As filed via Edgar with the Securities and Exchange Commission on October 13,
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
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 42 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 |X|
STRALEM FUND
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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
[ ] On (date) pursuant to paragraph (a)(1)
[X} On January 3, 2000 pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
Part A
STRALEM EQUITY FUND
PROSPECTUS
__________, 2000
The Securities and Exchange Commission has not approved or 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.
<PAGE>
Table of Contents
Page
Risk/Return Summary...........................................................1
Investment Objective........................................................1
Principal Investment Strategies.............................................1
Principal Risks of Investing................................................1
Fees and Expenses of the Fund.................................................1
Investment Objectives, Principal Strategies and Related Risks.................2
Investment Objective........................................................2
Principal Strategies........................................................2
Risks of Investing..........................................................3
Investment Adviser and Investment Advisory Agreement..........................3
Shareholder Information.......................................................4
Investment Minimums.........................................................4
Net Asset Value.............................................................4
How to Purchase Shares......................................................4
How to Redeem Shares........................................................5
Dividends and Capital Gains Distributions.....................................5
Tax Issues..................................................................5
<PAGE>
RISK/RETURN SUMMARY
Investment Objective
The investment objective of Stralem Equity Fund (the "Fund") is long-term
capital appreciation.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by investing in equity
securities listed or traded on major U.S. stock exchanges and in the
over-the-counter market. The Fund will invest at least 65% of its assets in the
equity securities of large capitalization U.S. companies. The Fund's investment
strategies can be identified as "value-driven" and/or "flexible" investing.
Principal Risks of Investing
The Fund is subject to the risks common to all mutual funds that invest in
equity securities. You may lose money by investing in this Fund if any of these
occur:
o the stock market of the United States goes down decreasing the value of
equity securities;
o a stock or stocks in the Fund's portfolio do not perform as well as
expected; or
o the Fund manager's investment strategy does not achieve the Fund's
objective or the manager does not implement the strategy properly.
In addition, the Fund is non-diversified which means that, compared to other
funds, the Fund may invest a greater percentage of its assets in a particular
issuer. 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.
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)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
Management Fees 1.50%
Distribution (12b-1) Fees 0.00%
Other Expenses* 0.20%
Total Annual Fund Operating Expenses* 1.70%
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*These expenses are based on estimated amounts for the current fiscal year.
-1-
<PAGE>
EXAMPLE OF EXPENSES
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
This 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
$173 $536
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 RISKS
Investment Objective
The Fund's investment objective is long-term capital appreciation.
Principal Strategies
The Fund's investment strategies can be identified as "value-driven" and/or
"flexible" investing. This means that when the Fund anticipates a generally
rising stock market, the Fund invests in equity securities of companies that:
o are listed or traded on major U.S. stock exchanges;
o are a primary factor in their industry;
o have an equity capitalization (at market) of at least $4 billion;
o have a consistently strong and conservative balance sheet;
o have demonstrated a long-term potential for growth superior to the
long-term inflation rate; and
o can be purchased at a price which is in line with current earnings.
Temporary Defensive Investing. During unfavorable market conditions, the Fund
may invest "defensively," that is, make temporary investments that are not
consistent with the Fund's investment objective and principal strategies. For
example, if there is a market downturn or if the Fund must raise cash to meet
redemption requests, the Fund may invest more assets in bonds or money market
instruments, or invest in derivative instruments to protect the Fund's
investments.
-2-
<PAGE>
Risks of Investing
As with all mutual funds, investing in the Fund involves certain risks. We
cannot guarantee that the Fund will meet its investment objective. You may lose
money if you invest in the Fund.
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, its service providers or the companies in
which the Fund invests 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.
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.
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,
-3-
<PAGE>
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. The Adviser also provides certain
clerical, statistical and other administrative services for the Fund.
For providing these services, the Fund pays the Adviser a quarterly management
fee calculated at an annual rate of 1.50% 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 1973.
SHAREHOLDER INFORMATION
Investment Minimums. The minimum initial investment in the Fund is $200,000.
There is no minimum for subsequent investments. The Fund may reduce or waive the
minimum investment requirements in some cases. Current shareholders of Stralem
Fund are not subject to the investment minimum.
Net Asset Value. The net asset value ("NAV") per share of the Fund is determined
generally as of 4:00 p.m. Eastern 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. You must be a client of the Adviser to purchase shares
of the Fund. Clients may purchase shares from the Adviser at 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 Exchange or Redeem Shares. You may exchange or 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. When you exchange shares, you sell shares of your shares
of one Stralem Fund and buy shares of another Stralem Fund. Your shares will be
valued at the next-determined NAV of such shares. 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.
-4-
<PAGE>
Additional Exchange and Redemption Information
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.
Exchange Limit. In order to limit expenses, the Fund reserves the right to limit
the number of exchanges you can make in any year.
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 whether you want your dividends and distributions
reinvested in the Fund at NAV. Otherwise, your dividends and/or capital gains
distributions will be automatically paid to you in cash.
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.
-5-
<PAGE>
[back cover]
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. To obtain a free copy of the Statement of
Additional Information and annual and semi-annual reports or to make any other
inquiries about the Fund, you may call (212) 888-8123. This information may be
reviewed and copied at the Public Reference Room of the Securities and Exchange
Commission in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling (800) SEC-0330. Copies of this
information may also be obtained for a fee by writing the Public Reference Room
of the Securities and Exchange Commission, Washington, D.C. 20549-6009.
Information about the Fund is also available on SEC's World Wide Web site at
http://www.sec.gov.
Investment Company Act File No. 811-1920.
<PAGE>
Part B
STATEMENT OF ADDITIONAL INFORMATION
STRALEM FUND
405 Park Avenue
New York, New York 10022
STRALEM FUND
STRALEM EQUITY FUND
__________, 2000
- --------------------------------------------------------------------------------
This Statement of Additional Information ("SAI") is not a Prospectus. This SAI
should be read in conjunction with Stralem Fund's current prospectus dated April
30, 1999 pursuant to which Stralem Fund is offered and Stralem Equity Fund's
current prospectus dated _____, 2000 to which Stralem Equity Fund (each Fund to
which this SAI relates will be referred to as, collectively, the "Funds") is
offered (each, a "Prospectus"). This SAI should also be read in conjunction with
Stralem Fund's Annual Report dated December 31, 1998. This SAI is incorporated
by reference in its entirety into each Prospectus. To obtain a copy of either
Prospectus, please write to Stralem Fund at 405 Park Avenue, New York, New York
10022 or call (212) 888-8123.
Stralem & Company Incorporated serves as the Funds' investment adviser (the
"Investment Adviser").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
General Information.........................................................B-2
Organization and History....................................................B-2
Investment Objective, Policies and Techniques...............................B-2
Management of the Funds.....................................................B-5
Control Persons and Principal Holders of Securities.........................B-7
Investment Adviser..........................................................B-7
Brokerage Allocation........................................................B-9
Additional Information on Purchase, Redemption and Pricing of Shares........B-10
Performance of the Funds....................................................B-10
Taxes.......................................................................B-11
Additional Information About the Funds......................................B-16
Financial Statements........................................................B-16
B-1
<PAGE>
GENERAL INFORMATION
The SAI provides a further discussion of certain matters described in
each Prospectus and other matters which may be of interest to investors. No
investment in shares of the Funds should be made without first reading each
Prospectus.
ORGANIZATION AND HISTORY
Stralem Fund (the "Trust" or "Stralem") is an open-end management
investment company. Stralem was incorporated on July 9, 1969 under the laws of
the State of Delaware, and on April 30, 1999, Stralem was reorganized into a
Delaware business trust. Currently, the Trust offers two separate,
non-diversified series portfolios: Stralem Fund and Stralem Equity Fund.
INVESTMENT OBJECTIVE, POLICIES AND TECHNIQUES
Objectives of the Funds
The investment objective of Stralem Fund is to seek the realization of a
combination of income and capital appreciation in an attempt to maximize total
return. The investment objective of Stralem Equity Fund is long-term capital
appreciation.
Investment Policies
Since 1974, Stralem Fund's investment policy has been to achieve its
investment objective through a portfolio of securities which is not confined to
any particular area. Stralem Equity Fund's investment policy is to invest
primarily in equity securities listed or traded on major U.S. stock exchanges.
Both Funds are 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 each Fund's assets
is invested in a smaller number of issuers, an investment in either Fund may be
considered more speculative than an investment in a diversified fund.
Other Investment Techniques
Each Fund may purchase and sell covered options on stocks and stock
price index listed on major exchanges or traded over-the counter where the total
cost of such options does not exceed 10% of the net asset value of a Fund at the
time of purchase. A covered option is one where a Fund owns the underlying
securities.
Turnover Rate
During 1998 and 1997 the turnover rate of Stralem 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 Stralem Fund during the period, was approximately 18% and 52%,
respectively. Neither Stralem Fund nor Stralem Equity Fund can 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 a Fund's shareholders in
order for a Fund to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code.
Fundamental Investment Restrictions
Each Fund has adopted the following investment restrictions which cannot
be changed without approval of the holders of a majority of its outstanding
shares of that Fund. 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
B-2
<PAGE>
outstanding shares of a Fund are present (in person or by proxy) or (ii) more
than one-half of the outstanding shares of a Fund.
1. Each Fund may not issue any senior security (as defined by the
Investment Company Act of 1940 (the "1940 Act")), except that (a) each
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) each 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, each Fund may borrow as authorized by the
1940 Act.
2. Each Fund may not borrow money, except that it 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 that 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 a Fund's total
assets must be repaid before that Fund may make additional investments.
3. Each Fund may underwrite securities of other issuers, except
to extent that it may be considered an underwriter within the meaning of
the Securities Act when reselling securities held in its own portfolio.
4. The Funds may not concentrate their 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 a 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 a
Fund from investing all of its assets in a "master" fund that has
adopted a similar restriction.
5. The Funds 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 Funds may, however, invest in securities of real
estate investment trusts when such securities are readily marketable,
but the Funds have no current intention of so doing.
6. The Funds may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instruments
(but this shall not prevent a Fund from purchasing or selling options
and futures contracts or from investing in securities or other
instruments backed by physical commodities).
7. The Funds 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.
Each Fund will also be subject to certain restrictions in order to
qualify as a regulated investment company. See "Taxes - Qualifications as a
Regulated Investment Company".
B-3
<PAGE>
MANAGEMENT OF THE FUNDS
Trustees and Officers
- ---------------------
The Board of Trustees is responsible for the over-all operations of the
Funds. The officers of the Funds, under the direction of the Board of Trustees,
are responsible for the day-to-day operations of the Funds. The Board of
Trustees and Officers of the Funds are as follows:
<TABLE>
<CAPTION>
Shares of Funds Beneficially Current Principal Occupation
Name, Office, Address and Owned Directly or Indirectly and Principal Occupation
Age at March 5, 1999 During Past Five Years
--- ------------------ ----------------------
<S> <C> <C>
Philippe E. Baumann (69)* 182,516(1) Mr. Baumann has been a
Trustee and President Director and
880 Fifth Avenue Vice-President of
New York, NY 10021 Stralem & Company
Incorporated from 1970
to May 31, 1973. Since
June 1, 1973, he has
been its Executive Vice
President.
Hirschel B. Abelson (65)* 218,621(2) Mr. Abelson has been a
Secretary and Treasurer Director and President
112 East 74th Street of Stralem & Company
New York, NY 10021 Incorporated since June
1, 1973.
Kenneth D. Pearlman (69) 376 Mr. Pearlman has been
Trustee the Managing Director
200 East 64th Street of The Evans
New York, NY 10021 Partnership, an
investment partnership,
since 1992.
Michael T. Rubin (58) 3,883(3) From 1974 through his
Trustee retirement in June
425 Park Avenue South 1997, Mr. Rubin served
New York, NY 10016 as Vice President of
Stralem Fund and an
Assistant Vice
President and an
Assistant Secretary of
Stralem & Company
Incorporated.
Jean Paul Ruff (64) 1,530(4) Mr. Ruff has been
Trustee President of Hawley
351 E. 84th Street Fuel Coal, Inc. since
New York, NY 10028 1976 and Chairman since
1980.
Philippe Labaune (30) 516 Mr. Labaune has been
Vice President employed by Stralem &
313 East 95th Street Company Incorporated
#14 since May 1997. He has
New York, NY 10128 served as Assistant
Vice President and
Assistant Secretary of
Stralem & Company
Incorporated and Vice
President of Stralem
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.
B-4
<PAGE>
Joann Paccione (42) 0 Ms. Paccione has been
Assistant Secretary and Assistant Secretary and
Assistant Treasurer Assistant Treasurer of
112 Thomas Avenue Stralem Fund since
Emerson, NJ 07630 April 1990. She was
employed as an
accountant by Richard
A. Eisner & Company,
LLP from 1981 through
October 1987. Since
October 1987, Ms.
Paccione has been
engaged in providing
accounting services on
an independent basis.
</TABLE>
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* Interested person as defined in the Investment Company Act of 1940, as
amended, by reason of relationship as officer or trustee.
1 Does not include 159,291 shares owned in the aggregate by two children
of Mr. Baumann and 13,144 shares owned by his wife, but includes 179,239
shares owned beneficially by Mr. Baumann through his interest in Stralem
Employees Profit Sharing Trust, and 3,277 shares held directly.
2 Does not include 2,681 shares owned in the aggregate by three children
of Mr. Abelson and 376 shares owned by his wife, but includes 218,245
shares owned beneficially by Mr. Abelson through his interest in Stralem
Employees Profit Sharing Trust and 376 shares held directly.
3 Does not include an aggregate of 3,833 shares owned by Mr. Rubin's
daughter, of which shares he disclaims beneficial ownership.
4 Does not include 30,252 shares owned in the aggregate by two children of
Mr. Ruff and 15,126 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 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 vacant
upon the death of William Hertan in December 1996. At a meeting of shareholders
on April 7, 1999, Messrs. Baumann, Pearlman, Ruff and Rubin were elected to
serve as Trustees.
None of the Board of Trustees and Officers of the Funds receives any
compensation, other than Trustees' fees, from the Funds. The Funds pay each
Trustee who is not an employee of the Investment Adviser 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 most recently
completed fiscal year:
<TABLE>
<CAPTION>
Pension or Estimated Total
Aggregate Retirement Benefits Annual Compensation
Compensation Accrued as Part of Benefits Upon from the Funds
Name of Person, Position from the Funds Fund Expenses Retirement Paid to Trustees
------------------------ -------------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
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
</TABLE>
B-5
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 5, 1999, Stralem Fund had authorized 5,000,000 shares of
beneficial interests, par value $1.00, of which Stralem Fund had 3,933,007
shares of beneficial interest were issued and outstanding. The following table
shows certain information as to the holdings of shareholders with 5% or more of
Stralem Fund's outstanding shares and the trustees and officers of Stralem Fund
as a group as of March 5, 1999:
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial Percent
Beneficial Owner Address Ownership(1) of Class
<S> <C> <C> <C>
Stralem Employees' 405 Park Avenue 599,644 shares 15.25%
Profit Sharing Trust New York, NY 10022
Brown Brothers Harriman - 4 World Trade Center 576,911 shares(2) 14.67%
UBS New York, NY 10005
</TABLE>
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1 Unless otherwise indicated, all ownership is record and beneficial.
2 Record only.
INVESTMENT ADVISER
The Investment Adviser, Stralem & Company Incorporated, having an office
at 405 Park Avenue, New York, New York 10022, is the investment adviser to the
Funds under separate contracts (each, a "Contract") dated April 30, 1999 with
Stralem Fund and _______ with Stralem Equity Fund. Pursuant to each Contract,
the Investment Adviser provides the Funds with, and pays for, all office space
and utilities and all research and investment services. The Investment Adviser
provides the Funds with, and initially pays for (subject to reimbursement by the
Funds, as provided below), all clerical, statistical and related services
(excluding legal, accounting, auditing and custodial services) reasonably
required by the Funds for the conduct of its business. Legal, accounting,
auditing and custodial services are separately obtained and paid for by the
Funds.
Contract with Stralem Fund
Under its Contract, Stralem Fund reimburses the Investment Adviser for
certain of its expenses attributable to the administration of Stralem Fund,
including a proportionate part of the compensation of employees of the
Investment Adviser who perform the clerical, statistical and related services
for Stralem Fund referred to above; such reimbursement is limited by its
Contract to $25,000 per annum. Under its Contract, Stralem Fund reimburses the
Investment Adviser for, among other things, the expenses and compensation of its
employees incurred in preparing reports for Stralem Fund, in performing Stralem
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
Stralem Fund. Stralem Fund pays all of its other costs and expenses directly. As
a consequence of such reimbursement of the Investment Adviser and such direct
payment of other costs, substantially all of Stralem Fund's expenses, other than
those for office space and facilities, are directly or indirectly paid by
Stralem Fund. Stralem Fund's Contract is reviewed annually by the Board of
Trustees who may in their discretion approve the continuation of the Contract.
Stralem Fund's Contract was approved and adopted by Stralem Fund's
shareholders at an Annual Shareholders' meeting held on April 7, 1999 following
the conversion to a Delaware business trust. This Contract replaced the prior
investment management agreement of Stralem Fund dated February 28, 1977.
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Stralem Fund pays the Adviser an advisory fee as described in its
Contract. Under the Contract, Stralem 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 Stralem Fund during the quarterly period
then ended:
1/4 of 1.00% of the first $50 million of such net asset value
(1.00% annually),
3/16 of 1.00% of the next $50 million of such net asset value
(0.75% annually), and
1/8 of 1.00% of such net asset value in excess of $100 million
(0.50% annually).
The total payment under the Contract for Stralem Fund for 1998 was $505,341, of
which $24,945 was a reimbursement of the Investment Adviser's expenses
attributable to administration of Stralem Fund. The total payment under Stralem
Fund's Contract for 1997 was $412,175 of which $21,240 was a reimbursement for
the Investment Adviser's expenses attributable to the administration of Stralem
Fund. The total payment under the Contract for 1996 was $365,410 of which
$20,600 was a reimbursement of the Investment Adviser's expenses attributable to
administration of Stralem Fund.
Contract with Stralem Equity Fund
Under its Contract, Stralem Equity Fund reimburses the Investment
Adviser for certain of its expenses attributable to the administration of
Stralem Equity Fund, including a proportionate part of the compensation of
employees of the Investment Adviser who perform the clerical, statistical and
related services for Stralem Equity Fund referred to above. Under such provision
of its Contract, Stralem Equity Fund reimburses the Investment Adviser for,
among other things, the actual expenses and compensation of its employees
incurred in preparing reports for Stralem Equity Fund, in performing Stralem
Equity 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
Stralem Equity Fund. Stralem Equity Fund pays all of its other costs and
expenses directly. As a consequence of such reimbursement of the Investment
Adviser and such direct payment of other costs, substantially all of Stralem
Equity Fund's expenses, other than those for office space and facilities, are
directly or indirectly paid by Stralem Equity Fund. Stralem Equity Fund's
Contract is reviewed annually by the Board of Trustees who may in their
discretion approve the continuation of the Contract.
Stralem Equity Fund pays the Adviser an advisory fee as described in its
Contract. Under its Contract, Stralem Equity 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 Stralem Equity Fund during
the quarterly period then ended:
1/4 of 1.50% of the first $100 million of such net asset value
(1.50% annually),
1/4 of 1.25% of the next $100 million of such net asset value
(1.25% annually), and
1/4 of 1.00% of such net asset value in excess of $200 million
(1.00% annually).
Each 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 or (2) by the vote of a majority of the outstanding shares of a
Fund, provided that in either event the continuance is also approved by the vote
of a majority of the Trustees 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, each Contract may be terminated, without
the payment of any penalty, at any time by the Board of Trustees or by the
Investment Adviser, or by the vote of a majority of the outstanding shares of a
Fund upon not more than 60 days' written notice, and will be automatically
terminated upon any assignment thereof.
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Allocation of Investments
The Investment Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended, and has as clients private
individuals, trusts, pension and profit sharing funds, some of whom, like the
Funds, have capital appreciation as an investment objective. As a result,
investment personnel of the Investment Adviser may at times consider purchases
and sales of the same investment securities for the Funds 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 Funds and such other accounts in an equitable manner with
each account paying the average share price for all transactions in a particular
security on a given business day. In making such allocation, the main factors
considered would be the respective investment objectives of a 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 a Fund
and each of the other accounts, the tax status of a Fund and the other accounts,
and the size of investment commitments generally held by a Fund and the other
accounts. All transaction costs relating to these purchases and sales will be
shared pro rata by the Funds and the other accounts based on each account's
participation in a transaction.
Within the limits set forth in Section 17 of the Investment Company Act
of 1940, as amended (the "1940 Act"), each Fund may invest in securities the
issuers of which are clients of the Investment Adviser, but such investments
would only be made in securities which are freely marketable under the
Securities Act of 1933 (the "Securities Act").
Each Fund pays an investment advisory fee to the Investment Adviser;
accordingly, investment advisory clients of the Investments Adviser who pay an
investment advisory fee based upon the amount of securities or cash with respect
to which the Investment Adviser renders investment advice and who own shares of
a Fund may also effectively pay an additional advisory fee with respect to these
shares. No additional investment advisory fees are charged to clients of the
Investment Adviser which are subject to the Employee Retirement and Income
Security Act on amounts invested by such clients in a Fund.
Mr. Philippe E. Baumann is an officer and trustee of the Funds and also
of the Investment Adviser. Mr. Abelson is an officer of the Funds and is also an
officer of the Investment Adviser. Mr. Labaune is an officer of the Funds and an
officer of the Investment Adviser. The following persons, as of March 5, 1999,
beneficially owned 5% or more of the Investment Adviser's outstanding voting
common stock: President of the Investment Adviser, Hirschel B. Abelson (33.3%);
Executive Vice President of the Investment Adviser, Philippe E. Baumann (33.3%);
and Vice President of the Investment Adviser, M. Joel Unger (33.3%). Messrs.
Abelson, Baumann and Unger together control the Investment Adviser. Messrs.
Abelson, Baumann and Unger, together with members of their families, also own
100% of the outstanding non-voting common stock of the Investment Adviser.
BROKERAGE ALLOCATION
Decisions to buy and sell securities for a Fund and assignment of
portfolio business and negotiation of commission rates, where applicable, are
made by the President and the Vice-President of the Funds, who are also officers
of the Investment Adviser. It is the Funds' policy to obtain the best prices and
execution of orders available, and, in doing so, the Funds 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 a Fund. Where commissions paid reflect services furnished to
a Fund in addition to execution of orders, each Fund will stand ready to
demonstrate that such services were bona fide and rendered for the benefit of
that Fund. It is possible that certain of such services may have the effect of
reducing the Investment Adviser's expenses.
During 1998, 1997 and 1996, Stralem Fund's brokerage amounted to
$37,935, $57,500 and $33,788, respectively, 100% of which was placed through the
Investment Adviser or affiliated persons of Stralem Fund or
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the Investment Adviser or any other brokers an affiliated person of which is an
affiliated person of Stralem Fund or the Investment Adviser. The Contracts do
not contain any provision requiring a Fund's brokerage to be transacted through
the Investment Adviser. 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 Adviser at
a commission rate less favorable than the Investment Adviser's contemporaneous
charges for its other most favored, but unaffiliated, customers; and, in
addition, a good faith judgment will be made that the Investment Adviser 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
Adviser's overall responsibilities to the Funds. Since the obligation already
exists to provide management (which would include elements of research and
related skills), brokerage commissions paid to the Investment Adviser will not
reflect anything other than payment for the execution services performed on the
particular transactions.
When a 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 a Fund a better execution will be achieved
through the use of a broker.
The Contracts do not provide for a reduction of the investment advisory
fee by any portion of the brokerage generated by portfolio transactions of a
Fund which the Investment Adviser may receive.
The Investment Adviser will not participate in commissions paid by a
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
Shares sold by the Funds 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 agreements dated as
of April 30, 1999 with Stralem Fund and ________ with Stralem Equity Fund, acts
without any compensation as exclusive representative of the Funds in making such
sales. It receives, on behalf of the Funds, subscriptions for shares and
payments therefor. The April 30, 1999 distribution agreement for Stralem Fund
replaced the prior distribution agreement dated February 28, 1977.
PERFORMANCE OF THE FUNDS
From time to time, the "average annual total return" and "total return"
of an investment in a 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 a
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 a 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 a Fund of future rates of return on
its shares. The total return of the shares of a Fund are affected by portfolio
quality, portfolio maturity, the type of investments a Fund holds, and operating
expenses.
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Total Returns
The "average annual total return" of a 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 a 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 Funds and its shareholders that are not
described in each Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussions here and in each Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. As a regulated investment company, a 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 a 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 a 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 a
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
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of the market discount which accrued during the period of time a 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 a 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 a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
a 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 a 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 a 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 a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a 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 a Fund as part of a "straddle" (which term generally
excludes a situation where the asset is stock and a Fund grants 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 a Fund grants an
in-the-money qualified covered call option with respect thereto. In addition, a
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.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by a 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, a 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 a Fund's
taxable year, at least 50% of the value of a 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 a Fund has
not invested more than 5% of the value of a Fund' total assets in securities of
such issuer and as to which a 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 Funds control 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.
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If, for any taxable year, a 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 a 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).
Each 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 a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
Each 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.
Each Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. Each Funds 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 a 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 a Fund's disposition of domestic "small business" stock will be
subject to tax.
Conversely, if a Fund elects to retain its net capital gain, a Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If a Fund elects to retain its net capital gain,
it is expected that a 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 a 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 a 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
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taxes such as the accumulated earnings tax and the personal holding company tax)
to the extent of the amount of qualifying dividends received by a Fund from
domestic corporations for the taxable year. Generally, a dividend Fund will not
be treated as a qualifying dividend (1) if it has been received with respect to
any share of stock that a 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 a 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
a 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 a 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 a 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.
Investment income that may be received by a 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 a 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 a Fund's assets to be invested in various countries is not known.
Distributions by a 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 a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of a 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 a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of a 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 a 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 a 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.
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Each 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 a 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 a 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 a 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 a 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 a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a 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 a Fund, capital gain dividends and amounts
retained by a Fund that are designated as undistributed capital gains.
If the income from a 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 a 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, a 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 a 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 a 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 SAI. 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.
B-14
<PAGE>
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 a Fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Each Fund is a separate series of Stralem Fund, a Delaware business
trust. 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 Trust Instrument
provides that shareholders of each Fund shall not be liable for the obligations
of that Fund. The Trust Instrument also provides for indemnification out of Fund
property for any shareholder held personally liable solely by his or her being
or having been a shareholder. The Trust Instrument also provides that a Fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of a 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 a Fund and in a 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 Funds and performs
auditing services for the Funds.
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 Adviser clears its securities transactions, acts as
the custodian for all securities of the Funds. The Custodian's principal office
is presently located at 787 Seventh Avenue, New York, New York 10019. Each 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 Funds.
Each Fund acts as its own transfer agent and registrar and dividend
agent.
FINANCIAL STATEMENTS
The audited financial statements for Stralem Fund (formerly Stralem
Fund, Inc.) and the notes thereto as of December 31, 1998 are incorporated
herein by reference to Stralem 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 Stralem 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 as an Exhibit to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed electronically on
February 26, 1999, accession number 0000922423-99-000367 and incorporated herein
by reference.
(iv) Form of Trust Instrument, filed as an Exhibit to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed electronically
on February 26, 1999, accession number 0000922423-99-000367 and incorporated
herein by reference.
(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 as an Exhibit to Post-Effective Amendment No.
40 to Registrant's Registration Statement on Form N-1A filed electronically on
February 26, 1999, accession number 0000922423-99-000367 and incorporated herein
by reference.
(c) Not applicable.
(d) Investment Advisory Contracts.
(i) Incorporated by reference from the 1980 Registration Statement.
(ii) Form of new Investment Advisory Agreement, filed as an Exhibit to
Post-Effective Amendment No. 40 to Registrant's Registration Statement on Form
N-1A filed electronically on February 26, 1999, accession number
0000922423-99-000367 and incorporated herein by reference.
(iii) Form of Investment Advisory Agreement for Stralem Equity Fund, filed
herewith.
C-1
<PAGE>
(e) Distribution Agreements.
(i) Incorporated by reference from the 1980 Registration Statement.
(ii) Form of new Distribution Agreement, filed as an Exhibit to Post-Effective
Amendment No. 40 to Registrant's Registration Statement on Form N-1A filed
electronically on February 26, 1999, accession number 0000922423-99-000367 and
incorporated herein by reference.
(iii) Form of Distribution Agreement for Stralem Equity Fund, filed herewith.
(f) Not applicable.
(g) Custodian Agreements.
(i) Incorporated by reference from the 1980 Registration Statement.
(ii) Form of new Custodian Agreement, filed as an Exhibit to Post-Effective
Amendment No. 41 to Registrant's Registration Statement on Form N-1A filed
electronically on April 29, 1999, accession number 0000922423-99-000570 and
incorporated herein by reference.
(h) Not applicable.
(i) Legal Opinion.
(i) Opinion of Kramer Levin Naftalis & Frankel LLP, filed as an Exhibit to
Post-Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A filed electronically on April 29, 1999, accession number
0000922423-99-000570 and incorporated herein by reference.
(ii) Opinion of Morris, Nichols, Arsht & Tunnell, filed as an Exhibit to
Post-Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A filed electronically on April 29, 1999, accession number
0000922423-99-000570 and incorporated herein by reference.
(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) Not applicable.
C-2
<PAGE>
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.
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 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 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.
C-3
<PAGE>
(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.
Item 26. Business and Other Connections of Investment Adviser.
The names and principal occupations of the officers and directors of
the Investment Adviser are:
Name and Title Principal Occupation
- -------------- --------------------
Hirschel B. Abelson President of Stralem & Company
Director and President Incorporated
Philippe E. Baumann Executive Vice President of Stralem &
Director and Executive Vice Company Incorporated
President
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
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
C-4
<PAGE>
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
Trustee of the Fund, is the Executive Vice-President and a Director
of Stralem & Company Incorporated. 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 Stralem
Fund at 405 Park Avenue, New York, New York 10022.
Item 29. Management Services.
Inapplicable.
Item 30. Undertakings.
The Registrant will provide each person to whom a prospectus is
delivered with a copy of Stralem Fund's most recent annual report to
shareholders upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its 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 13th day of October, 1999.
STRALEM FUND
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.
Signatures Title Dates
---------- ----- -----
/s/Philippe E. Baumann Trustee and President October 13, 1999
- ----------------------------- (Principal Executive
(Philippe E. Baumann) Officer)
/s/Kenneth D. Pearlman Trustee October 13, 1999
- ----------------------------
(Kenneth D. Pearlman)
/s/Jean Paul Ruff Trustee October 13, 1999
- -----------------------------
(Jean Paul Ruff)
/s/Michael Rubin Trustee October 13, 1999
- -----------------------------
(Michael Rubin)
/s/Hirschel B. Abelson Secretary and Treasurer October 13, 1999
- ---------------------------- (Principal
(Hirschel B. Abelson) Financial and Accounting
Officer)
<PAGE>
EXHIBIT INDEX
Ex. 99.B5 Form of Investment Advisory Agreement
Ex. 99.B6 Form of Distribution Agreement
Ex-99.B11(a) Consent of Kramer Levin Naftalis & Frankel LLP
Ex-99.B11(b) Consent of Richard A. Eisner & Company, LLP
INVESTMENT ADVISORY AGREEMENT
Between
STRALEM FUND
And
STRALEM & COMPANY INCORPORATED
This agreement is made this ___ day of _______, 1999 by and between Stralem
Fund, a Delaware business trust (the "Trust"), on behalf of Stralem Equity Fund,
a series of the Trust (the "Fund"), registered as an investment company under
the Investment Company Act of 1940, and Stralem & Company Incorporated, a
Delaware corporation (the "Adviser"), registered as an investment adviser under
the Investment Advisers Act of 1940 with respect to the following recital of
fact:
RECITAL
The Trust, on behalf of the Fund, intends to have the Adviser act as its
investment adviser to the Fund 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 Trust, on behalf of 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 Trust Instrument and
By-Laws, the Fund's fundamental investment policies as in effect from time to
time, and control and review by the 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.
2. Expenses. The expenses connected with the Fund shall be allocable between the
Fund and the Adviser as follows:
<PAGE>
(a) 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 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.
(b) All other costs and expenses 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.
Notwithstanding the obligation of the Fund to bear the expense
of the functions referred to in this subparagraph (b), the
Adviser may pay the salaries, including any applicable
employment or payroll taxes and other salary costs, of any
officer and other personnel carrying out such functions and
the Fund shall reimburse the Adviser therefor upon proper
accounting.
(c) All of the ordinary business expenses incurred in the
operations of the Fund and the offering of its shares shall be
borne by the Fund unless specifically provided otherwise in
this paragraph 2.
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 Funds 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
-2-
<PAGE>
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, Abrokerage 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
promulgated thereunder by the Securities and Exchange Commission. It is
understood that, consistent with the Advisers 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) .375 percent of the first $100 million of the
"Average Net Asset Value of the Fund" (determined in accordance with the
provisions of the Trust's current registration statement) at the close of
business on the last business days of each calendar week during such fiscal
quarter, (ii) .3125 percent of the next $100 million of the average net asset
value of the Fund at the close of business on such last business days, and (iii)
.25 percent of the average net asset value of the Fund in excess of $200 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) 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 January
31, April 30, July 31 and October 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 January 31, April 30, July 31 or
October 31 next succeeding such date.
(iii) The term "final period" shall mean the period commencing on the
February 1, May 1, August 1 or November 1 next preceding the date of the
termination of this Agreement and ending on such last mentioned date.
-3-
<PAGE>
(iv) The term "fiscal year" shall mean the final fiscal year and each
period of 12 consecutive calendar months ending on October 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 Equity 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.
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 "Trust" 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 "the Trust" 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
-4-
<PAGE>
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.
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
---------------------------------------
Hirschel B. Abelson
President
STRALEM FUND, on behalf of its Series, Stralem Equity Fund
By
---------------------------------------
Philippe E. Baumann
President
-5-
DISTRIBUTION AGREEMENT
Between
STRALEM FUND
And
STRALEM & COMPANY INCORPORATED
_________, 1999
Stralem & Company Incorporated
405 Park Avenue
New York, NY 10022
Dear Sirs:
STRALEM FUND, a Delaware business trust (the "Trust"), on behalf of Stralem
Equity Fund, a series of the Trust (the "Fund"), is registered as an investment
company under the Investment Company Act of 1940 and has registered ________
shares of beneficial interest in the Fund under the Securities Act of 1933,
Registration Number 2-34277, 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 Trust, on behalf of 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 Trust, on behalf of the Fund, that
you are willing to act as distributor, and it is, accordingly, agreed between us
as follows:
1. The Trust, on behalf of 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 kind, you will suspend such efforts.
<PAGE>
The Trust, on behalf of 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. It is understood that you do not
undertake to sell all or any specific portion of the shares of the Fund.
3. The shares of the Fund shall be sold by you at net asset value as determined
in the Trust'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 Trust, on
behalf of 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 Trust, on behalf of 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 Trust, on behalf of 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 Trust, on behalf of 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 Trust 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.
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<PAGE>
(c) You will not give any information or make any representations other
than as contained in the Registration Statement filed under the Securities Act
of 1933, as in effect from time to time, or in any supplemental sales literature
authorized by the Trust, on behalf of the Fund, for 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 Trust 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, on behalf of its series, Stralem Equity Fund
By: ______________________________________
Accepted:
STRALEM & COMPANY INCORPORATED
By: ______________________________________
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KRAMER LEVIN NAFTALIS & FRANKEL LLP
919 THIRD AVENUE
NEW YORK, N.Y. 10022-3852
(212) 715-9100
FAX
(212) 715-8000
----
WRITER'S DIRECT NUMBER
(212) 715-9100
October 13, 1999
Stralem Fund
405 Park Avenue
New York, New York 10022
Re: Stralem Fund
Registration No. 2-34277
Dear Gentlemen:
We hereby consent to the reference of our firm as counsel in
Post-Effective Amendment No. 42 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. 42 to the Registration Statement
(No. 2-34277) being filed under the Securities Act of 1933 (No. 22 under the
Investment Company Act of 1940) on Form N-1A by Stralem Fund 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 (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
October 12, 1999
