fund.

The Fund will ordinarily declare and pay dividends from its net investment income and distribute net realized capital gains, if any, once a year. The Fund, however, may make distributions on a more frequent basis to comply with the distribution requirements of the Code, in all events in a manner consistent with the provisions of 1940 Act.

Distributions by the Fund generally are taxable to U.S. Shareholders as ordinary income or capital gains. Distributions of the Fund’s investment company taxable income, determined without regard to the deduction for dividends paid, will be taxable as ordinary income to U.S. Shareholders to the extent of the Fund’s current or accumulated earnings and profits, whether paid in cash or reinvested in additional Shares. To the extent such distributions the Fund pays to U.S. Shareholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributions generally are taxable to U.S. Shareholders at the preferential rates applicable to long-term capital gains. Distributions of the Fund’s net capital gains (which generally are the Fund’s net long-term capital gains in excess of net short-term capital losses) that are properly reported by the Fund as “capital gain dividends” will be taxable to a U.S. Shareholder as long-term capital gains that are currently taxable at reduced rates in the case of taxpayers, regardless of the U.S. Shareholder’s holding period for his, her or its Shares and regardless of whether paid in cash or reinvested in additional Shares. Distributions in excess of the Fund’s earnings and profits first will reduce a U.S. Shareholder’s adjusted tax basis in such U.S. Shareholder’s Shares and, after the adjusted tax basis is reduced to zero, will constitute capital gains to such U.S. Shareholder.

The Fund generally expects to make distributions in cash but retains the discretionary ability to make distributions of securities in kind. Shareholders should consult their own tax advisers as to the possibility of the Fund distributing securities as well as the specific tax consequences of owning and disposing any securities actually distributed in kind by the Fund.