As filed via Edgar with the Securities and Exchange Commission
on February 26, 1999
Registration Statement No. 2-34277
ICA No. 811-1920
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 40 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [X]
STRALEM FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
405 Park Avenue, New York NY 10022
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 888-8123
Philippe E. Baumann, 405 Park Avenue, New York, NY 10022
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(Name and Address of Agent for Service)
Copy to:
Susan J. Penry-Williams, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] On April 30, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
CROSS-REFERENCE SHEET
(Pursuant to Rule 404 showing location in each form of Prospectus of
the responses to the Items in Part A and location in each form of Prospectus and
the Statement of Additional Information of the responses to the Items in Part B
of Form N-1A).
STRALEM FUND, INC.
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
1(a) Front Cover Page *
(b) Back Cover Page *
2(a) Risk/Return Summary: Investment *
Objective
(b) Principal Investment Strategies *
(c) Principal Risks of Investing; *
Bar Chart and Performance Table
3 Fees and Expenses of the Fund *
4(a) Investment Objective, Principal *
Strategies and Related Risk
(b) Implementation of Investment *
Objectives
(c) Risks of Investing; Risks of Investing *
in Mutual Funds
5 Not Applicable *
6(a) Investment Adviser and Investment *
Advisory Agreement
(b) Not Applicable *
7(a) Shareholder Information - Net Asset *
Value
(b) How to Purchase Shares *
(c) How to Redeem Shares *
(d) Dividends and Capital Gains *
Distributions
(e) Tax Issues *
(f) Not Applicable *
8(a) Not Applicable *
<PAGE>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
(b) Not Applicable *
(c) Not Applicable *
9 Financial Highlights *
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<PAGE>
STRALEM FUND, INC.
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
------ ------------------ -------------------
10 * Front Cover Page
11 * Fund Organization and History
12(a) * Fund Organization and History
12(b) * Investment Objectives,
Policies and Techniques
12(c) * Investment Objectives,
Policies and Techniques
12(d) * Investment Objectives,
Policies and Techniques
12(e) Investment Objectives,
Policies and Techniques
13(a)-(d) * Management of the Fund
13(e) * Not Applicable
14(a) * Control Persons and Principal
Holders of Securities
14(b) * Control Persons and Principal
Holders of Securities
14(c) * Control Persons and Principal
Holders of Securities
15(a) Investment Advisor
(b) * Not Applicable
(c) Investment Advisor
(d) * Not Applicable
(e) * Not Applicable
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<PAGE>
(f) * Not Applicable
(g) * Not Applicable
(h) * Additional Information About the Fund
16(a)-(c) * Brokerage Allocation
(d) * Not Applicable
(e) * Not Applicable
17(a) * Additional Information About the Fund
(b) * Not Applicable
18(a) Additional Information on Purchase,
Redemption and Pricing of Shares
(b) * Not Applicable
(c) Additional Information on Purchases,
Redemption and Pricing of Shares
(d) * Not Applicable
19(a) * Taxes
(b) * Taxes
20(a) * Not Applicable
(b) * Not Applicable
(c) * Not Applicable
21(a) * Not Applicable
(b) * Performance of the Fund
22(a) * Financial Statements
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<PAGE>
(b) * Financial Statements
(c) * Financial Statements
* See Prospectus
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-5-
<PAGE>
STRALEM FUND
PROSPECTUS
_______, 1999
The Securities and Exchange Commission has not approved nor disapproved the
shares of the Fund as an investment. The Securities and Exchange Commission also
has not determined whether this prospectus is accurate or complete. Any person
who tells you that the Securities and Exchange Commission has made such an
approval or determination is committing a crime.
-1-
<PAGE>
Table of Contents
[To Be Added if Needed]
STRALEM FUND
Risk/Return Summary
Investment Objective
Stralem Fund (the "Fund") is a no-load mutual fund with the investment objective
of realizing both income and capital appreciation in an attempt to maximize
total return.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by selecting different types
of investments for capital growth and income and modifying the composition of
the Fund's portfolio as economic and market trends change. It is anticipated
that the Fund will invest primarily in equity securities of companies listed on
major U.S. stock exchanges.
Principal Risks of Investing
The Fund is subject to the risks common to all mutual funds that invest in
equity securities. The value of the Fund's portfolio will change with the
movement of the market as well as activities of the individual companies in the
Fund's portfolio. Therefore, you may lose money by investing in this Fund if any
of these occur:
o the stock markets of the United States go down; or
o a stock or stocks in the Fund's portfolio do not perform as well as
expected.
In addition, the Fund is non-diversified which means that the Fund could have a
portfolio with as few as twelve issuers. To the extent that the Fund invests in
a small number of issuers, there may be a greater risk of losing money than in a
diversified investment company.
For a more detailed risk discussion involving investments in this Fund, please
read "Risks of Investing" on page_____.
Risk/Return Bar Chart and Performance Table
The following bar chart and table shows the risks of investing in the Fund by
showing changes in the Fund's performance from year to year from January 1, 1989
through December 31, 1998. The following table also shows the Fund's average
annual returns for 1, 5 and 10 years compared with those of Lipper Flexible
Portfolio Index Average. Past performance is not an indication of future
performance.
-2-
<PAGE>
Bar Chart
[GRAPHIC OMITTED]
The Fund's highest quarterly return was 11.3% (for the quarter ended 6/30/97).
The lowest quarterly return was -7.6% (for the quarter ended 9/30/90).
Performance Table
Avg. Annual Total Returns One Five Ten
for period Ending 12/31/98 Year Years Years
Stralem Fund 24.7% 13.8% 12.2%
Lipper Flexible Portfolio 14.2% 13.5% 12.2%
Index Average*
* The Lipper Flexible Portfolio Index Average is a composite average of all
qualifying funds in the respective investment objective group. In this case, a
flexible fund is one that allocates its investments across a wide range of asset
classes including domestic common stocks, bonds, and money market instruments
with a focus on total return. All Lipper Performance Fund Indexes are adjusted
for capital-gains distributions and income dividends. They are compiled and
distributed by Lipper Analytical Services, Inc.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (Fees paid directly from your investment)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge Imposed on Reinvested Dividends Cash None
Redemption Fee (as a percentage of amount redeemed) None
ANNUAL FUND OPERATING EXPENSES
12b-1 Fee 0.00%
Management Fees 1.07%
Other Expenses 0.11%
Total Annual Expenses 1.18%
- ----------------
Shareholder Transaction Expenses represent charges paid when you purchase shares
of the Fund.
EXAMPLE OF EXPENSES
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that the investor redeems all of his or her
shares at the end of each period and that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your cost would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-3-
<PAGE>
$120 $375 $649 $1,432
The Example does not reflect reinvested dividends and other expenses. If these
expenses were included, your costs would be higher.
The purpose of the above table is to assist you in understanding the various
costs and expenses that an investor in the Fund would bear directly or
indirectly.
Investment Objective, Principal Strategies and Related Risk
Investment Objective
The Fund's investment objective is realizing both income and capital
appreciation in an attempt to maximize total return.
Implementation of Investment Objective
The Fund seeks to implement its investment objective by selecting different
types of investments for capital growth and income and modifying the composition
of the Fund's portfolio as economic and market trends change. The Fund considers
both the opportunity for gain and the risk of loss in making investments.
The Fund anticipates that over the long term the Fund will invest primarily in
the common stock of companies listed on major U.S. stock exchanges and the
companies undervalued by the stock market and convertible common stock of these
companies.
Other Investment Instruments. The Fund may also invest in the following:
o long-term bonds;
o short-term investments (including short-term U.S. government
securities, bank interest-bearing accounts, certificates of
deposit and other money market instruments from banks
insured by the Federal Deposit Insurance Corporation); and
o real estate investment trusts that are readily marketable.
The Fund selects debt securities from U.S. treasury issues, long or short-term,
or high quality bonds.
The Adviser's flexibility to choose among these various types of investments for
the Fund is a principal feature of the Fund's investment approach. The Fund may
shift its emphasis among these different types of investments, as well as among
various industry sectors, as financial trends and economic conditions change.
For example, one strategy will be to increase the Fund's investments in equity
securities when the Adviser anticipates a generally rising stock market. A
corresponding strategy will be to reduce the Fund's investments in equity
securities when the Adviser anticipates a declining stock market or when it
believes that the total return form debt and short-term investments are expected
to exceed returns from equity investments.
Risks of Investing
-4-
<PAGE>
As with all mutual funds, investing in the Fund involves certain risks. We
cannot guarantee that the Fund will meet its investment objective or that the
Fund will perform as it has in the past. You may lose money if you invest in the
Fund.
The Fund may use various investment techniques, some of which involve greater
amounts of risk. These investment techniques are discussed in detail in the
Statement of Additional Information. To reduce risk, the Fund is subject to
certain limitations and restrictions. The Fund, however, intends to comply with
the diversification requirements of federal tax law as necessary to qualify as a
regulated investment company.
Risks of Investing in Mutual Funds
The following risks are common to all mutual funds and therefore apply to the
Fund:
o Market Risk. The market value of a security may go up or down,
sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than it was at the time of purchase. Market
risk applies to individual securities, a particular sector or the
entire economy.
o Manager Risk. Fund management affects Fund performance. A Fund may
lose money if the Fund manager's investment strategy does not achieve
the Fund's objective or the manager does not implement the strategy
properly.
o Year 2000 Risk. The Fund or its service providers could be disrupted
by problems in their computer systems related to the Year 2000. The
Adviser has taken steps that it reasonably believes are designed to
adequately address the Year 2000 issue as it relates to the operation
of the Fund. In addition, the Fund's major service providers have
assured the Adviser that they have taken comparable steps. Neither the
Fund nor its major service providers can assure that these steps will
be sufficient to avoid any adverse affects from the Year 2000 issue.
Risk of Investing in Equity Securities
The following risk is common to all mutual funds that invest in equity
securities and therefore applies to the Fund:
o Equity Risk. The value of the stock will fluctuate with events
affecting the company's profitability or volatility. Unlike debt
securities, which have a preference to a company's earnings and cash
flow, equity securities receive value only after the company meets its
other obligations.
-5-
<PAGE>
Risks of Investing in Debt Securities
The following risks are common to all mutual funds that invest in debt
securities and therefore apply to the portion of the Fund that is invested in
such debt to the extent that the Fund invests in securities that give rise to
such risks:
o Interest Rate Risk. The value of a debt security may lose value if
interest rates change. The value of a debt security changes in the
opposite direction from a change in interest rates. For example, the
value of the security typically decreases when interest rates rise. In
general, debt securities with longer maturities are more sensitive to
changes in interest rates.
o Credit Risk. The issuer of a debt security may be unable to make
timely payments of principal or interest, or may default on the debt.
Investment Adviser and Investment Advisory Agreement
Stralem & Company Incorporated (the "Adviser"), 405 Park Avenue, New York, NY
10022 is the investment adviser of the Fund. The Adviser, an investment adviser
registered with the SEC, was founded in November 22, 1966. The Adviser manages
funds for individuals, trusts, pension plans and other institutional investors.
The Adviser also performs some brokerage functions for its clients. The Adviser
has not in the past, and does not currently, sponsor or manage any other mutual
fund.
Advisory Services. Under the investment advisory agreement (the "Contract"), the
Adviser screens and analyzes potential investments for the Fund and, subject to
the investment restrictions and policies of the Fund, determines the amount of
each investment that should be made and the form of such investment. The Adviser
also reviews and re-evaluates the Fund's portfolio, periodically, to determine
at what point investments have met the Fund's investment objective or are
unlikely to meet such objective. The Adviser then purchases or sells the Fund's
investments as it deems appropriate and consistent with the Fund's investment
objective.
Compensation. For providing these services, the Fund pays the Adviser an
advisory fee as described in the Contract. Under the Contract, the Fund pays to
the Investment Adviser on a quarterly basis an amount equal to the aggregate of
the following percentages of the average weekly net asset value of the Fund
during the quarterly period then ended:
1/4 of 1% of the first $50 million of such net asset value (1%
annually),
3/16 of 1% of the next $50 million of such net asset value (3/4 of 1%
annually),
and
1/8 of 1% of such net asset value in excess of $100 million (1/2 of 1%
annually).
For the year ending December 31, 1998, the Fund paid a quarterly advisory fee
calculated at an annual rate of 1.0% of the Fund's average weekly net assets.
Portfolio Manager. Philippe E. Baumann is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Baumann has been executive
vice president of the Adviser since
-6-
<PAGE>
1973.
Shareholder Information
Investment Minimums. The minimum initial investment in the Fund is $100. We may
reduce or waive the minimum investment requirements in some cases.
Net Asset Value. The net asset value ("NAV") per share of the Fund is determined
as of 4:00 p.m. Eastern Standard Time on each day the New York Stock Exchange,
Inc. (the "Exchange") is open for business. The NAV is calculated by subtracting
the Fund's liabilities from its assets and then dividing that number by the
total number of outstanding shares. Securities without a readily available price
quotation may be priced at fair value. Fair value is determined in good faith by
the management of the Fund.
How to Purchase Shares. Only clients of the Adviser may purchase shares of the
Fund. The Fund's shares may be purchased only from the Adviser, 405 Park Avenue,
New York, New York 10022. When you purchases shares of the Fund, you will pay no
sales charges, underwriting discounts or commissions. The Fund's shares are
continuously offered for sale at NAV. The Fund must receive your purchase
request by the close of the Exchange to receive the NAV of that day. If your
request is received after the close of trading on the Exchange, it will be
processed the next business day.
How to Redeem Shares. You may redeem shares without charge at any time. The Fund
must receive your request in writing and if you were issued certificates, your
properly endorsed certificates with your signature guaranteed. Your shares will
be valued at the next-determined NAV of such shares. The Fund must receive your
purchase request by the close of the Exchange to receive the NAV of that day.
The Fund will pay you as soon as reasonably practicable after receipt of the
redemption request and certificates. In any event, the Fund will pay you within
three business days. Because the NAV fluctuates with the change in market value
of the securities owned, the amount you receive upon redemption may be more or
less than the amount you paid for the shares.
Suspension of Redemptions. The Fund may suspend at any time redemption of shares
or payment when:
o the Exchange is closed;
o trading on the Exchange is restricted; or
o certain emergency circumstances exists.
Dividends and Capital Gains Distributions. The Fund intends to distribute all or
most of its net investment income and net capital gains to shareholders
annually. You should indicate on your purchase application whether you want your
dividends and distributions in cash. Otherwise, your dividends and/or capital
gains distributions will be automatically reinvested in the Fund at NAV.
-7-
<PAGE>
Tax Issues. The Fund intends to continue to qualify as a regulated investment
company, which means that it pays no federal income tax on the earnings or
capital gains it distributes to its shareholders. We provide this tax
information for your general information. You should consult your own tax
adviser about the tax consequences of investing in a Fund.
o Ordinary dividends from the Fund are taxable as ordinary income and
dividends from the Fund's long-term capital gains are taxable as
capital gain.
o Dividends are treated in the same manner for federal income tax
purposes whether you receive them in the form of cash or additional
shares. They may also be subject to state and local taxes.
o Certain dividends paid to you in January will be taxable as if they
had been paid the previous December.
o We will mail you tax statements every January showing the amounts and
tax status of the distributions you received.
o When you sell (redeem) or exchange shares of a Fund, you must
recognize any gain or loss.
o Because your tax treatment depends on your purchase price and tax
position, you should keep your regular account statements for use in
determining your tax.
o You should review the more detailed discussion of federal income tax
considerations in the Statement of Additional Information.
Financial Highlights
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single share of the Fund. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund assuming reinvestment of all dividends and distributions. Richard A.
Eisner & Company, LLP has audited this information. Richard A. Eisner & Company
LLP's report along with further detail on the Fund's financial statements are
included in the annual report which is available upon request.
-8-
<PAGE>
For a capital share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.15 $ 11.66 $ 11.55 $ 9.77 $ 10.90
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income .35 .41 .47 .49 .50
Net gains or losses on securities 2.90 2.00 .36 2.00 (1.11)
---------- ---------- ---------- ---------- ----------
Total from investment income (loss) 3.25 2.41 .83 2.49 (.61)
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (.34) (.40) (.47) (.49) (.49)
Distributions from capital gains (.92) (.52) (.25) (.22) (.03)
---------- ---------- ---------- ---------- ----------
Total distributions (1.26) (.92) (.72) (.71) (.52)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 15.14 $ 13.15 $ 11.66 $ 11.55 $ 9.77
========== ========== ========== ========== ==========
Total Return 24.70% 20.62% 7.22% 25.45% (5.58)%
Ratio/supplemental data:
Net assets, end of period (in thousands) $ 48,662 $ 35,586 $ 30,849 $ 29,483 $ 25,597
Ratio of expenses to average net assets 1.18% 1.19% 1.21% 1.23% 1.25%
Ratio of net investment income to average
net assets 2.30% 2.87% 3.72% 4.12% 4.52%
Portfolio turnover rate 18.00% 52.00% 17.00% 35.00% 42.00%
</TABLE>
-9-
<PAGE>
Statement of Additional Information. The Statement of Additional Information
provides a more complete discussion about the Fund and is incorporated by
reference into this prospectus, which means that it is considered a part of this
prospectus.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about the Fund's investments,
including a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
To Review or Obtain this Information. The Statement of Additional Information
and annual and semi-annual reports are available without charge upon your
request by calling Stralem Fund at (212) 888-8123. This information may be
reviewed at the Public Reference Room of the Securities and Exchange Commission
or by visiting the SEC's World Wide Web site at www.sec.gov. In addition, this
information may be obtained for a fee by writing or calling the Public Reference
Room of the Securities and Exchange Commission, Washington, D.C. 20549-6009,
telephone (800) SEC-0330.
Investment Company Act File No. 811-1920.
-10-
<PAGE>
PURCHASE APPLICATION
TO BE ADDED
-11-
<PAGE>
STRALEM FUND
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a Prospectus. This SAI
should be read in conjunction with the Prospectus of Stralem Fund (the "Fund"),
dated _______________, 1999 and the Fund's Annual Report dated December 31,
1998. This SAI is incorporated by reference in its entirety into the Prospectus.
To obtain a copy of the Fund's Prospectus, please write to the Fund at 405 Park
Avenue, New York, New York 10022 or call (212) 888-8123.
Stralem & Company Incorporated serves as the Fund's investment advisor (the
"Investment Advisor").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Fund Organization and History................................................B-
Investment Objective, Policies and Techniques................................B-
Management of the Fund.......................................................B-
Control Persons and Principal Holders of Securities..........................B-
Investment Advisor...........................................................B-
Brokerage Allocation.........................................................B-
Additional Information on Purchase, Redemption and Pricing of Shares.........B-
Performance of the Fund......................................................B-
Taxes........................................................................B-
Additional Information About the Fund........................................B-
Financial Statements.........................................................B-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The SAI provides a further discussion of certain matters described in the
Prospectus and other matters which may be of interest to investors. No
investment in shares of the Fund should be made without first reading the
Prospectus.
FUND ORGANIZATION AND HISTORY
Stralem Fund (the "Fund") is an open-end management investment company. The Fund
was incorporated on July 9, 1969 under the laws of the State of Delaware, and on
April_, 1999, the Fund was reorganized into a Delaware business trust.
INVESTMENT OBJECTIVE, POLICIES AND TECHNIQUES
Objective of the Fund
- ---------------------
The investment objective of the Fund is to seek the
realization of a combination of income and capital appreciation in an attempt to
maximize total return.
Investment Policies
- -------------------
Since 1974, the Fund's investment policy has been to achieve
its investment objective through a portfolio of securities which is not confined
to any particular area. The Fund is non-diversified and may, therefore, invest a
greater percentage of its assets in the securities of fewer issuers than many
diversified investment companies. To the extent that a greater portion of its
assets is invested in a smaller number of issuers, an investment in the Fund may
be considered more speculative than an investment in a diversified fund.
Investment Techniques
- ---------------------
Privately Placed Securities. The Fund may invest in privately placed securities.
Short Sales. The Fund may make short sales to the extent, at the time of such
sales, it owns not less than the amount of such security sold short and/or other
securities convertible or exchangeable into such amount. A short sale is a sale
of securities not owned at the time of sale anticipating the price to fall and
the securities to be repurchased at a profit. A person selling short borrows the
equivalent securities to be delivered to the buyer and eventually buys the
securities to return to the buyer. The Fund may also make such short sales in
special arbitrage situations for the purpose of profiting from a current
difference between the price of a security sold, such as stock, and a security
owned, such as a debenture convertible into that stock.
Options. The Fund may purchase and sell options on stocks and stock price index
listed on major exchanges (i.e., not including securities traded
over-the-counter) where the total cost of such options does not exceed 10% of
the net asset value of the Fund at the time of purchase.
Turnover Rate
- -------------
During 1998 and 1997 the turnover rate of the Fund's
portfolio, calculated by dividing the lesser of purchases or sales of portfolio
securities for the period by the monthly average of the value of the portfolio
securities owned by the Fund during the period, was approximately 18% and 52%,
respectively. The Fund cannot predict what its turnover rate will be in 1999. A
high rate of turnover may result in increased income and gain which would have
to be distributed to the Fund's stockholders in order for the Fund to continue
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code.
Allocation of Investments by the Investment Advisor
- ---------------------------------------------------
B-2
<PAGE>
Although the Investment Advisor does not presently act as an
investment advisor for any other mutual fund, it is a registered investment
advisor under the Investment Advisers Act of 1940, as amended, and, accordingly,
it has as clients private individuals, trusts, pension and profit sharing funds,
some of whom, like the Fund, have capital appreciation as an investment
objective. As a result, investment personnel of the Investment Advisor may at
times consider purchases and sales of the same investment securities for the
Fund as well as for one or more of the other accounts which they manage or
advise. In such cases, it would be the practice of such personnel to allocate
the purchases and sales transactions among the Fund and such other accounts in
an equitable manner. In making such allocation, the main factors considered
would be the respective investment objectives of the Fund and the other
accounts, the relative size of the portfolio holdings of each of the same or
comparable securities, the current availability of cash for investment by the
Fund and each of the other accounts, the tax status of the Fund and the other
accounts, and the size of investment commitments generally held by the Fund and
the other accounts.
Within the limits set forth in Section 17 of the Investment
Company Act of 1940, as amended (the "1940 Act"), the Fund may invest in
securities the issuers of which are clients of the Investment Advisor, but such
investments would only be made in securities which are freely marketable under
the Securities Act of 1933 (the "Securities Act").
Fundamental Investment Restrictions
- -----------------------------------
The Fund has adopted the following investment restrictions
which cannot be changed without approval of the holders of a majority of its
outstanding shares. A majority vote means the lesser of (i) 67% or more of the
shares present (in person or by proxy) at a meeting of shareholders at which
more than one-half of the outstanding shares of the Fund are present (in person
or by proxy) or (ii) more than one-half of the outstanding shares of the Fund.
1. The Fund may not issue any senior security (as defined by
the 1940 Act), except that (a) the Fund may engage in transactions that
may result in the issuance of senior securities to the extent permitted
under applicable regulations and interpretations of the 1940 Act or an
exemptive order; (b) the Fund may acquire other securities, the
acquisition of which may result in the issuance of a senior security,
to the extent permitted under applicable regulations or interpretations
of the 1940 Act; and (c) subject to the restrictions set forth below,
the fund may borrow as authorized by the 1940 Act.
2. The Fund may not borrow money, except that the Fund may (a)
enter into commitments to purchase securities and instruments in
accordance with its investment program, provided that the total amount
of any borrowing does not exceed 33 1/3% of the Fund's total assets at
the time of the transaction; and (b) borrow money in an amount not
exceeding 33 1/3% of the value of its total assets at the time when the
loan is made. Any borrowings representing more than 33 1/3% of the
Fund's total assets must be repaid before the Fund may make additional
investments.
3. The Fund may underwrite securities of other issuers, except
to extent that the Fund may be considered an underwriter within the
meaning of the Securities Act when reselling securities held in its own
portfolio.
4. The Fund may not concentrate its investments in a
particular industry (other than securities issued or guaranteed by the
government or any of its agencies or instrumentalities). No more than
25% of the value of the Fund's total assets, based upon the current
market value at the time of purchase of securities in a particular
industry, may be invested in such industry. This restriction shall not
prevent the Fund from investing all of its assets in a "master" fund
that has adopted a similar restriction.
5. The Fund may not engage in the purchase or sale of direct
interests in real estate or invest in indirect interests in real
estate, except for the purpose of providing office space for the
transaction of its business, The Fund may, however, invest in
securities of real estate investment trusts when such securities are
readily marketable, but has no current intention of so doing.
B-3
<PAGE>
6. The Fund may not purchase or sell physical commodities
unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or
selling options and futures contracts or from investing in securities
or other instruments backed by physical commodities).
7. The Fund may not lend any security or make any other loan
if, as a result, more than 33 1/3% of its total assets would be lent to
other parties, but this limitation does not apply to purchases of
publicly issued debt securities or to repurchase agreements.
8. As to 50% of the value of its total assets, the Fund may
not invest more than 5% of its assets, taken at market value, in the
securities of any one issuer (except United States Government
securities) and may not purchase more than 10% of the outstanding
voting securities of any such issuer.
9. The Fund may not invest more than 25% of the value of its
total assets, taken at market value, in the securities of a single
issuer.
MANAGEMENT OF THE FUND
Trustees and Officers
- ---------------------
The Board of Trustees of the Fund is responsible for the
over-all operations of the Fund. The officers of the Fund, under the direction
of the Board of Trustees of the Fund, are responsible for the day-to-day
operations of the Fund. The Trustees and Officers of the Fund are as follows:
<TABLE>
<CAPTION>
Shares of Fund Beneficially Current Principal Occupation
Owned Directly or Indirectly and Principal Occupation
Name, Office and Address at March 5, 1999 During Past Five Years
------------------------ ------------------ -----------------------
<S> <C> <C>
Philippe E. Baumann* _______/3/ Mr. Baumann has been a Director and
Trustee and President Vice-President of Stralem & Company
880 Fifth Avenue Incorporated from 1970 to May 31, 1973.
New York, NY 10021 Since June 1, 1973, he has been its
Executive Vice President.
Hirschel B. Abelson* _______/4/ Mr. Abelson has been President of
Secretary and Treasurer Stralem & Company Incorporated for
112 East 74th Street more than five years.
New York, NY 10021
Kenneth D. Pearlman ___ Mr. Pearlman has been the Managing
Trustee Director of The Evans Partnership, an
200 East 64th Street investment partnership, for more than five
New York, NY 10021 years.
Michael T. Rubin* ___/5/ From 1974 through his retirement in June
Trustee 1997, Mr. Rubin served as Vice President
425 Park Avenue South of the Fund and an Assistant Vice
New York, NY 10016 President and an Assistant Secretary of
Stralem & Company Incorporated.
B-4
<PAGE>
- ---------------------
* Interested person as defined in the Investment Company Act of 1940, as
amended, by reason of relationship as officer or trustee.
3 Does not include _______ shares owned in the aggregate by two children
of Mr. Baumann and ______ shares owned by his wife, but includes
_______ shares owned beneficially by Mr. Baumann through his interest
in Stralem Employees Profit Sharing Trust, and _____ shares held
directly.
4 Does not include _____ shares owned in the aggregate by three children
of Mr. Abelson and ___ shares owned by his wife, but includes _______
shares owned beneficially by Mr. Abelson through his interest in
Stralem Employees Profit Sharing Trust and ___ shares held directly.
5 Does not include an aggregate of ___ shares owned by Mr. Rubin's
daughter, of which shares he disclaims beneficial ownership.
Shares of Fund Beneficially Current Principal Occupation
Owned Directly or Indirectly and Principal Occupation
Name, Office and Address at March 5, 1999 During Past Five Years
------------------------ ------------------ -----------------------
Jean Paul Ruff _____/6/ Mr. Ruff has been President of Hawley
Trustee Fuel Coal, Inc. since 1976 and Chairman
351 E. 84th Street since 1980.
New York, NY 10028
Philippe Labaune __ Mr. Labaune has been employed by
Vice President Stralem & Company Incorporated since
313 East 95th Street May 1997. He has served as Assistant
#14 Vice President and Assistant Secretary of
New York, NY 10128 Stralem & Company Incorporated and
Vice President of the Fund since October
1997. He was a trader at Societe
Generale Securities Corp. from 1995-1997
and a student at Pace University prior to
1995.
Joann Paccione __ Ms. Paccione has been Assistant Secretary
Assistant Secretary and and Assistant Treasurer of the Fund since
Assistant Treasurer April 1990. She was employed as an
112 Thomas Avenue accountant by Richard A. Eisner &
Emerson, NJ 07630 Company, LLP from 1981 through
October 1987. Since October 1987, Ms.
Paccione has been engaged in providing
accounting services on an independent
basis.
- --------------------
6 Does not include ______ shares owned in the aggregate by two children
of Mr. Ruff and ______ shares held by Mr. Ruff's wife in custody for
his daughter, of which shares he disclaims beneficial ownership.
Mr. Baumann has served as a director of the Fund since April
27, 1972. Mr. Pearlman was elected a director for the first time on February 6,
1974. Mr. Ruff was elected a director at the Annual Meeting of Stockholders held
on April 23, 1980. Mr. Rubin was elected a director on October 8, 1997 to fill
the seat left
B-5
<PAGE>
vacant upon the death of William Hertan in December 1996. Following the
conversion of the Fund to a Delaware business trust, Messrs. Baumann, Pearlman,
Ruff and Rubin were elected to serve as trustees of the Fund on April __, 1999.
None of the trustees and officers of the Fund receives any
compensation, other than trustees' fees, from the Fund. The Fund pays each
trustee of the Fund who is not an employee of the Investment Advisor a trustee's
fee of $200 for each meeting attended, but not in excess of $1,200 a year, and
reimburses them for their out-of-pocket expenses incurred on Fund business. No
trustees' out-of-pocket expenses were claimed or reimbursed during 1998. The
table below illustrates the compensation paid to each trustee for the Fund's
most recently completed fiscal year:
Pension or Estimated Total
Aggregate Retirement Benefits Annual Compensation
Compensation Accrued as Part of Benefits Upon from the Fund
Name of Person, Position from the Fund Fund Expenses Retirement Paid to Trustees
------------------------ ------------- ------------- ---------- -----------------
Jean Paul Ruff, $800 0 0 $800
Trustee
Kenneth D. Pearlman, $1,000 0 0 $1,000
Trustee
Michael T. Rubin, $1,000 0 0 $1,000
Trustee
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 5, 1999, the Fund had authorized capital of
5,000,000 shares of one class of capital stock, par value $1.00. As of March 5,
1999, the Fund had _________ shares of beneficial interest issued and
outstanding. The following table shows certain information as to the holdings of
shareholders with 5% or more of the Fund's outstanding shares and the trustees
and officers of the Fund as a group as of March 5, 1999:
Amount and Nature
Name of of Beneficial Percent
Beneficial Owner Address Ownership /7/ of Class
---------------- ------- ---------- --------
Stralem Employees' 405 Park Avenue _______ shares _____%
Profit Sharing Trust New York, NY 10022
Gunther & Co. - UBS 4 World Trade Center _______ shares /8/ _____%
New York, NY 10005
All officers and directors of the _______ shares /9/ _____%
Fund as a group
</TABLE>
- ---------------------
7 Unless otherwise indicated, all ownership is record and beneficial.
8 Record only.
9 Does not include an aggregate of _______ shares beneficially owned by
wives or children of certain of such officers and directors, as to
which shares said officers and trustees disclaim any beneficial
interest. See table under "Management of the Fund" above for further
information.
INVESTMENT ADVISOR
B-6
<PAGE>
The Investment Advisor, Stralem & Company Incorporated, having
an office at 405 Park Avenue, New York, New York 10022, is the investment
advisor to the Fund under a contract (the "Contract") dated ______, 1999.
Pursuant to the Contract, the Investment Advisor provides the Fund with, and
pays for, all office space and utilities and all research and investment
services. The Investment Advisor provides the Fund with, and initially pays for
(subject to reimbursement by the Fund, as provided below), all clerical,
statistical and related services (excluding legal, accounting, auditing and
custodial services) reasonably required by the Fund for the conduct of its
business. Legal, accounting, auditing and custodial services are separately
obtained and paid for by the Fund.
The Fund reimburses the Investment Advisor for certain of its
expenses attributable to the administration of the Fund, including a
proportionate part of the compensation of employees of the Investment Advisor
who perform the clerical, statistical and related services for the Fund referred
to above; such reimbursement is limited by the Contract to $25,000 per annum.
Under such provision of the Contract, the Fund reimburses the Investment Advisor
for, among other things, the expenses and compensation of its employees incurred
in preparing reports for the Fund, in performing the Fund's duties as the
transfer agent and registrar of its own shares and as dividend agent and in
performing all of the other administrative functions of the Fund. The Fund pays
all of its other costs and expenses directly. As a consequence of such
reimbursement of the Investment Advisor and such direct payment of other costs,
substantially all of the Fund's expenses, other than those for office space and
facilities, are directly or indirectly paid by the Fund. The Contract is
reviewed annually by the Board of Trustees of the Fund who may in their
discretion approve the continuation of the Contract.
The Contract was approved and adopted by the Fund's
shareholders at an Annual Shareholders' meeting held on April 7, 1999 following
the conversion of the Fund to a Delaware business trust. This Contract replaced
the prior investment management agreement of the Fund dated February 28, 1977.
The total payment under the Contract for 1998 was $505,341,
of which $24,945 was a reimbursement of the Investment Advisor's expenses
attributable to administration of the Fund. The total payment under the Contract
for 1997 was $412,175 of which $21,240 was a reimbursement for the Investment
Advisor's expenses attributable to the administration of the Fund. The total
payment under the Contract for 1996 was $365,410 of which $20,600 was a
reimbursement of the Investment Advisor's expenses attributable to
administration of the Fund.
The Contract will continue in effect from year to year so long
as its continuance is specifically approved at least annually either (1) by the
Board of Trustees of the Fund or (2) by the vote of a majority of the
outstanding shares of the Fund, provided that in either event the continuance is
also approved by the vote of a majority of the directors of the Fund who are not
parties to the Contract or interested persons of such parties, cast in person at
a meeting called for the purpose of voting on such approval. In addition, the
Contract may be terminated, without the payment of any penalty, at any time by
the Board of Trustees of the Fund, by the Investment Advisor, or by the vote of
a majority of the outstanding shares of the Fund upon not more than 60 days'
written notice, and will be automatically terminated upon any assignment
thereof.
The Investment Advisor's other advisory clients pay advisory
fees to the Investment Advisor based upon the amount of the securities and/or
cash of such clients with respect to which the Investment Advisor renders
investment advice. Accordingly, although the Fund pays an investment advisory
fee to the Investment Advisor, investment advisory clients of the Investment
Advisor who own shares of the Fund's stock may also pay an additional advisory
fee to the Investment Advisor (in addition to the fee indirectly paid on their
behalf by the Fund) with respect to the amount invested in the shares of the
Fund. No additional investment advisory fees are charged to clients of the
Investment Advisor which are subject to the Employee Retirement and Income
Security Act on amounts invested by such clients in the Fund.
Mr. Philippe E. Baumann is an officer and trustee of the Fund
and also of the Investment Advisor. Mr. Abelson is an officer of the Fund and is
also an officer of the Investment Advisor. Mr. Labaune is an officer of the Fund
and an officer of the Investment Advisor. The following persons, as of March 5,
1999, beneficially owned 5% or more of the Investment Advisor's outstanding
voting common stock: President of the Investment Advisor, Hirschel B. Abelson
(33.3%); Executive Vice President of the Investment Advisor, Philippe E. Baumann
(33.3%); and Vice President of the Investment Advisor, M. Joel Unger (33.3%).
Messrs. Abelson, Baumann and
B-7
<PAGE>
Unger together control the Investment Advisor. Messrs. Abelson, Baumann and
Unger, together with members of their families, also own 100% of the outstanding
non-voting common stock of the Investment Advisor.
BROKERAGE ALLOCATION
Decisions to buy and sell securities for the Fund and
assignment of its portfolio business and negotiation of its commission rates,
where applicable, are made by the President and the Vice-President of the Fund,
who are also officers of the Investment Advisor. It is the Fund's policy to
obtain the best prices and execution of orders available, and, in doing so, the
Fund will assign portfolio executions and negotiate transactions in accordance
with the reliability and quality of a broker's services (including handling of
execution of orders, research services the nature of which is the receipt of
research reports, and related services) and the value of such services and
expected contribution to the performance of the Fund. Where commissions paid
reflect services furnished to the Fund in addition to execution of orders, the
Fund will stand ready to demonstrate that such services were bona fide and
rendered for the benefit of the Fund. It is possible that certain of such
services may have the effect of reducing the Investment Advisor's expenses.
During 1998, 1997 and 1996, the Fund's brokerage amounted to
$37,935, $57,500 and $33,788, respectively, all of which was placed through the
Investment Advisor or affiliated persons of the Fund or the Investment Advisor
or any other brokers an affiliated person of which is an affiliated person of
the Fund or the Investment Advisor. The Contract does not contain any provision
requiring the Fund's brokerage to be transacted through the Investment Advisor.
The Board of Trustees has reviewed and approved the foregoing brokerage
arrangements.
With respect to any transactions to which competitively
determined rates are applicable, the execution will not be placed with the
Investment Advisor at a commission rate less favorable than the Investment
Advisor's contemporaneous charges for its other most favored, but unaffiliated,
customers; and, in addition, a good faith judgment will be made that the
Investment Advisor is qualified to obtain the best price on the particular
transaction and that the commission charged will be reasonable in relation to
the value of the brokerage provided in terms of either the particular
transaction or the Investment Advisor's overall responsibilities to the Fund.
Since the obligation already exists to provide management (which would include
elements of research and related skills), brokerage commissions paid to the
Investment Advisor will not reflect anything other than payment for the
execution services performed on the particular transactions.
When the Fund purchases or sells a security "over-the-counter"
if possible it effects the transaction with a principal market maker, without
the use of a broker, unless in the opinion of the Fund a better execution will
be achieved through the use of a broker.
The Contract does not provide for a reduction of the
investment advisory fee by any portion of the brokerage generated by portfolio
transactions of the Fund which the Investment Advisor may receive.
The Investment Advisor will not participate in commissions
paid by the Fund to other brokers or dealers and will not receive any reciprocal
business, directly or indirectly, as a result of such commissions.
ADDITIONAL INFORMATION ON PURCHASE, REDEMPTION AND PRICING OF SHARES
The Fund pays an investment advisory fee to the Investment
Advisor; accordingly, investment advisory clients of the Investment Advisor who
pay an investment advisory fee based upon the amount of securities or cash with
respect to which the Investment Advisor renders investment advice and who own
shares of the Fund's stock may also effectively pay an additional advisory fee
with respect to these shares.
Shares sold by the Fund may be purchased only from Stralem &
Company Incorporated, 405 Park Avenue, New York, New York 10022, the statutory
underwriter of such shares, which pursuant to a distribution
B-8
<PAGE>
agreement dated as of _______, 1999, acts without any compensation as exclusive
representative of the Fund in making such sales. It receives, on behalf of the
Fund, subscriptions for shares and payments therefor. This distribution
agreement replaced the prior distribution agreement dated February 28, 1977.
PERFORMANCE OF THE FUND
From time to time, the "average annual total return" and
"total return" of an investment in the Fund's shares may be advertised. An
explanation of how yields and total returns are calculated for each class and
the components of those calculations are set forth below.
Total return information may be useful to investors in
reviewing the Fund's performance. A Fund's advertisement of its performance
must, under applicable SEC rules, include the average annual total returns for
each class of shares of a Fund for the 1, 5, and 10-year period (or the life of
the class, if less) as of the most recently ended calendar quarter. This enables
an investor to compare the Fund's performance to the performance of other funds
for the same periods. However, a number of factors should be considered before
using such information as a basis for comparison with other investments.
Investments in a Fund are not insured; its total return is not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Total return for any given
past period are not a prediction or representation by the Fund of future rates
of return on its shares. The total return of the shares of the Fund are affected
by portfolio quality, portfolio maturity, the type of investments the Fund
holds, and operating expenses.
Total Returns
The "average annual total return" of the Fund is an average
annual compounded rate of return for each year in a specified number of years.
It is the rate of return ("T" in the formula below) based on the change in value
of a hypothetical initial investment of $1,000 ("P") held for a number of years
("n") to achieve an Ending Redeemable Value ("ERV"), according to the following
formula:
P(1+T)n = ERV
The cumulative "total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total return, but it
does not average the rate of return on an annual basis. Cumulative total return
is determined as follows:
ERV - P = Cumulative Total Return
-------
P
In calculating total return for the Fund, the current maximum sales charge (as a
percentage of the offering price) is deducted from the initial investment ("P").
Total returns also assume that all dividends and net capital gains distributions
during the period are reinvested to buy additional shares at net asset value per
share, and that the investment is redeemed at the end of the period.
TAXES
The following is only a summary of certain additional federal
income tax considerations generally affecting the Fund and its shareholders that
are not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
- -----------------------------------------------
B-9
<PAGE>
The Fund has elected to be taxed as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, the
Fund is not subject to federal income tax on the portion of its net investment
income (i.e., taxable interest, dividends and other taxable ordinary income, net
of expenses) and capital gain net income (i.e., the excess of capital gains over
capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year (the "Distribution Requirement"),
and satisfies certain other requirements of the Code that are described below.
Distributions by the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and will,
therefore, count towards the satisfaction of the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a
regulated investment company must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement").
In general, gain or loss recognized by the Fund on the
disposition of an asset will be a capital gain or loss. In addition, gain will
be recognized as a result of certain constructive sales, including short sales
"against the box." However, gain recognized on the disposition of a debt
obligation purchased by the Fund at a market discount (generally, at a price
less than its principal amount) will be treated as ordinary income to the extent
of the portion of the market discount which accrued during the period of time
the Fund held the debt obligation. In addition, under the rules of Code Section
988, gain or loss recognized on the disposition of a debt obligation denominated
in a foreign currency or an option with respect thereto (but only to the extent
attributable to changes in foreign currency exchange rates), and gain or loss
recognized on the disposition of a foreign currency forward contract, futures
contract, option or similar financial instrument, or of foreign currency itself,
except for regulated futures contracts or non-equity options subject to Code
Section 1256 (unless the Fund elects otherwise), will generally be treated as
ordinary income or loss.
Further, the Code also treats as ordinary income a portion of
the capital gain attributable to a transaction where substantially all of the
return realized is attributable to the time value of the Fund's net investment
in the transaction and: (1) the transaction consists of the acquisition of
property by the Fund and a contemporaneous contract to sell substantially
identical property in the future; (2) the transaction is a straddle within the
meaning of section 1092 of the Code; (3) the transaction is one that was
marketed or sold to the Fund on the basis that it would have the economic
characteristics of a loan but the interest-like return would be taxed as capital
gain; or (4) the transaction is described as a conversion transaction in the
Treasury Regulations. The amount of the gain recharacterized generally will not
exceed the amount of the interest that would have accrued on the net investment
for the relevant period at a yield equal to 120% of the federal long-term,
mid-term, or short-term rate, depending upon the type of instrument at issue
reduced by an amount equal to: (1) prior inclusions of ordinary income items
from the conversion transaction and (2) the capital interest on acquisition
indebtedness under Code section 263(g). Built-in losses will be preserved where
the Fund has a built-in loss with respect to property that becomes a part of a
conversion transaction. No authority exists that indicates that the converted
character of the income will not be passed through to the Fund's shareholders.
In general, for purposes of determining whether capital gain
or loss recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, or (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the Fund
grants a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto), or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
B-10
<PAGE>
Any gain recognized by the Fund on the lapse of, or any gain
or loss recognized by the Fund from a closing transaction with respect to, an
option written by the Fund will be treated as a short-term capital gain or loss.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above,
the Fund must satisfy an asset diversification test in order to qualify as a
regulated investment company. Under this test, at the close of each quarter of
the Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer), and no more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses. Generally, an
option (call or put) with respect to a security is treated as issued by the
issuer of the security not the issuer of the option.
If, for any taxable year, the Fund does not qualify as a
regulated investment company, all of its taxable income (including its net
capital gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the Fund's
current or accumulated earnings and profits. Such distributions generally will
be eligible for the dividends-received deduction in the case of corporate
shareholders.
Excise Tax on Regulated Investment Companies
- --------------------------------------------
A 4% non-deductible excise tax is imposed on a regulated
investment company that fails to distribute in each calendar year an amount
equal to 98% of its ordinary taxable income for such calendar year and 98% of
its capital gain net income for the one-year period ended on October 31 of such
calendar year (or, at the election of a regulated investment company having a
taxable year ending November 30 or December 31, for its taxable year (a "taxable
year election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company
shall: (1) reduce its capital gain net income (but not below its net capital
gain) by the amount of any net ordinary loss for the calendar year; and (2)
exclude foreign currency gains and losses incurred after October 31 of any year
(or after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
- ------------------
B-11
<PAGE>
The Fund anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes. However, such distributions will qualify for the
70% dividends-received deduction for corporate shareholders, but only to the
extent discussed below.
The Fund may either retain or distribute to shareholders its
net capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. Net capital gain that is distributed and designated as a
capital gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) of the capital gain
recognized upon the Fund's disposition of domestic "small business" stock will
be subject to tax.
Conversely, if the Fund elects to retain its net capital gain,
the Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If the Fund elects to retain its
net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each
received a distribution of his pro rata share of such gain, with the result that
each shareholder will be required to report his pro rata share of such gain on
his tax return as long-term capital gain, will receive a refundable tax credit
for his pro rata share of tax paid by the Fund on the gain, and will increase
the tax basis for his shares by an amount equal to the deemed distribution less
the tax credit.
Ordinary income dividends paid by the Fund with respect to a
taxable year will qualify for the 70% dividends-received deduction generally
available to corporations (other than corporations, such as S corporations,
which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax) to the extent of
the amount of qualifying dividends received by the Fund from domestic
corporations for the taxable year. Generally, a dividend received by the Fund
will not be treated as a qualifying dividend (1) if it has been received with
respect to any share of stock that the Fund has held for less than 46 days (91
days in the case of certain preferred stock), excluding for this purpose under
the rules of Code Section 246(c)(3) and (4) any period during which the Fund has
an option to sell, is under a contractual obligation to sell, has made and not
closed a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (2) to the extent that the Fund is under an obligation (pursuant to a
short sale or otherwise) to make related payments with respect to positions in
substantially similar or related property; or (3) to the extent that the stock
on which the dividend is paid is treated as debt-financed under the rules of
Code section 246A. The 46-day holding period must be satisfied during the 90-day
period beginning 45 days prior to each applicable ex-dividend date; the 91-day
holding period must be satisfied during the 180-day period beginning 90 days
before each applicable ex-dividend date. Moreover, the dividends-received
deduction for a corporate shareholder may be disallowed or reduced (1) if the
corporate shareholder fails to satisfy the foregoing requirements with respect
to its shares of the Fund or (2) by application of Code Section 246(b) which in
general limits the dividends-received deduction to 70% of the shareholder's
taxable income (determined without regard to the dividends-received deduction
and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but
only to the extent it exceeds, the regular tax and is computed at a maximum
marginal rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers
on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over
an exemption amount. For purposes of the corporate AMT, the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, a corporate shareholder will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
B-12
<PAGE>
Investment income that may be received by the Fund from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of, or exemption from, taxes
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested in various
countries is not known.
Distributions by the Fund that do not constitute ordinary
income dividends or capital gain dividends will be treated as a return of
capital to the extent of (and in reduction of) the shareholder's tax basis in
his/her shares; any excess will be treated as gain from the sale of his/her
shares, as discussed below.
Distributions by the Fund will be treated in the manner
described above regardless of whether such distributions are paid in cash or
reinvested in additional shares of the Fund (or of another fund). Shareholders
receiving a distribution in the form of additional shares will be treated as
receiving a distribution in an amount equal to the fair market value of the
shares received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of the Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions of
such amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by
the Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder (1)
who has failed to provide a correct taxpayer identification number, (2) who is
subject to backup withholding for failure to properly report the receipt of
interest or dividend income, or (3) who has failed to certify to the Fund that
it is not subject to backup withholding or that it is a corporation or other
"exempt recipient."
Sale or Redemption of Shares
- ----------------------------
A shareholder will recognize gain or loss on the sale or
redemption of shares of the Fund in an amount equal to the difference between
the proceeds of the sale or redemption and the shareholder's adjusted tax basis
in the shares. All or a portion of any loss so recognized may be disallowed if
the shareholder purchases other shares of the Fund within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss arising
from the sale or redemption of shares held for six months or less will be
treated as a long-term capital loss to the extent of the amount of capital gain
dividends received on such shares. For this purpose, the special holding period
rules of Code Section 246(c)(3) and (4) (discussed above in connection with the
dividends-received. deduction for corporations) generally will apply in
determining the holding period of shares. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
non-corporate taxpayer, $3,000 of ordinary income.
Foreign Shareholders
- --------------------
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
B-13
<PAGE>
If the income from the Fund is not effectively connected with
a U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends paid to a foreign shareholder will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such foreign shareholder would generally be exempt from U.S. federal income tax
on gains realized on the sale of shares of the Fund, capital gain dividends and
amounts retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a
U.S. trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends, and any gains realized upon the sale of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of a foreign shareholder other than a corporation,
the Fund may be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholder furnishes the Fund with proper
notification of his/her foreign status.
The tax consequences to a foreign shareholder entitled to
claim the benefits of an applicable tax treaty may be different from those
described herein. Foreign shareholders are urged to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund, including the applicability of foreign taxes.
Effect of Future Legislation; State and Local Tax Consideration
- ---------------------------------------------------------------
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect.
Rules of state and local taxation of ordinary income dividends
and capital gain dividends from regulated investment companies may differ from
the rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in the Fund.
ADDITIONAL INFORMATION ABOUT THE FUND
The Delaware Business Trust Act provides that a shareholder
of a Delaware business trust shall be entitled to the same limitation of
personal liability extended to shareholders of Delaware corporations, and the
Fund's Trust Instrument provides that shareholders of the Fund shall not be
liable for the obligations of the Fund. The Trust Instrument also provides for
indemnification out of Fund property any shareholder held personally liable
solely by his or her being or having been a shareholder. The Trust Instrument
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund, and shall
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss because of shareholder liability is considered to be extremely
remote.
The Trust Instrument authorizes the Board of Trustees to issue
an unlimited number of shares, which are units of beneficial interest, with a
par value of $0.01 per share. Each share has one vote and participates equally
in dividends and distributions declared by the Fund and in the Fund's net assets
on liquidation. The shares, when issued, are fully paid and non-assessable.
Shares have no pre-emptive, subscription or conversion rights and are freely
transferable.
Richard A. Eisner & Company, LLP, 575 Madison Avenue, New
York, New York 10022 is the independent certified public accountant for the Fund
and performs auditing services for the Fund.
B-14
<PAGE>
Schroder & Co. Inc. (the "Custodian"), a Delaware Corporation
which is a member corporation of the New York Stock Exchange, Inc., and the
corporation through which the Investment Advisor clears its securities
transactions, acts as the custodian for all securities of the Fund. The
Custodian's principal office is presently located at 787 Seventh Avenue, New
York, New York 10019. The Fund has a bank checking account with Chase Manhattan
Bank.
Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New
York, New York 10022 serves as counsel to the Fund.
The Fund acts as its own transfer agent and registrar and
dividend agent.
FINANCIAL STATEMENTS
The audited financial statements for the Fund and the notes
thereto as of December 31, 1998 are incorporated herein by reference to the
Fund's Annual Report to Shareholders dated January 13, 1999. The December 31,
1998 financial statements are incorporated herein in reliance upon the report of
Richard A. Eisner & Company, LLP, independent accountants, given on the
authority of such firm as experts in auditing and accounting. Additional copies
of the Annual Report may be obtained free of charge by telephoning the Fund at
the telephone number appearing on the front page of this SAI.
B-15
<PAGE>
PART C
OTHER INFORMATION
- -----------------
Item 23.Exhibits.
(a) Charter
(i) Amendment dated December 11, 1987, incorporated by reference herein
from Post-Effective Amendment No. 29 to its Registration Statement on Form
N-1A dated May 1, 1988 (the "1988 Registration Statement").
(ii) Charter, as amended, incorporated by reference from Post-Effective
Amendment No. 21 dated March 31, 1980 (SEC Reg. No. 2-34277) (the "1980
Registration Statement").
(iii) Certificate of Trust, filed herewith.
(iv) Form of Trust Instrument, filed herewith.
(b) By-laws
i) Restated and amended, effective as of February 24, 1988, incorporated by
reference herein from 1988 Registration Statement.
(ii) By-laws effective prior to February 24, 1988, incorporated by
reference herein from the 1980 Registration Statement.
(iii) Form of Trust Bylaws, filed herewith.
(c) Not applicable.
(d) Investment Advisory Contracts.
(i) Incorporated by reference from the 1980 Registration Statement.
(ii) Form of new Investment Advisory Agreement, filed herewith.
(e) Distribution Agreements.
(i) Incorporated by reference from the 1980 Registration Statement.
(ii) Form of new Distribution Agreement, filed herewith.
(f) Not applicable.
C-1
<PAGE>
(g) Custodian Agreements.
Incorporated by reference from the 1980 Registration Statement.
(h) Not applicable.
(i) Not applicable.
(j) Consents
(i) Consent of Counsel, filed herewith.
(ii) Consent of Independent Public Accountants, filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
(n) Financial Data Schedule, filed herewith.
(o) Not applicable.
Item 24. Persons Controlled by or Under Common Control with Registrant.
There are no persons controlled by or under common control with the Registrant.
Item 25. Indemnification.
(i) Indemnification in Articles of Incorporation.
Article VI of the Fund's By-laws, as amended, which is contained in the
1988 Registration Statement as a part of Exhibit 2 thereof and is hereby
incorporated by reference herein, generally provides that the Fund shall
indemnify the directors and officers of the Fund and its affiliated companies to
the fullest extent permitted by Section 145 of the General Corporation Law of
the state of Delaware as limited by the provisions of the Investment Company Act
of 1940, as amended.
In general, Section 145 permits a Delaware corporation to indemnify its
directors and officers and those of affiliated companies against liability and
expenses incurred in connection with actions, suits and proceedings against such
persons in their capacity as directors and officers, if such persons acted in
good faith and in a manner which such
C-2
<PAGE>
persons reasonably believed to be in the best interest of the corporation or its
affiliated entities and, with respect to a criminal action, had no reasonable
cause to believe their conduct was unlawful. A Delaware corporation has the
power to indemnify an officer or director in a shareholder derivative action
only if, in addition to meeting the above standards of conduct, such person has
not been judged by a court to be liable for negligence or misconduct in the
performance of his duty to the corporation or, if he has been so judged, the
court has specifically approved such indemnification.
Section 145 further provides for mandatory indemnification against expenses
actually and reasonably incurred by a director or officer in an action, suit or
proceeding in which such director or officer has been successful on the merits
or otherwise.
Section 17(h) of the Investment Company Act of 1940 (the "Investment Company
Act") further limits such indemnification by prohibiting the purported
protection of directors against liability to which they may otherwise be subject
by reason of gross negligence or the reckless disregard of the duties involved
in the conduct of their office.
Indemnification provisions of the present By-laws now state that an officer or
director who seeks indemnification for other than "disabling conduct" as defined
in the Investment Company Act of 1940, as amended, shall be indemnified fully.
"Disabling conduct" will be found to exist where an officer's or directors
liability arises by reason of willful malfeasance, bad faith, gross negligence
or reckless disregard of duties. Expenses may be advanced to an officer or
director upon receipt from such individual of an undertaking to repay such
advanced amounts if it is ultimately determined that he is not entitled to be
indemnified, provided that at least one of the following conditions to such
advances shall have been met: (i) the person to be indemnified provides security
for the undertaking, (ii) the Corporation is insured against losses arising out
of the undertaking, or (iii) a majority of a quorum of "disinterested" directors
or independent legal counsel determine that there is reason to believe the
person to be indemnified will ultimately be found to be entitled to
indemnification.
In addition, Section 102(b)(7) of the General Corporation Law permits the
adoption in the Certificate of Incorporation of a Delaware corporation of a
provision limiting or eliminating the potential monetary liability of directors
to the corporation or its stockholders by reason of their conduct as directors.
The provision would not permit any limitation on or the elimination of the
liability of a director for disloyalty to the corporation or its stockholders,
failing to act in good faith, engaging in intentional misconduct or a knowing
violation of law, obtaining an improper personal benefit or paying a dividend or
approving a stock repurchase that was illegal under the General Corporation Law
(Section 174). Accordingly, the provisions limiting or eliminating the potential
monetary liability of directors permitted by Section 102(b)(7) apply only to the
"duty of care" of directors - unintentional errors in their deliberations or
judgments and not to any form of "bad faith" conduct.
At the April 22, 1987 Annual Meeting the holders of a majority of the
outstanding shares of the Company's Common Stock approved an amendment to the
Certificate of incorporation of the Company eliminating the personal monetary
liability of directors as permitted by Section 102(b)(7) of the General
Corporation Law of the State of Delaware and by the Investment Company Act. A
stockholder is able to prosecute an action against a director for monetary
C-3
<PAGE>
damages only if he can show a breach of the duty of loyalty, a failure to act in
good faith, intentional misconduct, a knowing violation of law, an improper
personal benefit, grossly negligent conduct, reckless disregard of the duties
involved in the conduct of his office, or an illegal dividend or stock
repurchase, as referred to in the amendment, and not "negligence" in satisfying
his duty of care. Directors remain potentially liable for monetary damages for
suits by parties other than the Fund and its shareholders, such as governmental
and regulatory agencies. The amendment does not limit or eliminate the right of
the Company or any stockholder to seek an injunction or any other non-monetary
relief in the event of a breach of a director's duty of care. The amendment does
not apply to any act or omission occurring prior to its effective date. In
addition, the amendment applies only to claims against a director arising out of
his role as a director and not, if he is also an officer, his role as an officer
or in any other capacity or to his responsibilities under any other law, such as
the federal securities laws.
As of the date of this Statement of Additional Information, no judicial
interpretations of such an amendment to a certificate of a company that is a
registered investment company under the Investment Company Act have been
reported. If Delaware courts, or the Delaware legislature, should narrow or
expand coverage of the relevant portions of Delaware law, the potential
liability of directors for their actions likewise would be narrowed or expanded
without further shareholder action.
In addition, it is the view of the staff of the Securities and Exchange
Commission that, to the extent that provisions of Delaware corporate law, the
Certificate of Incorporation or the Bylaws of the Fund are inconsistent with
requirements imposed by the Investment Company Act, including Section 17(h)
thereof, the provisions of the Investment Company Act are preemptive.
Consequently, as a result of the compliance of the language of the amendment to
the Certificate of Incorporation with Section 17(h) of the Investment Company
Act, the public policies of the Investment Company Act in respect thereof, and
the staff of the Securities and Exchange Commission's position on Federal
preemption of State law, it is unlikely that a court would relieve a director of
an Investment Company Act-determined standard of care in reliance upon either
Delaware law or the proposed amendment.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the Fund
pursuant to the foregoing provisions, or otherwise, the Fund has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses incurred or
paid by a director, officer or controlling person of the Fund in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Fund will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
C-4
<PAGE>
(ii) Indemnification in Form of Trust Instrument for Delaware business
trust.
Section 10.02 Indemnification
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of
his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the word "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal
or other, including appeals), actual or threatened while in office
or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable tot he Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office, (A) by the court
or other body approving the settlement; (B) by at least a majority
of those Trustees who are neither interested persons of the Trust
nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (C) by
written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any covered Persona and shall inure to the
benefit of the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which Trust
personnel, other than Covered Persons, and other persons may be entitled by
contact or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection (a) of this Section
C-5
<PAGE>
10.02 may be paid by the Trust or Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered person that such amount will be paid over by him to the Trust or Series
if it is ultimately determined that he is not entitled to indemnification under
this Section 10.02; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Trustees who are neither interested persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Covered Person will be found entitled to indemnification under this Section
10.02.
Item 26. Business and Other Connections of Investment Adviser.
The names and principal occupations of the officers and directors of
the Investment Advisor are:
<TABLE>
<CAPTION>
Name and Title Principal Occupation
-------------- --------------------
<S> <C>
Hirschel B. Abelson President of Stralem & Company
Director and President Incorporated
Philippe E. Baumann Executive Vice President of
Director and Executive Vice President Stralem & Company Incorporated
M. Joel Unger Vice President of Stralem & Company
Director and Vice President Incorporated
Irene Bergman Assistant Vice President of Stralem &
Assistant Vice President Company Incorporated
Philippe Labaune Assistant Vice President and Assistant
Assistant Vice President Secretary of Stralem & Company
Incorporated
</TABLE>
Except for Mr. Unger, the address of each of the foregoing is 405 Park
Avenue, New York, NY 10022. Mr. Unger's address is 1650 Yates Street, Denver, CO
90203
Item 27. Principal Underwriters.
(a) Stralem & Company Incorporated, the only underwriter
of the Fund, does not act as a principal underwriter, depositor or
investment advisor to any other investment company.
(b) Please see the table furnished in response to Item 26
above. In addition, Mr. Philippe E. Baumann, the President and a
director of the Fund, is the Executive Vice-President and a director
of Stralem & Company Incorporated.
C-6
<PAGE>
Hirschel Abelson, the Secretary and Treasurer of the Fund is also the
President of Stralem & Company Incorporated. Mr. Philippe Labaune,
Vice-President of the Fund, is also an Assistant Vice-President and
Assistant Secretary of Stralem & Company Incorporated.
(c) Inapplicable.
Item 28. Location of Accounts and Records.
All accounts and records are in the physical possession of the Fund
at 405 Park Avenue, New York, New York 10022.
Item 29. Management Services.
Inapplicable.
Item 30. Undertakings.
The Fund will provide each person to whom the Prospectus dated
______, 1999 is delivered with a copy of the Fund's most recent annual report to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 26th
day of February, 1999.
STRALEM FUND, INC.
By: /s/ Philippe E. Baumann
-------------------------------
Philippe E. Baumann, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Dates
---------- ----- -----
<S> <C> <C>
Director and President February 26, 1999
/s/Philippe E. Baumann (Principal Executive Officer)
- ---------------------------
(Philippe E. Baumann)
Director February 26, 1999
/s/Kenneth D. Pearlman
- ---------------------------
(Kenneth D. Pearlman)
Director February 26, 1999
/s/Jean Paul Ruff
- ---------------------------
(Jean Paul Ruff)
Director February 26, 1999
/s/Michael Rubin
- ---------------------------
(Michael Rubin)
Secretary and Treasurer February 26, 1999
/s/Hirschel B. Abelson (Principal Financial and
- --------------------------- Accounting Officer)
(Hirschel B. Abelson)
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
Ex-99.B1(a) Certificate of Trust dated January 27, 1999
Ex-99.B1(b) Form of Trust Instrument dated January 27, 1999
Ex-99.B2 Form of Trust Bylaws dated 27, 1999
Ex-99.B5 Form of new Investment Advisory Agreement
Ex-99.B6 Form of new Distribution Agreement
Ex-99.B10 Consent of Kramer Levin Naftalis & Frankel LLP
Ex-99.B11 Consent of Richard A. Eisner & Company, LLP
Ex-99.B27 Financial Data Schedule
CERTIFICATE OF TRUST
This Certificate of Trust of Stralem Fund (the "Trust"), dated January
27, 1999, is being duly executed and filed by Philippe E. Baumann and Hirschel
B. Abelson, as trustees of the Trust, to form a business trust under the laws of
the State of Delaware.
1. Name. The name of the business trust formed hereby is Stralem Fund.
2. Registered Office. The address of the Trust's registered office in
the State of Delaware is 1201 North Market Street, Wilmington, New Castle
County, Delaware.
3. Registered Agent. The name of the Trust's registered agent at the
above listed address is Delaware Corporation Organizers, Inc.
4. Effective Date. This Certificate of Trust shall be effective upon
the date and time of filing.
5. Series Trust. Notice is hereby given that pursuant to Section 3804
of the Delaware Business Trust Act, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of such
series only and not against the assets of the Trust generally. The Trust is, or
will become prior to or within 180 days following the first issuance
<PAGE>
of shares of beneficial interests therein, a registered investment company under
the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
/s/ Philippe E. Baumann
-----------------------
Philippe E. Baumann
as Trustee and not individually
/s/ Hirschel B. Abelson
-----------------------
Hirschel B. Abelson
as Trustee and not individually
STRALEM FUND
FORM OF
TRUST INSTRUMENT
DATED JANUARY 27, 1999
<PAGE>
STRALEM FUND
TABLE OF CONTENTS
Page
----
ARTICLE I - NAME AND DEFINITIONS...........................................1
Section 1.01 Name.......................................................1
Section 1.02 Definitions................................................1
ARTICLE II - BENEFICIAL INTEREST...........................................2
Section 2.01 Shares Of Beneficial Interest..............................2
Section 2.02 Issuance of Shares.........................................2
Section 2.03 Register of Shares and Share Certificates..................2
Section 2.04 Transfer of Shares.........................................3
Section 2.05 Treasury Shares............................................3
Section 2.06 Establishment of Series....................................3
Section 2.07 Investment in the Trust....................................4
Section 2.08 Assets and Liabilities of Series...........................4
Section 2.09 No Preemptive Rights.......................................5
Section 2.10 No Personal Liability of Shareholder.......................5
ARTICLE III - THE TRUSTEES.................................................6
Section 3.01 Management of the Trust...................................6
Section 3.02 Initial Trustees..........................................6
Section 3.03 Term of Office............................................6
Section 3.04 Vacancies and Appointments................................6
Section 3.05 Temporary Absence.........................................7
Section 3.06 Number of Trustees........................................7
Section 3.07 Effect of Ending of a Trustee's Service...................7
Section 3.08 Ownership of Assets of the Trust..........................7
ARTICLE IV - POWERS OF THE TRUSTEES........................................8
Section 4.01 Powers....................................................8
Section 4.02 Issuance and Repurchase of Shares........................11
Section 4.03 Trustees and Officers as Shareholders....................11
Section 4.04 Action by the Trustees...................................11
Section 4.05 Chairman of the Board of Trustees........................11
Section 4.06 Principal Transactions...................................11
ARTICLE V - EXPENSES OF THE TRUST.........................................12
ARTICLE VI - INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT..........................................12
Section 6.01 Investment Adviser.......................................12
Section 6.02 Principal Underwriter....................................13
<PAGE>
Section 6.03 Administration...........................................13
Section 6.04 Transfer Agent...........................................13
Section 6.05 Parties to Contract......................................13
Section 6.06 Provisions and Amendments................................14
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS....................14
Section 7.01 Voting Powers............................................14
Section 7.02 Meetings.................................................15
Section 7.03 Quorum and Required Vote.................................15
ARTICLE VIII - CUSTODIAN..................................................16
Section 8.01 Appointment and Duties...................................16
Section 8.02 Central Certificate System...............................16
ARTICLE IX - DISTRIBUTIONS AND REDEMPTIONS................................17
Section 9.01 Distributions............................................17
Section 9.02 Redemptions..............................................17
Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets.........................................18
Section 9.04 Suspension of the Right of Redemption....................18
Section 9.05 Required Redemption of Shares............................19
ARTICLE X - LIMITATION OF LIABILITY AND INDEMNIFICATION...................19
Section 10.01 Limitation of Liability.................................19
Section 10.02 Indemnification.........................................19
Section 10.03 Shareholders............................................20
ARTICLE XI - MISCELLANEOUS................................................21
Section 11.01 Trust Not a Partnership.................................21
Section 11.02 Trustee's Good Faith Action, Expert Advice,
No Bond or Surety.......................................21
Section 11.03 Establishment of Record Dates...........................21
Section 11.04 Dissolution and Termination of Trust....................22
Section 11.05 Reorganization and Master/Feeder........................22
Section 11.06 Filing of Copies, References, Headings..................23
Section 11.07 Applicable Law..........................................24
Section 11.08 Derivative Actions......................................24
Section 11.09 Amendments..............................................25
Section 11.10 Fiscal Year.............................................25
Section 11.11 Name Reservation........................................25
Section 11.12 Provisions in Conflict With Law.........................26
<PAGE>
STRALEM FUND
JANUARY 27, 1999
TRUST INSTRUMENT of Stralem Fund, a Delaware business trust (the
"Trust").
ARTICLE I
NAME AND DEFINITIONS
Section 1.01 Name. The name of the trust created under this instrument
hereby is "Stralem Fund".
Section 1.02 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time. Whenever reference is made hereunder to the 1940 Act, such
references shall be interpreted as including any applicable order or orders of
the Commission or any rules or regulations adopted by the Commission thereunder
or interpretive releases of the Commission staff;
(b) "Bylaws" means the Bylaws of the Trust as adopted by the Trustees,
as amended from time to time;
(c) "Commission" has the meaning given it in the 1940 Act. In addition,
"Affiliated Person," "Assignment," "Interested Person" and "Principal
Underwriter" shall have the respective meanings given them in the 1940 Act.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" under the 1940 Act;
(d) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time;
(e) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(f) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may
<PAGE>
include fractions of Shares as well as whole Shares;
(j) The "Trust" means Stralem Fund, a Delaware business trust, and
reference to the Trust when applicable to one or more Series of the Trust, shall
refer to any such Series;
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument so long as he or they shall continue in office in
accordance with the terms hereof and all other persons who may from time to time
be duly qualified and serving as Trustees in accordance with the provisions of
Article III hereof, and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their respective capacity as Trustees
hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
ARTICLE II
BENEFICIAL INTEREST
Section 2.01 Shares Of Beneficial Interest. The beneficial interest in
the Trust shall be divided into such Shares of one or more separate and distinct
Series or classes of a Series as set forth in Section 2.06 or as the Trustees
shall otherwise from time to time create and establish as provided in Section
2.06. The number of Shares of each Series and class thereof authorized hereunder
is unlimited. Each Share shall have a par value of $0.001. All Shares issued
hereunder, including without limitation, Shares issued in connection with a
dividend paid in Shares or a split of Shares, shall be fully paid and
non-assessable.
Section 2.02 Issuance of Shares. The Trustees in their discretion may,
from time to time, without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1000th of a Share or integral
multiples thereof. The Trustees or any person the Trustees may authorize for the
purpose may, in their discretion, reject any application for the issuance of
shares.
Section 2.03 Register of Shares and Share Certificates. A register
shall be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. No
share certificates shall be issued by the Trust except as the Trustees or their
delegates may otherwise authorize, and the persons indicated as shareholders in
such register shall be entitled to receive
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dividends or other distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as herein or in
the Bylaws provided, until he has given his address to the transfer agent or
such officer or other agent of the Trustees as shall keep the said register for
entry thereon.
Section 2.04 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.05 Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.06 Establishment of Series. Subject to the provisions of this
Section 2.06, the Trust shall consist of the Series indicated on Schedule A
attached hereto, as such Schedule may be amended from time to time. The
preferences, voting powers, rights and privileges of the Series and any classes
thereof existing as of the date hereof shall be as set forth in the Trust's
registration statement or statements as filed with the Commission, as from time
to time in effect. Distinct records shall be maintained by the Trust for each
Series and the assets associated with each Series shall be held and accounted
for separately from the assets of the Trust or any other Series. The Trustees
shall have full power and authority, in their sole discretion and without
obtaining any prior authorization or vote of the Shareholders of any Series, to
establish and designate and to change in any manner any Series or any classes of
initial or additional Series and to fix such preferences, voting powers, rights
and privileges of such Series or classes thereof as the Trustees may from time
to time determine, to divide or combine the Shares or any Series or classes
thereof into a greater or lesser number, to classify or reclassify any issued
Shares or any Series or classes thereof into one or more Series or classes of
Shares, and to take such other action with respect to the Shares as the Trustees
may deem desirable. The establishment and designation of any Series thereof
(other than those existing as of the date hereof) shall be effective upon the
adoption of a resolution by a majority of the Trustees setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series (or classes), whether directly in such resolution or by
reference to, or approval of, another document that sets forth such relative
rights and preferences of such Series (or class) including, without limitation,
any registration statement of the Trust, or as otherwise provided in such
resolution. Upon the establishment of any such Series (or class), Schedule A
shall be amended to reflect the addition of such Series (or class) thereto;
provided that amendment of Schedule A shall not be a condition precedent to the
establishment of any Series (or class) in accordance with this Trust Instrument.
A Series may issue any number of Shares, but need not issue Shares. At any time
that there are no Shares outstanding of any particular Series (or class)
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previously established and designated, the Trustees may by a majority vote
abolish that Series (or class) and the establishment and designation thereof,
and, in connection with such abolishment, Schedule A shall be amended to reflect
the removal of such Series (or class) therefrom; provided that amendment of
Schedule A shall not be a condition precedent to the abolishment of any Series
(or class) in accordance with this Trust Instrument.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his proportionate share of all distributions made
with respect to such Series, based upon the number of full and fractional Shares
of the Series held. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust.
Section 2.07 Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX
Section 9.03 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full and fractional Shares at the net asset
value per Share next determined after the investment is received or accepted as
may be determined by the Trustees; provided, however, that the Trustees may, in
their sole discretion, (a) fix minimum amounts for initial and subsequent
investments or (b) impose a sales charge upon investments in such manner and at
such time determined by the Trustees.
Section 2.08 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, and shall be
subject only to the rights of creditors of that Series. In addition, any assets,
income, earnings, profits or funds, or payments and proceeds with respect
thereto, which are not readily identifiable as belonging to any particular
Series shall be allocated by the Trustees between and among one or more of the
Series in such manner as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes, and such assets, income, earnings,
profits or funds, or payments and proceeds with respect thereto shall be assets
belonging to that Series. The assets belonging to a particular Series shall be
so recorded upon the books of the Trust, and shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Series, and separate and
distinct records shall be maintained for each Series. The
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<PAGE>
assets belonging to each particular Series shall be charged with the liabilities
of that Series and all expenses, costs, charges and reserves attributable to
that Series. Any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees between or among any one
or more of the Series in such manner as the Trustees in their sole discretion
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series for all purposes. Without limitation of the
foregoing provisions of this Section 2.08, but subject to the right of the
Trustees in their discretion to allocate general liabilities, expenses, costs,
changes or reserves as herein provided, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Series shall be enforceable against the assets of such Series only,
and not against the assets of the Trust generally or of any other Series. Notice
of this contractual limitation on inter-Series liabilities may, in the Trustee's
sole discretion, be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
inter-Series liabilities (and the statutory effect under Section 3804 of setting
forth such notice in the certificate of trust) shall become applicable to the
Trust and each Series. Any person extending credit to, contracting with or
having any claim against any Series may look only to the assets of that Series
to satisfy or enforce any debt, with respect to that Series. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
Section 2.09 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 No Personal Liability of Shareholder. No Shareholder shall
be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
by or on behalf of any Series. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the payment of any
sum of money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise.
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ARTICLE III
THE TRUSTEES
Section 3.01 Management of the Trust. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Any Shareholder meeting held for such purpose shall be held on
a date fixed by the Trustees. In the event that less than a majority of the
Trustees holding office have been elected by Shareholders, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees in
accordance with the provisions of the 1940 Act.
Section 3.02 Initial Trustees. The Initial Trustees shall be Philippe
E. Baumann and Hirshel B. Abelson.
Section 3.03 Term of Office. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, becomes physically or mentally incapacitated by reason
of illness or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares of the Trust.
Section 3.04 Vacancies and Appointments. In case of a Trustee's
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of illness, disease
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or otherwise, or if a Trustee is otherwise unable to serve, or if there is an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of a vacancy, the
remaining Trustees shall fill such vacancy by appointing such other person as
they in their discretion see fit, to the extent consistent with the limitations
provided under the 1940 Act. Such appointment shall be evidenced by a written
instrument signed by a majority of the Trustees in office or by resolution of
the Trustees, duly adopted, which shall be recorded in the minutes of a meeting
of the Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any person
appointed as a Trustee pursuant to this Section 3.04 shall have accepted this
Trust, the trust estate shall vest in the new Trustee or Trustees, together with
the continuing Trustees, without any further act or conveyance, and such person
shall be deemed a Trustee.
Section 3.05 Temporary Absence. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall fewer than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.06 Number of Trustees. The number of Trustees shall be at
least two (2), and thereafter shall be such number as shall be fixed from time
to time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than twelve (12).
Section 3.07 Effect of Ending of a Trustee's Service. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
Section 3.08 Ownership of Assets of the Trust. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of, the Trust or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series based upon the number of Shares owned. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument.
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ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.01 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property (including
investment, notwithstanding any other provision hereof, of all of the assets of
any Series in a single open-end investment company, including investment by
means of transfer of such assets in exchange for an interest or interests in
such investment company), and to hold cash or other property of the Trust
uninvested, without in any event being bound or limited by any present or future
law or custom in regard to investments by trustees, and to sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or all of the
assets of the Trust:
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
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(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
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(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware;
(x) To invest part or all of the Trust Property (or part or all of the
assets of any Series), or to dispose of part or all of the Trust Property (or
part or all of the assets of any Series) and invest the proceeds of such
disposition, in securities issued by one or more other investment companies
registered under the 1940 Act (including investment by means of transfer of part
or all of the Trust Property in exchange for an interest or interests in such
one or more investment companies) all without any requirement of approval by
Shareholders unless required by the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the State of Delaware or
of any other state) which is classified as a partnership for federal income tax
purposes; and
(y) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see the application
of any payments made or property transferred to the Trustees or upon their
order.
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Section 4.02 Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
Section 4.03 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
Bylaws.
Section 4.04 Action by the Trustees. In any action taken by the
Trustees hereunder, unless otherwise specified, the Trustees shall act by
majority vote at a meeting (including a telephone meeting) duly called, provided
a quorum of Trustees participate, or by written consent of a majority of the
Trustees without a meeting, unless the 1940 Act requires that a particular
action be taken only at a meeting at which the Trustees are present in person.
At any meeting of the Trustees, a majority of the Trustees shall constitute a
quorum. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of the
time, date and place of all meetings of the Trustees shall be given by the
person calling the meeting to each Trustee by telephone, facsimile or other
electronic mechanism sent to his home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to his home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect to
the meeting. Any meeting conducted by telephone shall be deemed to take place at
the principal office of the Trust, as determined by the Bylaws or by the
Trustees. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any one or more of their number their authority to approve
particular matters or take particular actions on behalf of the Trust. Written
consents or waivers of the Trustees may be executed in one or more counterparts.
Execution of a written consent or waiver and delivery thereof to the Trust may
be accomplished by facsimile or other similar electronic mechanism.
Section 4.05 Chairman of the Board of Trustees. The Trustees shall
appoint one of their number to be Chairman of the Board of Trustees. The
Chairman shall preside at all meetings of the Trustees, shall be responsible for
the execution of policies established by the Trustees and the administration of
the Trust, and may be (but is not required to be) the chief executive, financial
and/or accounting officer of the Trust.
Section 4.06 Principal Transactions. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
interested person of such person; and the Trust may employ any such person, or
firm or company in which such person is an interested
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person, as broker, legal counsel, registrar, investment adviser, administrator,
distributor, transfer agent, dividend disbursing agent, custodian or in any
other capacity upon customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of Shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodians,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to existing
Shareholders; expenses of meetings of Shareholders and proxy solicitations
therefor; costs of maintaining books and accounts; costs of reproduction,
stationery and supplies; fees and expenses of the Trustees; compensation of the
Trust's officers and employees and costs of other personnel performing services
for the Trust; costs of Trustee meetings; Commission registration fees and
related expenses; state or foreign securities laws registration fees and related
expenses and for such non-recurring items as may arise, including litigation to
which the Trust (or a Trustee acting as such) is a party, and for all losses and
liabilities by them incurred in administering the Trust, and for the payment of
such expenses, disbursements, losses and liabilities the Trustees shall have a
lien on the assets belonging to the appropriate Series, or in the case of an
expense allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Shareholders thereto. This section shall
not preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser.
(a) The Trustees may in their discretion, from time to time, enter into
an investment advisory contract or contracts with respect to the Trust or any
Series whereby the other party or parties to such contract or contracts shall
undertake to furnish the Trustees with such investment advisory, statistical and
research facilities and services and such other facilities and services, if any,
all upon such terms and conditions (including any Shareholder vote) that may be
required under the 1940 Act, as may be prescribed in the Bylaws, or as the
Trustees may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Notwithstanding any other provision of this Trust Instrument, the Trustees may
authorize any investment adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities, other
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investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by all of the
Trustees.
(b) The Trustees may authorize the investment adviser to employ, from
time to time, one or more sub-advisers to perform such of the acts and services
of the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and subadviser (such terms and conditions
not to be inconsistent with the provisions of this Trust Instrument or of the
Bylaws). Any reference in this Trust Instrument to the investment adviser shall
be deemed to include such sub-advisers, unless the context otherwise requires;
provided that no Shareholder approval shall be required with respect to any
sub-adviser unless required under the 1940 Act or other law, contract or order
applicable to the Trust.
Section 6.02 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Section 6.03 Administration. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Section 6.04 Transfer Agent. The Trustees may in their discretion from
time to time enter into one or more transfer agency and shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
Section 6.05 Parties to Contract. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such
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relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VI or Article VIII hereof or of the Bylaws.
The same person (including a corporation, firm, partnership, trust, or
association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
Section 6.06 Provisions and Amendments. Any contract entered into
pursuant to Section 6.01 or 6.02 of this Article VI shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 or 6.02 of this Article VI shall be
effective unless assented to in a manner consistent with the requirements of
said Section 15, as modified by any applicable rule, regulation or order of the
Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers.
(a) The Shareholders shall have power to vote only (a) for the election
of Trustees to the extent provided in Article III, Section 3.01 hereof, (b) for
the removal of Trustees to the extent provided in Article III, Section 3.03(d)
hereof, (c) with respect to any investment advisory contract to the extent
provided in Article VI, Section 6.01 hereof, (d) with respect to an amendment of
this Trust Instrument, to the extent provided in Article XI, Section 11.08, and
(e) with respect to such additional matters relating to the Trust as may be
required by law, by this Trust Instrument, or any registration of the Trust with
the Commission or any State, or as the Trustees may consider desirable.
(b) Notwithstanding paragraph (a) of this Section 7.01 or any other
provision of this Trust Instrument (including the Bylaws) which would by its
terms provide for or require a vote of Shareholders, the Trustees may take
action without a Shareholder vote if (i) the Trustees shall have obtained an
opinion of counsel that a vote or approval of such action by Shareholders is not
required under (A) the 1940 Act or any other applicable laws, or (B) any
registrations, undertakings or agreements of the Trust known to such counsel,
and if the Trustees determine that the taking of such action without a
Shareholder vote would be consistent with the best interests of the Shareholders
(considered as a group).
(c) On any matter submitted to a vote of the Shareholders, all Shares
shall be voted separately by individual Series, and whenever the Trustees
determine that the matter affects only certain Series, may be submitted for a
vote by only such Series, except (i) when required by the 1940 Act, Shares shall
be voted in the aggregate and not by individual Series; and (ii) when the
Trustees have determined that the matter affects the interests of more than one
Series and that voting by shareholders of all Series would be consistent with
the 1940 Act, then the Shareholders of all such
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Series shall be entitled to vote thereon (either by individual Series or by
Shares voted in the aggregate, as the Trustees in their discretion may
determine). The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case (or if required
under the 1940 Act) such matter shall be voted on by such class or classes. As
determined by the Trustees without the vote or consent of Shareholders (except
as required by the 1940 Act), on any matter submitted to a vote of Shareholders,
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of Net Asset Value (number of
Shares owned times Net Asset Value per share of such Series or class thereof, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. Without limiting the power of the Trustees in any
way to designate otherwise in accordance with the preceding sentence, the
Trustees hereby establish that each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative voting
in the election of Trustees. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The Bylaws
may provide that proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything else
herein or in the Bylaws, in the event a proposal by anyone other than the
officers or Trustees of the Trust is submitted to a vote of the Shareholders, or
in the event of any proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees of the Trust, Shares may
be voted only in person or by written proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Trust Instrument or any of the Bylaws of the
Trust to be taken by Shareholders.
Section 7.02 Meetings. Meetings may be held within or without the State
of Delaware. Special meetings of the Shareholders of any Series may be called by
the Trustees and shall be called by the Trustees upon the written request of
Shareholders owning at least one tenth of the Outstanding Shares of the Trust
entitled to vote. Whenever ten or more Shareholders meeting the qualifications
set forth in Section 16(c) of the 1940 Act, as the same may be amended from time
to time, seek the opportunity of furnishing materials to the other Shareholders
with a view to obtaining signatures on such a request for a meeting, the
Trustees shall comply with the provisions of said Section 16(c) with respect to
providing such Shareholders access to the list of the Shareholders of record of
the Trust or the mailing of such materials to such Shareholders of record,
subject to any rights provided to the Trust or any Trustees provided by said
Section 16(c). Notice shall be sent, by First Class Mail or such other means
determined by the Trustees, at least 10 days prior to any such meeting.
Notwithstanding anything to the contrary in this Section 7.02, the Trustees
shall not be required to call a special meeting of the Shareholders of any
Series or to provide Shareholders seeking the opportunity of furnishing the
materials to other Shareholders with a view to obtaining signatures on a request
for a meeting except to the extent required under the 1940 Act.
Section 7.03 Quorum and Required Vote. One-third of Shares outstanding
and entitled to vote in person or by proxy as of the record date for a
Shareholders' meeting shall be a quorum for the transaction of business at such
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that
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holders of a class shall vote as a class), then one-third of the aggregate
number of Shares of that Series (or that class) entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that Series
(or that class). Any meeting of Shareholders may be adjourned from time to time
by a majority of the votes properly cast upon the question of adjourning a
meeting to another date and time, whether or not a quorum is present. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent, to the extent not
inconsistent with the 1940 Act, and any such actions taken by a Series (or
class) may be consented to unanimously in writing by Shareholders of that Series
(or class).
ARTICLE VIII
CUSTODIAN
Section 8.01 Appointment and Duties. The Trustees shall employ a bank,
a company that is a member of a national securities exchange, or a trust
company, that in each case shall have capital, surplus and undivided profits of
at least twenty million dollars ($20,000,000) and that is a member of the
Depository Trust Company (or such other person or entity as may be permitted to
act as custodian of the Trust's assets under the 1940 Act) as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Trust: (a) to
hold the securities owned by the Trust and deliver the same upon written order
or oral order confirmed in writing; (b) to receive and receipt for any moneys
due to the Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; and (c) to disburse such funds upon orders or
vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and that is a
member of the Depository Trust Company or such other person or entity as may be
permitted by the Commission or is otherwise able to act as custodian of the
Trust's assets in accordance with the 1940 Act.
Section 8.02 Central Certificate System. Subject to the 1940 Act and
such other rules, regulations and orders as the Commission may adopt, the
Trustees may direct the custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange Act of
1934, as amended, or such other person
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as may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series and/or class of a Series. The
amount of such dividends or distributions and the payment of them and whether
they are in cash or any other Trust Property shall be wholly in the discretion
of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend to the
Shareholders of a particular Series, or class thereof, as of the record date of
that Series fixed as provided in Subsection 9.01(b) hereof.
Section 9.02 Redemptions. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof he may
deposit at the office of the transfer agent or other authorized agent of that
Series a written request or such other form of request as the Trustees may from
time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and, subject to Section 9.04 hereof, the
Shareholder so requesting shall be entitled to require the Series to purchase,
and the Series or the principal underwriter of the Series shall purchase his
said Shares, but only at the Net Asset Value thereof (as described in Section
9.03 of this Article IX). The Series shall make payment for any such Shares to
be redeemed, as aforesaid, in cash or property from the assets of that Series
and, subject to Section 9.04 hereof, payment for such Shares shall be made by
the Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is effective.
Upon redemption, shares shall become Treasury shares and may be re-issued from
time to time.
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Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. The Trustees may delegate
any of their powers and duties under this Section 9.03 with respect to valuation
of assets and liabilities. Such value shall be determined separately for each
Series and shall be determined on such days and at such times as the Trustees
may determine. Such determination shall be made with respect to securities for
which market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair value
as determined in good faith by the Trustees; provided, however, that the
Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective.
The Trustees shall not be required to adopt, but may at any time adopt,
discontinue or amend a practice of seeking to maintain the Net Asset Value per
Share of the Series at a constant amount. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the Trustees shall
have the power with respect to that Series (a) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, (b) to reduce the number of Outstanding Shares of such Series by
reducing the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents the amount
of such excess negative net income, (c) to cause to be recorded on the books of
such Series an asset account in the amount of such negative net income (provided
that the same shall thereupon become the property of such Series with respect to
such Series and shall not be paid to any Shareholder), which account may be
reduced by the amount of dividends declared thereafter upon the Outstanding
Shares of such Series on the day such negative net income is experienced, until
such asset account is reduced to zero; (d) to combine the methods described in
clauses (a) and (b) and (c) of this sentence; or (e) to take any other action
they deem appropriate, in order to cause (or in order to assist in causing) the
Net Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power not to declare a dividend out of net income
for the purpose of causing the Net Asset Value per Share to be increased.
In the event that any Series is divided into classes, the provisions of
this Section 9.03, to the extent applicable as determined in the discretion of
the Trustees and consistent with the 1940 Act and other applicable law, may be
equally applied to each such class.
Section 9.04 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
if permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his
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request for redemption or receive payment based on the Net Asset Value per Share
next determined after the termination of the suspension.
Section 9.05 Required Redemption of Shares. The Trustees may require
Shareholders to redeem Shares for any reason under terms set by the Trustees,
including, but not limited to, (i) the determination of the Trustees that direct
or indirect ownership of Shares of any Series has or may become concentrated in
such Shareholder to an extent that would disqualify any Series as a regulated
investment company under the Internal Revenue Code of 1986, as amended (or any
successor statute thereto), (ii) the failure of a Shareholder to supply a tax
identification number if required to do so, or to have the minimum investment
required (which may vary by Series), (iii) the failure of a Shareholder to pay
when due for the purchase of Shares issued to him or (iv) the Shares owned by
such Shareholder being below the minimum investment set by the Trustees, from
time to time, for investments in the Trust or in such Series or classes thereof,
as applicable.
The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the requirements of any taxing
authority or for the Trustees to make any determination contemplated by this
Section 9.05.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability. Neither a Trustee nor an officer
of the Trust, when acting in such capacity, shall be personally liable to any
person other than the Trust or the Shareholders for any act, omission or
obligation of the Trust, any Trustee or any officer of the Trust. Neither a
Trustee nor an officer of the Trust shall be liable for any act or omission or
any conduct whatsoever in his capacity as Trustee or as an officer of the Trust,
provided that nothing contained herein or in the Delaware Act shall protect any
Trustee or any officer of the Trust against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee or officer of the Trust
hereunder.
Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without
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limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither interested persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection (a) of this Section 10.02 may be paid by the Trust or Series from
time to time prior to final disposition thereof upon receipt of an undertaking
by or on behalf of such Covered Person that such amount will be paid over by him
to the Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however, that either (i)
such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
interested persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 10.02.
Section 10.03 Shareholders. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to
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the applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the affected
Series, shall, upon request by the Shareholder, assume the defense of any claim
made against the Shareholder for any act or obligation of the Series and satisfy
any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Not A Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Trust Instrument
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees or the officers of the Trust of their
powers and discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article X hereof and to Section 11.01 of this Article XI,
the Trustees and the officers of the Trust shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees and the officers of the Trust
may take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of Article X
hereof and Section 11.01 of this Article XI, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees and the officers of the Trust shall not be required to give
any bond as such, nor any surety if a bond is obtained.
Section 11.03 Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a period not exceeding ninety (90) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding ninety (90) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the
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case may be, notwithstanding any transfer of any Shares on the books of the
Trust after any such record date fixed as aforesaid.
Section 11.04 Dissolution and Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to any necessary Shareholder, Trustee,
and regulatory approvals:
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which trust, partnership,
association or corporation is an open-end management investment company
as defined in the 1940 Act, or is a series thereof, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of
beneficial interest, stock or other ownership interests of such trust,
partnership, association or corporation or of a series thereof;
(ii) enter into a plan of liquidation in order to dissolve and
liquidate any Series (or class) of the Trust, or the Trust; or
(iii) at any time sell and convert into money all of the
assets of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all liabilities by assumption or otherwise, the Trustees shall
distribute the remaining proceeds or assets (as the case may be) of each Series
(or class) ratably among the holders of Shares of the affected Series, based
upon the ratio that each Shareholder's Shares bears to the number of Shares of
such Series (or class) then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.04(b), the Trustees and the
Trust or any affected Series shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties with respect to the Trust or Series shall be canceled and discharged and
any such Series shall terminate.
Following completion of winding up of its business, the Trustees shall
cause a certificate of cancellation of the Trust's certificate of trust to be
filed in accordance with the Delaware Act, which certificate of cancellation may
be signed by any one Trustee. Upon filing of the certificate of cancellation for
the Trust, the Trust shall terminate.
Section 11.05 Reorganization and Master/Feeder.
(a) Notwithstanding anything else herein, the Trustees, in order to
change the form or
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jurisdiction of organization of the Trust, may (i) cause the Trust to merge or
consolidate with or into one or more trusts, partnerships (general or limited),
associations or corporations so long as the surviving or resulting entity is an
open-end management investment company under the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under that Act
and which is formed, organized or existing under the laws of a state,
commonwealth, possession or colony of the United States or (ii) cause the Trust
to incorporate under the laws of Delaware.
(b) The Trustees may, subject to a vote of a majority of the Trustees
and any shareholder vote required under the 1940 Act, if any, cause the Trust to
merge or consolidate with or into one or more trusts, partnerships (general or
limited), associations, limited liability companies or corporations formed,
organized or existing under the laws of a state, commonwealth, possession or
colony of the United States.
(c) Any agreement of merger or consolidation or certificate of merger
or consolidation may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be valid.
(d) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Trust Instrument, an agreement of merger or consolidation
approved by the Trustees in accordance with paragraph (a) or (b) of this Section
11.05 may effect any amendment to the Trust Instrument or effect the adoption of
a new trust instrument of the Trust if it is the surviving or resulting trust in
the merger or consolidation.
(e) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval (unless required by the 1940 Act), invest all or a portion
of the Trust Property of any Series, or dispose of all or a portion of the Trust
Property of any Series, and invest the proceeds of such disposition in interests
issued by one or more other investment companies registered under the 1940 Act.
Any such other investment company may (but need not) be a trust (formed under
the laws of the State of Delaware or any other state or jurisdiction) (or series
thereof) which is classified as a partnership for federal income tax purposes.
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by the 1940 Act, cause a Series that
is organized in the master/feeder fund structure to withdraw or redeem its Trust
Property from the master fund and cause such series to invest its Trust Property
directly in securities and other financial instruments or in another master
fund.
Section 11.06 Filing of Copies, References, Headings. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions such
as "herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any
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such supplemental Trust Instrument. All expressions like "his," "he" and "him,"
shall be deemed to include the feminine and neuter, as well as masculine,
genders. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 11.07 Applicable Law. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 11.08 Derivative Actions. In addition to the requirements set
forth in Section 3816 of the Delaware Act, a Shareholder may bring a derivative
action on behalf of the Trust only if the following conditions are met:
(a) The Shareholder or Shareholders must make a pre-suit demand upon
the Trustees to bring the subject action unless an effort to cause the Trustees
to bring such an action is not likely to succeed. For purposes of this Section
11.08(a), a demand on the Trustees shall only be deemed not likely to succeed
and therefore excused if a majority of the Board of Trustees, or a majority of
any committee established to consider the merits of such action, has a personal
financial interest in the transaction at issue, and a Trustee shall not be
deemed interested in a transaction or otherwise disqualified from ruling on the
merits of a Shareholder demand by virtue of the fact that such Trustee receives
remuneration for his service on the Board of Trustees of the Trust or on the
boards of one or more investment companies that are under common management with
or otherwise affiliated with the Trust.
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(b) Unless a demand is not required under paragraph (a) of this Section
11.08, Shareholders eligible to bring such derivative action under the Delaware
Act who hold at least 10% of the Outstanding Shares of the Trust, or 10% of the
Outstanding Shares of the Series or Class to which such action relates, shall
join in the request for the Trustees to commence such action; and
(c) Unless a demand is not required under paragraph (a) of this Section
11.08, the Trustees must be afforded a reasonable amount of time to consider
such Shareholder request and to investigate the basis of such claim. The
Trustees shall be entitled to retain counsel or other advisors in considering
the merits of the request and shall require an undertaking by the Shareholders
making such request to reimburse the Trust for the expense of any such advisors
in the event that the Trustees determine not to bring such action.
For purposes of this Section 11.08, the Board of Trustees may
designate a committee of one Trustee to consider a Shareholder demand if
necessary to create a committee with a majority of Trustees who do not have a
personal financial interest in the transaction at issue.
Section 11.09 Amendments. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission and (b) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding any other provision of this Trust Instrument, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
Section 11.10 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may change the fiscal year of the Trust.
Section 11.11 Name Reservation. The Trustees on behalf of the Trust
acknowledge Stralem & Company, Inc. ("Stralem") has licensed to the Trust the
non-exclusive right to use the name "Stralem Fund" as part of the name of the
Trust, and has reserved the right to grant the non-exclusive use of the name
"Stralem Fund" or any derivative thereof to any other party. In addition,
Stralem reserves the right to grant the non-exclusive use of the name "Stralem
Fund" to, and to withdraw such right from, any other business or other
enterprise. Stralem reserves the right to withdraw from the Trust the right to
use said name "Stralem Fund" and will withdraw such right if the Trust ceases to
employ, for any reason, Stralem, an affiliate or any successor as adviser of the
Trust.
Section 11.12 Provisions in Conflict With Law. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provision is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such
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determination shall not affect any of the remaining provisions of this Trust
Instrument or render invalid or improper any action taken or omitted prior to
such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any matter affect such provision in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of date first written above.
- -------------------------- --------------------------
Philippe E. Baumann, as Trustee Hirschel B. Abelson, as Trustee
and not individually and not individually
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Schedule A
Establishment of Series of the Trust and Classes thereof
Established January 27, 1999:
- -----------------------------
o Stralem Fund
STRALEM FUND
FORM OF
BYLAWS
JANUARY 27, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PRINCIPAL OFFICE............................................................1
ARTICLE II
OFFICERS AND THEIR ELECTION.................................................1
Section 2.01 Officers...................................................1
Section 2.02 Election of Officers......................................1
Section 2.03 Resignations...............................................1
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES..................................1
Section 3.01 Management of the Trust....................................1
Section 3.02 Executive And Other Committees.............................2
Section 3.03 Compensation...............................................2
Section 3.04 Chairman of the Board of Trustees..........................2
Section 3.05 President..................................................2
Section 3.06 Treasurer..................................................2
Section 3.07 Secretary..................................................2
Section 3.08 Vice President.............................................3
Section 3.09 Assistant Treasurer........................................3
Section 3.10 Assistant Secretary........................................3
Section 3.11 Subordinate Officers.......................................3
Section 3.12 Surety Bonds...............................................3
Section 3.13 Removal....................................................3
Section 3.14 Remuneration...............................................3
ARTICLE IV
SHAREHOLDERS' MEETINGS......................................................4
Section 4.01 Special Meetings...........................................4
Section 4.02 Notices....................................................4
Section 4.03 Voting-Proxies.............................................4
Section 4.04 Place of Meeting...........................................5
Section 4.05 Action Without a Meeting...................................5
ARTICLE V
TRUSTEES' MEETINGS..........................................................5
Section 5.01 Special Meetings...........................................5
Section 5.02 Regular Meetings...........................................5
Section 5.03 Quorum.....................................................5
<PAGE>
Section 5.04 Notice.....................................................5
Section 5.05 Place of Meeting...........................................6
Section 5.06 Special Action.............................................6
Section 5.07 Action by Consent..........................................6
Section 5.08 Participation in Meetings By Conference Telephone..........6
ARTICLE VI
FISCAL YEAR; REGISTERED OFFICE AND REGISTERED AGENT.........................6
Section 6.01 Fiscal Year................................................6
Section 6.02 Registered Office and Registered Agent.....................6
ARTICLE VII
INSPECTION OF BOOKS.........................................................7
ARTICLE VIII
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES..............................7
ARTICLE IX
SEAL........................................................................7
ii
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STRALEM FUND
BYLAWS
These Bylaws of Stralem Fund (the "Trust"), a Delaware business trust,
are subject to the Trust Instrument of the Trust, dated January 27, 1999 as from
time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein which are defined in the Trust Instrument are used
as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in New York, or such
other location as the Trustees may, from time to time, determine. The Trust may
establish and maintain such other offices and places of business as the Trustees
may, from time to time, determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.01 Officers. The officers of the Trust shall be a President,
a Treasurer, a Secretary, and such other officers as the Trustees may from time
to time elect. The Trustees may delegate to any officer or committee the power
to appoint any subordinate officers or agents. It shall not be necessary for any
Trustee or other officer to be a holder of Shares in the Trust.
Section 2.02 Election of Officers. The Treasurer and Secretary shall be
chosen by the Trustees. The President shall be chosen by and from the Trustees.
Two or more offices may be held by a single person except the offices of
President and Secretary. Subject to the provisions of Section 3.13 hereof the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees.
Section 2.03 Resignations. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.01 Management of the Trust. The business and affairs of the
Trust shall be managed by, or under the direction of the Trustees, and they
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
<PAGE>
Section 3.02 Executive And Other Committees. The Trustees may elect
from their own number an executive committee, which shall have any or all of the
powers of the Board of Trustees while the Board of Trustees is not in session.
The Trustees may also elect from their own number other committees from time to
time. The number composing such committees and the powers conferred upon the
same are to be determined by vote of a majority of the Trustees. All members of
such committees shall hold such offices at the pleasure of the Trustees, and the
Trustees may abolish any of the committees at any time. Any committee to which
the Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
Section 3.03 Compensation. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
Section 3.04 Chairman of the Board of Trustees. The Trustees may
appoint from among their number a Chairman who shall serve as such at the
pleasure of the Trustees. When present, he shall preside at all meetings of the
Shareholders and the Trustees, and he may, subject to the approval of the
Trustees, appoint a Trustee to preside at such meetings in his absence. He shall
perform such other duties as the Trustees may from time to time designate.
Section 3.05 President. The President shall be the chief executive
officer of the Trust and, subject to the direction of the Trustees, shall have
general administration of the business and policies of the Trust. Except as the
Trustees may otherwise order, the President shall have the power to grant,
issue, execute or sign such powers of attorney, process, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisors and agents and counsel for the
Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
Section 3.06 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees may from time to time designate.
Section 3.07 Secretary. The Secretary shall record in books kept for
the purpose all votes and proceedings of the Trustees and the Shareholders at
their respective meetings. He shall have the custody of the seal of the Trust.
The Secretary shall perform such additional duties as the Trustees may from time
to time designate.
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Section 3.08 Vice President. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents) present and able to act may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 3.09 Assistant Treasurer. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer and, when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Treasurer.
Section 3.10 Assistant Secretary. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary and, when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Secretary.
Section 3.11 Subordinate Officers. The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or committees of Trustees the power to
appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.
Section 3.12 Surety Bonds. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by the Investment Company Act of 1940 (the "1940 Act") and the rules
and regulations of the Commission) to the Trust in such sum and with such surety
or sureties as the Trustees may determine, conditioned upon the faithful
performance of his duties to the Trust including responsibility for negligence
and for the accounting of any of the Trust's property, funds or securities that
may come into his hands.
Section 3.13 Removal. Any officer may be removed from office, with or
without cause, whenever in the judgment of the Trustees the best interest of the
Trust will be served thereby, by the vote of a majority of the Trustees given at
any regular meeting or any special meeting of the Trustees. In addition, any
officer or agent appointed in accordance with the provisions of Section 3.11
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
Section 3.14 Remuneration. The salaries or other compensation, if any,
of the officers of the Trust shall be fixed from time to time by resolution of
the Trustees.
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ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 4.01 Special Meetings. A special meeting of the shareholders
shall be called by the Secretary as provided in the Trust Instrument. If the
Secretary, when so ordered or requested, refuses or neglects for more than 30
days to call such special meeting, the Trustees or the Shareholders so
requesting may, in the name of the Secretary, call the meeting by giving notice
thereof in the manner required when notice is given by the Secretary. If the
meeting is a meeting of the Shareholders of one or more Series or classes of
Shares, but not a meeting of all Shareholders of the Trust, then only special
meetings of the Shareholders of such one or more Series or classes shall be
called and only the shareholders of such one or more Series or classes shall be
entitled to notice of and to vote at such meeting.
Section 4.02 Notices. Except as provided in Section 4.01, notices of
any meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least ten (10) days before
the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the records of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
Section 4.03 Voting-Proxies. Subject to the provisions of the Trust
Instrument, shareholders entitled to vote may vote either in person or by proxy.
A proxy shall be deemed signed if the Shareholder's name is placed on the proxy
(by manual signature, typewriting, telegraphic transmission, facsimile, other
electronic or computerized means or otherwise) by the Shareholder or the
Shareholder's attorney-in-fact. Proxies may be given by any electronic or
computerized or telecommunication device except as otherwise provided in the
Trust Instrument or determined by the Trustees. The placing of a Shareholder's
name on a proxy instruction transmitted by telephone, computer, other electronic
means or otherwise pursuant to procedures reasonably designed, as determined by
the Trustees, to verify that such instructions have been authorized by the
Shareholder shall constitute execution of the proxy by or on behalf of the
Shareholder. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder thereof to
vote at any adjournment of a meeting. A proxy purporting to be exercised by or
on behalf of a Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest on the
challenger. At all meetings of the Shareholders, unless the voting is conducted
by inspectors, all questions relating to the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes shall
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be decided by the Chairman of the meeting. Except as otherwise provided herein
or in the Trust Instrument, as these Bylaws or such Trust Instrument may be
amended or supplemented from time to time, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation Law
of the State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Shareholders
were shareholders of a Delaware corporation.
Section 4.04 Place of Meeting. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
Section 4.05 Action Without a Meeting. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
Section 4.06 Abstentions and Broker Non-Votes. (A) Shares that abstain
or do not vote with respect to one or more of any proposals presented for
Shareholder approval and (B) Shares held in "street name" as to which the broker
or nominee with respect thereto indicates on the proxy that it does not have
discretionary authority to vote with respect to a particular proposal will be
counted as outstanding and entitled to vote for purposes of determining whether
a quorum is present at a meeting, but will not be counted as Shares voted with
respect to such proposal or proposals.
ARTICLE V
TRUSTEES' MEETINGS
Section 5.01 Special Meetings. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
Section 5.02 Regular Meetings. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in Section 4.04 of the Trust Instrument.
Section 5.03 Quorum. A majority of the Trustees shall constitute a
quorum for the transaction of business at any meeting and an action of a
majority of the Trustees in attendance constituting a quorum shall constitute
action of the Trustees.
Section 5.04 Notice. Except as otherwise provided, notice of any
special meeting of the Trustees shall be given by the party calling the meeting
to each of the Trustees, as provided for in Section 4.04 of the Trust
Instrument. A written notice may be mailed,
5
<PAGE>
postage prepaid, addressed to him at his address as registered on the books of
the Trust or, if not so registered, at his last known address.
Section 5.05 Place of Meeting. All special meetings of the Trustees
shall be held at the principal place of business of the Trust or such other
place as the Trustees may designate. Any meeting may adjourn to any place.
Section 5.06 Special Action. When all the Trustees shall be present at
any meeting however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the records of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
Section 5.07 Action by Consent. Any action by the Trustees may be taken
without a meeting if a written consent thereto is signed by a majority of the
Trustees and filed with the records of the Trustees' meeting. Such consent shall
be treated, for all purposes, as a vote at a meeting of the Trustees held at the
principal place of business of the Trustees.
Section 5.08 Participation in Meetings By Conference Telephone. Except
when presence in person is required at a meeting under the 1940 Act or other
applicable laws, Trustees may participate in a meeting of Trustees by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting are able to hear each other, and such participation
shall constitute presence in person at such meeting. Any meeting conducted by
telephone shall be deemed to take place at and from the principal office of the
Trust.
ARTICLE VI
FISCAL YEAR; REGISTERED OFFICE AND REGISTERED AGENT
Section 6.01 Fiscal Year. The fiscal year of the Trust and of each
Series of the Trust shall end on December 31 of each year; provided that the
last fiscal year of the Trust and each Series shall end on the date on which the
Trust or each such Series is terminated, as applicable; and further provided
that the Trustees by resolution and without a Shareholder vote may at any time
change the fiscal year of the Trust and of any or all Series (and the Trust and
each Series may have different fiscal years as determined by the Trustees).
Section 6.02 Registered Office and Registered Agent. The initial
registered office of the Trust in the State of Delaware shall be located at 1201
North Market Street, Wilmington, Delaware 19801. The registered agent of the
Trust at such location shall be Delaware Corporation Organizers, Inc.; provided
that the Trustees by resolution and without a Shareholder vote may at any time
change the Trust's registered office or its registered agent, or both.
6
<PAGE>
ARTICLE VII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the Shareholders.
ARTICLE VIII
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any Covered
Person (as defined in Section 10.02 of the Trust Instrument) or employee of the
Trust, including any Covered Person or employee of the Trust who is or was
serving at the request of the Trust as a Trustee, officer or employee of a
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and claimed by him in any such capacity or
arising out of his status as such, whether or not the Trustees would have the
power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE IX
SEAL
The seal of the Trust shall be circular in form bearing the
inscription:
"STRALEM FUND, JANUARY 27, 1999
THE STATE OF DELAWARE"
7
FORM OF
INVESTMENT ADVISORY AGREEMENT
Between
STRALEM FUND
And
STRALEM & COMPANY INCORPORATED
This agreement is made this ____day of ___________, 1999 by and between Stralem
Fund (the "Fund"), a Delaware Business trust registered under the Investment
Company Act of 1940, and Stralem & Company Incorporated, a Delaware corporation
(the "Adviser") registered as a Registered Investment Adviser under the
Investment Advisers Act of 1940 with respect to the following recital of fact:
RECITAL
The Fund intends to have the Adviser act as its investment adviser and provide
it with investment research, advice, supervision and management. The Adviser is
willing to undertake these activities under the terms and conditions set forth
herein.
Now therefore, it is hereby agreed to by the Fund and the Adviser as follows:
1. Duties. The Adviser shall provide the Fund with such investment research,
data, advice and supervision as the Fund may consider necessary for proper
supervision of its funds. The Adviser shall act as manager and investment
adviser of the Fund and, as such, shall furnish continuously an investment
program, which will include determining what securities shall be purchased or
sold by the Fund and what portion of the assets of the Fund shall be held
uninvested, subject always to the provisions of the Fund's Trust Instrument and
By-Laws, the Fund's fundamental investment policies as in effect from time to
time, and control and review by the Fund's Board of Trustees. The Adviser shall
take, on behalf of the Fund, all actions which it deems necessary to carry into
effect the investment policies determined as provided above, and to that end the
Adviser may designate a person or persons who are to be authorized by the Fund
as the representative or representatives of the Fund, to give instructions to
the Custodian of the assets of the Fund as to deliveries of securities and
payments of cash for the account of the Fund.
<PAGE>
2. Allocation of Charges and Expenses. Except to the extent of the reimbursement
not to exceed $25,000 set forth in Section 4(b) below, the Adviser shall (i)
furnish at its own expense all administrative services, office space, equipment
and administrative and clerical personnel necessary for managing the affairs of
the Fund and (ii) provide persons satisfactory to the Fund's Board of Trustees
to act as officers and employees of the Fund and shall pay the salaries and
wages of all officers and employees of the Fund who are also officers and
employees of the Adviser or of an affiliated person (as defined in the
Investment Company Act of 1940) other than the Fund. All other costs and expense
not expressly assumed by the Adviser under this Agreement, or to be paid by the
Distributor of the shares of the Fund, shall be paid by the Fund, including (i)
interest and taxes; (ii) brokerage commissions and other costs in connection
with the purchase or sale of securities; (iii) insurance premiums for fidelity
and other coverage requisite to its operations; (iv) compensation and expenses
of its directors other than those affiliated with the Adviser; (v) legal, audit
and fund accounting expenses; (vi) custodian and shareholder servicing agent
fees and expenses; (vii) expenses incident to the issuance of its shares against
payment therefor by or on behalf of the subscribers thereto, including printing
of stock certificates; (viii) fees and expenses incident to the registration
under the Securities Act of 1933 or under any state securities laws of shares of
the Fund for public sale and fees imposed on the Fund under the Investment
Company Act of 1940; (ix) expenses of printing and mailing prospectuses, reports
and notices and proxy material to shareholders of the Fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; (xi) the
fees or dues of the Investment Company Institute or other trade associations;
(xii) fees and expenses in connection with registration of the Fund or
qualification of its shares under the securities laws of states and foreign
jurisdictions and (xiii) such non-recurring expenses as may arise, including
actions, suits or proceedings to which the Fund is a party and the legal
obligation which the Fund may have to indemnify its officers and directors with
respect therein.
3. Brokerage. The Adviser shall place purchase and sale orders for portfolio
transactions of the Fund with brokers and/or dealers including, where permitted
by law, the Fund's Distributor or affiliates thereof or of the Adviser, which,
in the judgment of the Adviser, are able to execute such orders as expeditiously
as possible and at the best obtainable price. The Adviser may select Stralem &
Company Incorporated as the broker/dealer to effect all or substantially all of
the security transactions which are effected on a national securities exchange.
Purchases and sales of securities which are not listed or traded on a securities
exchange shall ordinarily be executed with primary market makers acting as
principal except when it is determined that better prices and executions may
otherwise be obtained, provided, that the Adviser may cause the Fund to pay a
member of a securities exchange, broker or dealer an amount of commission higher
than that another member of an exchange, broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such member, broker or dealer, viewed in terms
of that particular transaction or the Adviser's overall responsibilities. As
used herein, "brokerage and research services" shall have the same meaning as in
Section 28 (e) (3) of the Securities Exchange Act of 1934, as such Section may
be amended from time to time, and any rules or regulations
-2-
<PAGE>
promulgated thereunder by the Securities and Exchange Commission. It is
understood that, consistent with the Adviser's fiduciary duty to the Fund, it is
the intent of the Agreement to allow the Adviser the widest discretion permitted
by law in determining the manner and means by which portfolio securities'
transactions can be affected in the best interests of the Fund.
4. Compensation.
(a). As promptly as shall be practicable after the last
business day of each "fiscal quarter" (as hereinafter defined), the Fund shall
pay the Adviser the amount equal to the sum of (i) .25 percent of the first $50
million of the "Average Net Asset Value of the Fund" (determined in accordance
with the provisions of the Fund's current registration statement) at the close
of business on the last business days of each calendar week during such fiscal
quarter, (ii) .1875 percent of the next $50 million of the average net asset
value of the Fund at the close of business on such last business days, and (iii)
.125 Percent of the average net asset value of the Fund in excess of $100
million at the close of business on such last business days (except that, if the
fiscal quarter shall be the "initial period" or the "final period" (as such
terms are hereinafter defined), such payment shall in no event exceed the
product of said sum and a fraction the numerator of which shall be the number of
calendar days constituting the initial period or the final period, as the case
may be, and the denominator of which shall be 90)."
(b). I. As promptly as shall be practicable after the last day
of each fiscal quarter, in addition to the amount referred to in part A of this
Section 4, the Fund shall reimburse the Adviser the amount equal to that
fraction of the total compensation paid or accrued by the Adviser to or for each
employee of the Adviser who shall have performed services for the Fund, other
than services of an investment advisory nature, during such fiscal quarter the
numerator of which shall be the number of hours spent by such employee on such
services during such fiscal quarter and the denominator of which shall be $20.
Such reimbursement shall be for, among other things, the expense and
compensation of its employees incurred in physically handling the assets of the
Fund, in preparing reports of the Fund, in performing the Fund's duties as the
transfer agent and registrar of its own shares and in performing all of the
other administrative functions of the Fund. Notwithstanding the foregoing
provisions of this paragraph I, the maximum amount of such reimbursement with
respect to any "fiscal year" (as hereinafter defined) shall not exceed $25,000
and, in the case of the "initial fiscal year" and the "final fiscal year" (as
such terms are hereinafter defined), the maximum amount of such payment shall
not exceed the product of $25,000 and the fraction the numerator of which shall
be the number of calendar days constituting the initial fiscal year or the final
fiscal year, as the case may be, and the denominator of which shall be 365.
II. The amount of each payment referred to in paragraph I of
this part B shall be determined by the Adviser and such determination shall be
binding upon the parties hereto. In the event that, with respect to any fiscal
year, the aggregate amount of the payments required to be paid pursuant to the
provisions of paragraph I of this part B and this paragraph
-3-
<PAGE>
II shall be limited by the provisions of the third sentence of said paragraph I,
any amount not so paid by virtue of the limitation contained in said sentence
shall be carried over to the next fiscal year and paid in such fiscal year
subject, however, to said limitation.
(c). As used herein:
(i). the term "fiscal quarter" shall mean the initial period, the final
period and each period of three consecutive calendar months ending on March 31,
June 30, September 30 and December 31 of each calendar year.
(ii). The term "initial period" shall mean the period commencing on the
date of this Agreement and ending on the March 31, June 30, September 30 or
December 31 next succeeding such date.
(iii). The term "final period" shall mean the period commencing on the
April 1, July 1, October 1 or January 1 next preceding the date of the
termination of this Agreement and ending on such last mentioned date.
(iv). The term "fiscal year" shall mean the final fiscal year and each
period of 12 consecutive calendar months ending on December 31 of each calendar
year.
5. Duration and Termination of Agreement. This Agreement shall become effective
on the date set forth above and shall continue in effect only so long as such
continuance is specifically approved at least annually in accordance with the
Investment Company Act of 1940. This Agreement may be terminated on sixty days
written notice by either party. This Agreement shall terminate automatically in
the event of its assignment as defined in the Investment Company Act of 1940.
6. Name of Fund. The Adviser consents to the use by the Fund of the name
"Stralem Fund" so long, and only so long, as this Agreement (or any agreement
with any organization which has succeeded to the business of the Adviser) or any
extension, renewal or amendment thereof, remains in effect. The Fund agrees that
if and when no such agreement is in effect, (a) it will cease to use said name
or any name indicating or suggesting that the Fund is advised by or otherwise
connected with the Adviser and (b) it will not thereafter refer to the former
association between the Adviser and the Fund.
7. Adviser May Act for Others. Nothing herein contained shall limit the freedom
of the Adviser or any affiliated person of the Adviser to render investment
supervisory or corporate administrative services to other investment companies,
or act as investment adviser or investment counselor to other persons, firms or
corporations, and to engage in other business activities.
-4-
<PAGE>
8. Amendment of Agreement. The Agreement may not be amended except pursuant to a
direction given by the vote of the holders of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the Fund.
9. Liability. The Adviser shall not be liable for any error of judgment, or
mistake of law, or any loss suffered by the Fund, in connection with the matters
to which this Agreement relates, expect for loss resulting from gross negligence
of the Adviser in the performance of its duties or from reckless disregard by
the Adviser of its obligations and duties hereunder.
10. Liabilities of the Trustees and Shareholders. The Adviser acknowledges the
following limitation of liability:
The terms "Stralem Fund" and "Trustees" refer, respectively, to the
trust created and the Trustees, as trustees but not individually or personally,
acting from time to time under the Trust Instrument, to which reference is
hereby made, such reference being inclusive of any and all amendments thereto so
filed or hereafter filed. The obligations of "Stralem Fund" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities and are not binding upon any of
the Trustees, shareholders or representatives of the Fund personally, but bind
only the assets of the Fund and all persons dealing with the Fund must look
solely to the assets of the Fund for the enforcement of any claims against the
Fund.
11. Notices. Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the mailing address of the Fund and that
of the Adviser shall be 405 Park Avenue, New York, New York 10022.
12. Questions of Interpretation. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act of 1940, as amended, shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Investment Company Act of
1940, reflected in any provision of this Agreement is released by rules,
regulations or order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
-5-
<PAGE>
In witness whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written
STRALEM & COMPANY INCORPORATED
By ____________________________
STRALEM FUND
By ___________________________
-6-
FORM OF
DISTRIBUTION AGREEMENT
Between
STRALEM FUND
And
STRALEM & COMPANY INCORPORATED
__________ 1999
Stralem & Company Incorporated
405 Park Avenue
New York, NY 10022
Dear Sirs:
STRALEM FUND (the "Fund"), a Delaware business trust, is registered as an
Investment Company under the Investment Company Act of 1940 and has registered
___________ shares of beneficial interest under the Securities Act of 1933,
Registration Number __________, to be offered continuously for sale to the
public in accordance with terms and conditions set forth in the Prospectus
included in such Registration Statement as it may be amended from time to time.
In this connection, the Fund desires that Stralem & Company Incorporated act as
principal underwriter and distributor (the "Distributor") of the Fund for the
sale and distribution of shares which have been registered as described above
and any additional shares which may become registered during the term of this
Agreement. You have advised the Fund that you are willing to act as distributor,
and it is, accordingly, agreed between us as follows:
1. The Fund hereby appoints you distributor for the sale of its shares, pursuant
to the aforesaid continuous public offering in connection with any sales made to
Fund investors in any states and/or jurisdictions in which you are or shall from
time to time become qualified as a broker/dealer, or through securities dealers
with whom you have entered into sales agreements.
2. You hereby accept such appointment and agree to use your best efforts to sell
such shares, provided, however, that when requested by the Fund at any time
because of market or other economic considerations or abnormal circumstances of
any kinds, you will suspend such efforts. The Fund may also withdraw the
offering of the shares at any time when required by the provisions of any
statute, order, rule or regulation of any governmental body having jurisdiction.
<PAGE>
It is understood that you do not undertake to sell all or any specific portion
of the shares of the Fund.
3. The shares shall be sold by you at net asset value as determined in the
Fund's Prospectus effective at the time of sale. Shares may be sold directly to
prospective purchasers or through securities dealers who have entered into sales
agreements with you. However, in no event will shares be issued prior to the
receipt by us of full payment for such shares.
4. You agree that the Fund shall have the right to accept or reject orders for
the purchase of shares of the Fund. Any consideration which you may receive in
connection with a rejected purchase order will be returned promptly. In the
event that any cancellation of a share purchase order, cancellation of a
redemption order or error in the timing of the acceptance of purchase or
redemption orders shall result in a gain or loss, you agree promptly to
reimburse the Fund for any amount by which losses shall exceed gains so arising;
to retain any net gains so arising for application against losses so arising in
future periods and, on the termination of this Agreement, to pay over to the
Fund the amount of any such net gains which may have accumulated. The Fund shall
register or cause to be registered all shares sold by you pursuant to the
provisions hereof in such name or names and amounts as you may request from time
to time, and the Fund shall issue or cause to be issued certificates evidencing
such shares for delivery to you or pursuant to your direction if, and to the
extent that, the shareholder requests issuance of such share certificates.
5. The Fund has delivered to you a copy of its current Registration Statement
under the Securities Act of 1933. It agrees that it will use its best efforts to
continue the effectiveness of the Registration Statement under the Securities
Act of 1933. The Fund further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data to comply
with the Securities Act of 1933.
6. The Fund is registered under the Investment Company Act of 1940 as an
investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of said Act.
7. You agree:
(a) That neither you nor any of your officers will take any short
position in the shares of the Fund.
(b) To furnish to the Fund any pertinent information required to be
included with respect to you as distributor within the meaning of the Securities
Act of 1933 in any reports or registration required to be filed with any
governmental authority.
(c) You will not give any information or make any representations other
than as contained in the Registration Statement or Prospectus filed under the
Securities Act of 1933, as in effect from time to time, or in any supplemental
sales literature authorized by the Fund for
-2-
<PAGE>
use in connection with the sale of shares.
8. You will pay all usual expenses of distribution, including advertising and
the costs of printing and mailing of Prospectuses, other than those furnished to
existing shareholders.
9. This agreement will continue in effect from year to year provided:
(a) Such continuation shall be specifically approved at least annually
by the Board of Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Investment Company Act of 1940) of any
such persons cast in person at a meeting called for the purpose of voting on
such approval or by vote of the holders of a majority of the outstanding voting
securities of the Fund and by such vote of the Board of Trustees.
(b) You shall have notified the Fund in writing at least sixty days
prior to the termination date that you shall not desire such continuation.
(c) We shall not have notified you in writing at least sixty days prior
to the termination date that we do not desire your continuation.
10. This Agreement may not be amended or changed except in writing and shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, but this Agreement shall not be assigned by either party
and shall automatically terminate upon its assignment.
If the foregoing is in accordance with your understanding, sign in the space
below.
STRALEM FUND
By: ______________________________________
Accepted:
STRALEM & COMPANY INCORPORATED
By: ______________________________________
-3-
[LETTERHEAD OF KRAMER LEVIN NAFTALIS & FRANKEL LLP]
February 26, 1999
Stralem Fund, Inc.
405 Park Avenue
New York, New York 10022
Re: Stralem Fund, Inc.
Registration No. 2-34277
------------------------
Dear Gentlemen:
We hereby consent to the reference of our firm as counsel in
Post-Effective Amendment No. 40 to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer Levin Naftalis & Frankel LLP
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference to the Fund's Annual Report
to shareholders dated January 13, 1999 in the Statement of Additional
Information in Post-Effective Amendment No. 40 to the Registration Statement
(No. 2-34277) being filed under the Securities Act of 1933 (No. 20 under the
Investment Company Act of 1940) on Form N-1A by Stralem Fund, Inc. of our report
dated January 13, 1999 relating to the statement of assets and liabilities,
including the portfolio of investments in securities of Stralem Fund, Inc. as of
December 31, 1998, the related statement of operations for the year then ended
and statements of changes in net assets for each of the years in the two-year
period then ended, and the condensed financial information for each of the years
in the five-year period then ended, appearing in the Prospectus. We also consent
to the reference to Richard A. Eisner & Company, LLP in the sections "Additional
Information About The Fund" and "Financial Statements".
/s/ Richard A. Eisner & Company, LLP
New York, New York
February 26, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 38,932
<INVESTMENTS-AT-VALUE> 55,406
<RECEIVABLES> 390
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7287
<TOTAL-LIABILITIES> 7287
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3213
<SHARES-COMMON-PRIOR> 2708
<ACCUMULATED-NII-CURRENT> 188
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,474
<NET-ASSETS> 48,662
<DIVIDEND-INCOME> 294
<INTEREST-INCOME> 1,349
<OTHER-INCOME> 0
<EXPENSES-NET> 558
<NET-INVESTMENT-INCOME> 1,085
<REALIZED-GAINS-CURRENT> 2,967
<APPREC-INCREASE-CURRENT> 6,583
<NET-CHANGE-FROM-OPS> 10,636
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,082
<DISTRIBUTIONS-OF-GAINS> 2,967
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 689
<NUMBER-OF-SHARES-REDEEMED> 323
<SHARES-REINVESTED> 142
<NET-CHANGE-IN-ASSETS> 13,076
<ACCUMULATED-NII-PRIOR> 162
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 480
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 558
<AVERAGE-NET-ASSETS> 47,245
<PER-SHARE-NAV-BEGIN> 13.15
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> 2.90
<PER-SHARE-DIVIDEND> 1.26
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.14
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
