As filed with the Securities and Exchange Commission on November 18, 1996
Registration No. 33-66528
811-7912
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 4
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5
OLD WESTBURY FUNDS, INC.
c/o Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-8160
ROBERT C. ELLIOTT Copy to: MICHAEL R. ROSELLA, Esq.
Bessemer Trust Company, N.A. Battle Fowler LLP
630 Fifth Avenue 75 East 55th Street
New York, New York 10111 New York, New York 10022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on _________________ pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on _____________ pursuant to paragraph (a)(i)
/x/ 75 days after filing pursuant to paragraph (a)(ii)
/ / on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant declares that an indefinite amount of its common stock (par
value $.001 per share) is being registered by this Registration Statement
pursuant to Section 24(f) under the Investment Company Act of 1940, as amended,
and Rule 24f-2 thereunder. Registrant filed the notice required by Rule 24f-2
on December 27, 1995 for Registrant's fiscal year ending October 31, 1995.
414578.1
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OLD WESTBURY FUNDS, INC.
Registration Statement on Form N-1A
------------------------
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c)
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Part A
ITEM NO. PROSPECTUS HEADING
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1. Cover Page................................................................................... Cover Page
2. Synopsis...............................................................................Prospectus Summary;
Table of Fees
and Expenses
3 Condensed Financial Information.......................................................Financial Highlights
4. General Description of Registrant.....................................................Investment Objective
and Policies;
Investment Restrictions
5. Management of the Fund.............................................................Management of the Fund;
The Administrator; Custodian,
Transfer Agent and Dividend Agent;
Distribution and Service Plan
5A. Management's Discussion of Fund Performance.................................................Not Applicable
6. Capital Stock and Other Securities.....................................................Purchase of Shares;
Redemption of Shares;
Exchange of Shares;
Retirement Plans; Dividends,
Distributions and Taxes;
Calculation of Investment
Performance; General
7. Purchase of Securities Being Offered..................................Purchase of Shares; Net Asset Value;
Distribution and Service Plan
8. Redemption or Repurchase..............................................................Redemption of Shares
9. Legal Proceedings...........................................................................Not Applicable
Part B Caption in Statement of
ITEM NO. Additional Information
10. Cover Page..................................................................................... Cover Page
11. Table of Contents........................................................................Table of Contents
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414578.1
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<TABLE>
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12. General Information and History............................................Description of Each Portfolio's
Investment Securities; Advisor;
Administrator; Directors and Officers
13. Investment Objectives and Policies......................................Investment Objective and Policies;
Investment Restrictions
14. Management of the Fund...................................................Advisor; Administrator; Directors
and Officers
15. Control Persons and Principal
Holders of Securities...............................................................Directors and Officers
16. Investment Advisory and Other Services................................Advisor; Administrator; Distribution
and Service Plan; Custodian,
Transfer Agent and Dividend Agent;
Counsel and Independent Auditors
17. Brokerage Allocation......................................................Brokerage and Portfolio Turnover
18. Capital Stock and Other Securities............................................Description of Common Stock;
Description of Corporate Debt
Ratings
19. Purchase, Redemption and Pricing of
Securities Being Offered................................................Purchase and Redemption of Shares;
Net Asset Value
20. Tax Status......................................................................................Tax Status
21. Underwriters.................................................................Distribution and Service Plan
22. Calculation of Fund Performance................................................................Performance
23. Financial Statements..................................................................Financial Statements
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Subject to Completion Dated November , 1996
OLD WESTBURY GROWTH OPPORTUNITY FUND
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone: (___) ___-____
PROSPECTUS
December , 1996
Old Westbury Funds, Inc. (the "Fund") is a diversified, open-end
management investment company currently consisting of two series, one of which,
the Old Westbury Growth Opportunity Fund portfolio (the "Portfolio"), is
discussed herein. The Portfolio is a fund whose investment objective is to seek
capital appreciation. The Portfolio seeks to achieve its objective by investing
primarily in a diversified portfolio of the securities of small and medium
sized companies that have the potential to become major enterprises. Such
companies will be based in the United States and Canada. There can be no
assurance that the Portfolio will achieve its objective. See "Investment
Objectives and Policies."
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Portfolio. A Statement of
Additional Information, dated , 1996, containing additional and more complete
information about the Portfolio has been filed with the Securities and Exchange
Commission and is incorporated by reference in its entirety into this
Prospectus. For a free copy, write or call the Portfolio at the telephone
number or address set forth above.
Bessemer Trust Company, N.A. ("Bessemer") is the investment advisor of
the Portfolio. Edgewood Services, Inc. ("Edgewood") is the distributor of the
Portfolio's shares and Federated Administrative Services ("Federated") is the
administrator of the Portfolio. Bessemer is a national banking association.
Edgewood is a registered broker-dealer and member of the National Association
of Securities Dealers, Inc.
Shares of the Portfolio are not deposits or obligations of, or
guaranteed or endorsed by any bank, and the shares are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
This Prospectus should be retained
by investors for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these Securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold or may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or
solicitation of an offer to buy nor shall there be any sale of these Securities
in any state in which said offer, solicitation or sale would be unlawful prior
to the registration or qualification under the Securities Laws of any state.
414574.1
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing in this Prospectus.
The Fund: Old Westbury Funds, Inc. is an open-end, diversified,
management investment company currently consisting of two series, one of which,
the Old Westbury Growth Opportunity Fund portfolio (the "Portfolio"), is
described herein.
Investment Objective: The Portfolio's investment objective is to seek
capital appreciation. The Portfolio seeks to achieve its objective by investing
primarily in a diversified portfolio of securities of small and medium sized
companies that have the potential to become major enterprises. Such companies
will be based in the United States and Canada. There is no assurance that the
Portfolio will achieve its investment objective. The investment objective of
the Portfolio and its investment restrictions described in the Statement of
Additional Information are fundamental and may not be changed without
shareholder approval.
Management and Fees: Bessemer Trust Company, N.A. (the "Advisor")
serves as the Portfolio's investment advisor and is compensated for its
services and its related expenses at an annual rate of 0.80% of the first $100
million of the Portfolio's average daily net assets, 0.75% of the second $100
million of the Portfolio's average daily net assets and 0.70% of the
Portfolio's average daily net assets exceeding $200 million. Edgewood Services,
Inc. (the "Distributor") will act as distributor for the Portfolio's shares.
The Portfolio has a distribution and service plan (the "Plan") which permits it
to pay (1) the Distributor a service fee of up to 0.25% per annum of the
Portfolio's average daily net assets to permit it to compensate broker-dealers
whose clients are Fund shareholders for providing shareholder services and (2)
reimbursements of up to 0.15% per annum of the Portfolio's average daily net
assets for distribution and marketing expenses. In addition, under the Plan,
the Advisor will act as a shareholder servicing agent for the Portfolio,
pursuant to which the Portfolio is permitted to pay the Advisor a service fee
of a maximum of 0.25% per annum of the Portfolio's average daily net assets to
compensate it and to permit it to compensate banks and other financial
institutions (the Advisor with such other institutions, each a "Shareholder
Servicing Agent") whose clients are Fund shareholders for providing shareholder
services. The service fees payable to the Distributor will only be paid by the
Portfolio with respect to the value of shares of the Portfolio represented by
the clients of broker-dealers that have agreements with the Distributor (each a
"Broker-Dealer," or just "Dealer"), and the service fees payable to the Advisor
will only be paid by the Portfolio with respect to the value of shares of the
Portfolio represented by the clients of the Advisor and the other Shareholder
Servicing Agents that have agreements with the Advisor. Therefore, the total
service fees in the aggregate payable to the Distributor and the Advisor
(collectively, the "Shareholder Servicing Fees") for shareholder servicing will
not exceed 0.25% per annum of the average daily net assets of the Portfolio.
However, the maximum amount payable under the Plan is 0.40% per annum of the
average daily net assets of the Portfolio. See "Distribution and Service Plan."
How to Purchase Shares: Shares of the Portfolio may be purchased at
the net asset value per share next determined after receipt of an order by the
Portfolio's Distributor or transfer agent in proper form with accompanying
check or other bank wire payment arrangements satisfactory to the Portfolio
plus a sales load of up to 4.5%. Shares of the Portfolio may be purchased only
through a Shareholder Servicing Agent, Dealer, or the Distributor. The minimum
initial investment is $1,000. See "Purchase of Shares" and "Retirement Plans."
Shares of the Portfolio may be purchased only in those states where they may
lawfully be sold.
How to Sell Shares: Shares of the Portfolio may be redeemed by the
shareholder at any time at the net asset value per share next determined after
the redemption request is received by the Portfolio's Distributor or transfer
agent in proper order. See "Redemption of Shares."
Dividends and Reinvestment: Each dividend and capital gains
distribution, if any, declared by the Portfolio on its outstanding shares will,
unless a shareholder elects otherwise, be paid on the payment date in
additional shares of the Portfolio having an aggregate net asset value as of
the ex-dividend date of such dividend or distribution equal to the cash amount
of such distribution. Shareholders may change this election by notifying
414574.1
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their Shareholder Servicing Agent or Broker-Dealer in writing at any time prior
to the record date for a particular dividend or distribution. There are no
sales or other charges in connection with the reinvestment of dividends and
capital gains distributions. There is no fixed dividend rate, and there can be
no assurance that the Portfolio will pay any dividends or realize any capital
gains. However, the Portfolio currently intends to pay dividends and capital
gains distributions, if any, on an annual basis. See "Dividends, Distributions
and Taxes."
Risk Considerations: Investors should consider the risks associated
with investing in emerging growth companies, which may involve greater price
volatility and risk than those funds which do not invest in such companies. In
addition, Investors should consider the risks associated with investing in
Canadian equity securities, since less information about Canadian companies may
be publicly available than is available about companies in the United States.
The Portfolio may invest in warrants, when-issued and delayed delivery
securities, and options and futures contracts. The Portfolio may not invest
more than 15% of its net assets in illiquid securities. For a more detailed
description of the risks associated with these investments, see "Additional
Investment Information and Risk Factors".
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TABLE OF FEES AND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases......................................................................4.5%
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(Percent of average net assets)
Advisory Fee (after waiver)................................................................................. %
12b-1 Expenses (after waiver)............................................................................... %
Estimated Other Expenses (after waivers and reimbursements)................................................. %
Administrative Services Fees (after waiver)....................................................... %
Estimated Total Operating Expenses (after waivers and reimbursements)....................................... %
</TABLE>
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EXAMPLE: 1 year 3 years
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You would pay the following expenses
on a $1,000 investment, assuming a
5% annual return and redemption at
the end of each time period....... $ $
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The foregoing table is to assist you in understanding the various
estimated costs and expenses that an investor in the Portfolio will bear
directly or indirectly. The sales load is a one-time charge paid at the time of
purchase of the shares. An investor may be entitled to a reduction in such
sales loads. For more information concerning the reduction in sales loads, see
"Purchase of Shares." Under the Plan, the Portfolio may bear up to 0.15% in
"asset based sales charges" (in addition to the Plan's shareholder servicing
fees) and, therefore, long-term shareholders may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. See
"Distribution and Service Plan." Investors purchasing or redeeming shares
through Shareholder Servicing Agents and Dealers may be charged a fee in
connection with such service and, therefore, the net return to such investors
may be less than the net return by investing in the Portfolio directly. The
Advisor, the Administrator and the Distributor may, at their discretion, waive
all or a portion of their fees. Absent such waivers, the Advisory fee, the
Administration fee and the maximum 12b-1 expenses would have been __%, __% and
__%, respectively. In addition, Estimated Other Expenses and Estimated Total
Operating Expenses would have been __% and __%, respectively, absent any fee
waivers and/or reimbursements. The expenses reflected above are estimates of
the expenses the Portfolio will incur during its first fiscal year. For a
further discussion of these fees see "Management of the Fund" and "Distribution
and Service Plan" herein. The expense amounts contained in this example may
increase if the fee waivers are discontinued. The figures reflected in this
example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than those shown above.
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INVESTMENT OBJECTIVE AND POLICIES
The Portfolio's investment objective is to seek capital appreciation.
The Portfolio seeks to achieve its objective by investing primarily in a
diversified portfolio of securities of small and medium-sized companies that
have the potential to become major enterprises. These United States and
Canadian based companies will generally offer special opportunities for growth
and capital appreciation without regard to current income and with earnings
growth that over time would be well above the growth rate of the overall
economy and the rate of inflation. Additionally, these companies will have a
rate of growth that is expected to accelerate as a result of a catalyst, such
as new products, changes in customer preferences, new management or changes or
improvements in the economy. Under normal circumstances, the Portfolio
generally will invest at least 65%/85% of its total assets in companies with
market capitalizations of under $3 billion. There is no assurance that the
Portfolio will achieve its investment objective. The investment objective of
the Portfolio, which is described herein, is fundamental and may not be changed
without shareholder approval. The Portfolio's investment policies, however, may
be changed by the Board of Directors without shareholder approval.
Although it is not the Portfolio's policy to invest or trade for
short-term gains, the Portfolio may, from time to time, sell a security
regardless of the length of time that it has been held in order to realize a
profit or to avoid anticipated or further loss.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
The following is a discussion of the various investments eligible to
be purchased by the Portfolio, the investment techniques anticipated to be
employed by the Portfolio and the risks associated with such investments. See
"Description of Each Portfolios' Investment Securities" in the Statement of
Additional Information for additional investments and their associated risk
factors.
Small and Mid Capitalization Stocks
Small market capitalization companies ("Small-Cap Companies") are
those with market capitalizations of $1 billion or less at the time of the
Trust's investment. Many Small-Cap Companies will have had their securities
publicly traded, if at all, for only a short period of time and will not have
had the opportunity to establish a reliable trading pattern through economic
cycles. Investing in small and mid capitalization stocks may involve greater
risk than investing in large capitalization stocks and more established
companies, since they can be subject to more abrupt and erratic movements. The
price volatility of Small-Cap Companies is relatively higher than larger, older
and more mature companies. The greater price volatility of Small-Cap Companies
may result from the fact that there may be less market liquidity, less
information publicly available or few investors who monitor the activities of
these companies. In addition, the market prices of these securities may exhibit
more sensitivity to changes in industry or general economic conditions. Some
Small-Cap Companies will not have been in existence long enough to experience
economic cycles or to know whether they are sufficiently well managed to
survive downturns or inflationary periods. Further, a variety of factors may
affect the success of a company's business beyond the ability of its management
to prepare or compensate for them, including domestic and international
political developments, government trade and fiscal policies, patterns of trade
and war or other military conflict which may affect particular industries or
markets or the economy generally.
Mid capitalization companies ("Mid-Cap Companies") are those with
market capitalizations between $1 billion and $3.0 billion. The risks
associated with investments in Mid-Cap Companies are similar to those
associated with Small-Cap Companies as discussed above.
Emerging Growth Companies
The nature of investing in emerging growth companies involves a
greater level of risk than would be associated when investing in more
established seasoned companies. Emerging growth companies are beyond their
initial start-up periods but have not yet reached a state of established growth
or maturity. The rate of growth of such companies may at times be dramatic;
such companies often provide new products or services that enable them
414574.1
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to capture a dominant or important market position, or have a special area of
expertise, or are able to take advantage of changes in demographic factors in a
more profitable way than other companies. These companies may have limited
product lines, markets or financial resources and may lack management depth
since they have not been tested by time or the marketplace. The securities of
emerging growth companies often have limited marketability and may be subject
to more volatile market movements than securities of larger, more established
growth companies or the market averages in general. Shares of the Portfolio,
therefore, may be subject to greater fluctuation in value than funds investing
entirely in proven growth stocks.
Common and Preferred Stocks
Since the Portfolio contains common stocks of domestic issuers, an
investment in Units of the Portfolio should be made with an understanding of
the risks inherent in any investment in common stocks including the risk that
the financial condition of the issuers of the Securities may become impaired or
that the general condition of the stock market may worsen (both of which may
contribute directly to a decrease in the value of the Securities and thus in
the value of the Units). Additional risks include risks associated with the
right to receive payments from the issuer which is generally inferior to the
rights of creditors of, or holders of debt obligations or preferred stock
issued by, the issuer. Holders of common stocks have a right to receive
dividends only when, if, and in the amounts declared by the issuer's board of
directors and to participate in amounts available for distribution by the
issuer only after all other claims on the issuer have been paid or provided
for. By contrast, holders of preferred stocks usually have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, normally on a cumulative basis. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also usually entitled to rights on liquidation which are senior to
those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks.
Moreover, common stocks do not represent an obligation of the issuer
and therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even
preferred stock by an issuer will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the economic
interest of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Further, unlike debt securities which typically have
a stated principal amount payable at maturity (which value will be subject to
market fluctuations prior thereto), common stocks have neither fixed principal
amount nor a maturity and have values which are subject to market fluctuations
for as long as the common stocks remain outstanding. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases in value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Portfolio thus may be expected to fluctuate over the life of the
Portfolio.
Canadian Companies
Canadian securities are sensitive to conditions within Canada, but
also tend to follow the U.S. market. The country's economy relies strongly on
the production and processing of natural resources. Also, the government has
attempted to reduce restrictions against foreign investment, and its recent
trade agreements with the U.S. and Mexico are expected to increase trade. Also,
demand by many citizens in the Province of Quebec for succession from Canada
may significantly impact the Canadian economy. For further disclosure and risk
factors regarding investment in foreign securities, generally, see "Foreign
Securities" in the Statement of Additional Information.
Convertible Securities
The convertible securities in which the Portfolio may invest include
any debt securities or preferred stock which may be converted into common stock
or which carry the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually
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of the same company, at specified prices within a certain period of time.
Convertible securities generally have paid dividends or interest at rates
higher than common stocks but lower than non-convertible securities. They
usually participate to a lesser degree in the appreciation or the depreciation
of the underlying stock into which they are convertible.
Warrants
The Portfolio may invest in warrants, which entitle the holder to buy
common stock from the issuer at a specific price (the strike price) for a
specific period of time (generally two or more years). The strike price of
warrants sometimes is much lower than the current market price of the
underlying securities, yet warrants are subject to similar price fluctuations.
As a result, warrants may be more volatile investments than the underlying
securities.
Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase securities on a when-issued or delayed
delivery basis. Delivery of and payment for these securities may take as long
as a month or more after the date of the purchase commitment. The value of
these securities is subject to market fluctuation during this period and for
fixed income investments no interest accrues to the Portfolio until settlement.
At the time of settlement, a when-issued security may be valued at less than
its purchase price. The Portfolio maintains with the custodian a separate
account with a segregated portfolio of securities in an amount at least equal
to these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
Illiquid Investments; Privately Placed and other Unregistered Securities
The Portfolio may not acquire any illiquid securities if, as a result
thereof, more than 15% of the market value of the Portfolio's net assets would
be in illiquid investments. Subject to this non-fundamental policy limitation,
the Portfolio may acquire investments that are illiquid or have limited
liquidity, such as private placements or investments that are not registered
under the Securities Act of 1933 (the "1933 Act") and cannot be offered for
public sale in the United States without first being registered under the 1933
Act. An illiquid investment is any investment that cannot be disposed of within
seven days in the normal course of business at approximately the amount at
which it is valued by the Portfolio. The price the Portfolio pays for illiquid
securities or receives upon resale may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly the valuation of
these securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to
institutional investors without registration under the 1933 Act. These
securities may be determined to be liquid in accordance with guidelines
established by the Advisor and approved by the Directors. The Directors will
monitor the Advisor's implementation of these guidelines on a periodic basis.
The Portfolio may invest in securities listed on a securities exchange
or traded in an over-the-counter market, and may invest in certain restricted
or unlisted securities.
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Money Market Instruments
The Portfolio may maintain a portion of its assets in U.S. dollar
denominated money market funds for temporary, defensive purposes. This reserve
position provides flexibility in meeting redemptions, expenses, and the timing
of new investments, and serves as a short-term defense during periods of
unusual market volatility. The Portfolio may invest in money market instruments
although it intends to stay invested in equity securities to the extent
practical in light of its objective and long-term investment perspective. The
money market investments permitted for the Portfolio include obligations of the
U.S. Government and its agencies and instrumentalities, other debt securities,
commercial paper, bank obligations and money market mutual funds. For more
detailed information about these money market investments, see "Description of
Each Portfolio's Investment Securities" in the Statement of Additional
Information.
Derivatives
The Portfolio may invest in various instruments that are commonly
known as derivatives. Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset,
or market index. A mutual fund, of course, derives its value from the value of
the investments it holds and so might even be called a "derivative." There are
in fact many different types of derivatives and many different ways to use
them. Such derivative transactions may be used to adjust the risk and return
characteristics of the Portfolio or to adjust the overall exposure to certain
markets. However, these techniques or investments may result in a loss,
regardless of whether the intent was to reduce risk or increase return, with
unexpected changes in market conditions or if the counterparty to the
transaction does not perform as promised. Additionally, these techniques or
investments may increase volatility of the Portfolio and may involve a small
investment of cash relative to the magnitude of the risk assumed. Futures and
options are commonly used for traditional hedging purposes to attempt to
protect a fund from exposure to changing interest rates, securities prices, or
for cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
The Portfolio may use derivatives for hedging purposes, cash management
purposes and as a substitute for investing directly in equity instruments or
other securities. A description of the derivatives that the Portfolio may use
and some of their associated risks follows.
Options and Futures Transactions. The Portfolio may use financial
futures contracts, options on futures contracts, call and put options on
securities and financial indices (collectively, "futures and options"). Futures
contracts provide for the sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and price.
An option is a legal contract that gives the holder the right to buy or sell a
specified amount of the underlying security or futures contract at a fixed or
determinable price upon the exercise of the option. A call option conveys the
right to buy and a put option conveys the right to sell a specified quantity of
the underlying instrument.
The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the Portfolio's return. While the use of these
instruments by the Portfolio may reduce certain risks associated with owning
its portfolio securities, these techniques themselves entail certain other
risks. If the Advisor applies a strategy at an inappropriate time or judges
market conditions or trends incorrectly, options and futures strategies may
lower the Portfolio's return. Certain strategies limit the Portfolio's
potential to realize gains as well as limit its exposure to losses. The
Portfolio could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments. There can be no
assurance that a liquid market will exist at a time when the Portfolio seeks to
close out a futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Portfolio from liquidating an
unfavorable position and the Portfolio would remain obligated to meet margin
requirements until the position is closed. In addition, the Portfolio
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will incur transaction costs, including trading commissions and options
premiums, in connection with its futures and options transactions, and these
transactions could significantly increase the Portfolio's turnover rate.
The Portfolio will not enter into futures contracts or options thereon
to the extent that its outstanding obligations to purchase securities under
these contracts in combination with its outstanding obligations with respect to
options transactions would exceed 35% of its total assets. The Portfolio will
use financial futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
Commodity Futures Trading Commission, or, with respect to positions in
financial futures and related options that do not qualify as "bona fide
hedging" positions, will enter such non-hedging positions only to the extent
that assets committed to initial margin deposits on such instruments, plus
premiums paid for open futures options positions, less the amount by which any
such positions are "in-the-money", do not exceed 5% of the Portfolio's net
assets. The Portfolio will segregate assets or "cover" its positions consistent
with requirements under the 1940 Act.
Portfolio Turnover
Purchases and sales are made for the Portfolio whenever necessary, in
the Advisor's opinion, to meet the Portfolio's objective. The Advisor expects
that the turnover of the Portfolio should not exceed ____%. Portfolio turnover
may involve the payment by the Portfolio of dealer spreads or underwriting
commissions, and other transaction costs, on the sale of securities, as well as
on the investment of the proceeds in other securities. The greater the
portfolio turnover the greater the transaction costs to the Portfolio which
could have an effect on the Portfolio's total rate of return. In order to
qualify as a regulated investment company, less than 30% of the Portfolio's
gross income must be derived from the sale or other disposition of stock,
securities or certain other investments held for less than three months.
Although increased portfolio turnover (over 100% per year) may increase the
likelihood of additional realized capital gains for the Portfolio, the
Portfolio expects to satisfy the 30% income test.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the total assets of the
Portfolio are subject to the following limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer and
(b) the Portfolio may not own more than 10% of the outstanding voting
securities of any one issuer. The classification of the Fund as a diversified
investment company is a fundamental policy of the Fund and may be changed only,
with respect to the Portfolio, with the approval of the holders of a majority
of the outstanding shares of the Portfolio. As used in this Prospectus, the
term "majority of the outstanding shares of the Portfolio" means, respectively,
the vote of the lesser of (i) 67% or more of the shares of the Portfolio
present at a meeting, if more than 50% of the outstanding shares of the
Portfolio are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Portfolio.
The Portfolio also operates under certain investment restrictions
which are deemed fundamental policies of the Portfolio and also may be changed
only with the approval of the holders of a majority of the Portfolio's
outstanding shares. In addition to other restrictions listed in the Statement
of Additional Information, the Portfolio may not (except where specified):
(i) mortgage, pledge or hypothecate any assets except that the
Portfolio may pledge not more than one-third of its total assets to secure
borrowings made in accordance with paragraph (ii) below. However, although not
a fundamental policy of the Portfolio, as a matter of operating policy in order
to comply with certain state statutes, the Portfolio will not pledge its assets
in excess of an amount equal to 10% of net assets; or
(ii) purchase securities on margin or borrow money, except from banks
for extraordinary or emergency purposes (not for leveraging or investment),
provided that such securities in the aggregate do not exceed an amount equal to
one-third of the value of the total assets of the Portfolio less its
liabilities (not including the amount borrowed) at the time of the borrowing,
and further provided that 300% asset coverage is maintained at all times.
414574.1
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The following are investment restrictions, in addition to other
restrictions in the Statement of Additional Information, that may be changed by
a vote of the majority of the Board of Directors. The Portfolio will not:
(a) invest more than 15% of the market value of the Portfolio's net
assets in illiquid investments including time deposits and repurchase
agreements of over seven days' duration; or
(b) purchase securities while borrowings exceed 5% of its total assets.
If a percentage restriction (except (ii) above) is adhered to at the
time an investment is made, a later change in percentage resulting from changes
in the value of the Portfolio's investment securities will not be considered a
violation of the Portfolio's restrictions.
For a more detailed discussion of these investment restrictions, see
"Investment Restrictions" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund's Board of Directors, which has overall responsibility for
the management of the Fund, has employed Bessemer Trust Company, N.A. to serve
as Advisor of the Portfolio. The Advisor is a national bank engaged primarily
in investment management, trust, fiduciary and other financial services which
it provides to individuals of high net worth and institutions. The Advisor
supervises all aspects of the Portfolio's operations and provides investment
advice and portfolio management services to the Portfolio. Subject to the
supervision of the Fund's Board of Directors, the Advisor makes the Portfolio's
day-to-day investment decisions with respect to all purchases and sales,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments. The Advisor also provides supervisory personnel who
are responsible for supervising the performance of the Portfolio's
administrator. However, the administrator, Federated Administrative Services
(the "Administrator"), provides personnel to perform the operational components
of all administrative services.
Mr. Harry P. Rekas is primarily responsible for the day-to-day
investment management of the Portfolio. Mr. Rekas has been managing equity
portfolios since 1981, when he joined Oppenheimer Capital Corporation. Most
recently he managed the Capital Appreciation portfolio at AIG Investment
Management Corporation. The portfolio had assets in excess of $300 million and
was focused on small and mid capitalization equities. In addition to his
investment management experience Mr. Rekas has been a commercial lender with
Fidelity Bank and assistant treasurer with Computer Science Corporation. After
graduating from the Wharton School of the University of Pennsylvania, where he
majored in Finance, he spent four years on active duty with the U.S. Air Force,
attaining the rank of Captain. Additionally, he earned an MBA degree from
Pepperdine University. A more detailed description of Mr. Rekas's business
experience is set forth under "Management--Directors and Officers" in the
Statement of Additional Information.
Due to the services performed by the Advisor and the Administrator,
the Fund currently has no employees and its officers are not required to devote
their full time to the affairs of the Fund. The Statement of Additional
Information contains general background information regarding each Director and
principal officer of the Fund.
The Advisor, along with its associated entities, Bessemer Trust
Company (New Jersey) and Bessemer Trust Company of Florida, is a subsidiary of
The Bessemer Group, Incorporated, a registered bank holding company in the
State of New Jersey, which is wholly owned by trusts for the benefit of the
descendants of Henry Phipps, a founder of the Carnegie Steel Company. In
addition to services provided to the Phipps family, which now account for less
than 20% of the Advisor's business, the Bessemer banks at present provide
investment, fiduciary and personal banking services to approximately 740
clients with total assets under management of about $10.7 billion,
approximately $420 million of which is represented by investments in emerging
growth securities. The banks have offices in New York, New York; Washington,
D.C.; Woodbridge, New Jersey; Palm Beach, Florida; Miami, Florida; Naples,
Florida; Chicago, Illinois; Los Angeles, California; London, England and Grand
Cayman, Cayman Islands B.W.I. In addition to the Portfolio, Bessemer is
investment advisor to the Old Westbury International Fund, the only other
active series of the Fund. The Advisor's address is 630 Fifth Avenue, New York,
New York 10111.
414574.1
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<PAGE>
The Advisor may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other clients
simultaneously with the Portfolio. If transactions on behalf of more than one
client during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price. It is the policy of the Advisor to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by the Advisor to the accounts involved, including the Portfolio. When two or
more of the clients of the Advisor, including the Portfolio, are purchasing the
same security in a given day from the same broker-dealer, such transactions may
be averaged as to price.
The Advisory Contract contains provisions relating to the selection of
securities brokers to effect the portfolio transactions of the Portfolio. Under
those provisions, subject to applicable law and procedures adopted by the Board
of Directors, the Advisor may (i) pay commissions to brokers which are higher
than might be charged by another qualified broker to obtain brokerage and/or
research services considered by the Advisor to be useful or desirable for its
investment management of the Portfolio and/or other advisory accounts of itself
and any investment advisor affiliated with it; and (ii) consider the sales of
shares of the Portfolio by brokers as a factor in its selection of brokers of
Portfolio transactions.
As compensation for its services and the related expenses borne by the
Advisor, the Portfolio pays the Advisor a fee, computed daily and payable
monthly, in accordance with the following schedule: 0.80% of the first $100
million of the Portfolio's average net assets, 0.75% of the second $100 million
of the Portfolio's average net assets and 0.70% of the Portfolio's average net
assets exceeding $200 million. The Statement of Additional Information contains
further information about the Advisory Contract including a more complete
description of the advisory and expense arrangements. Pursuant to the
Portfolio's Distribution and Service Plan, the Advisor will also act as a
shareholder servicing agent for the Portfolio pursuant to which the Portfolio
is permitted to pay the Advisor a maximum of 0.25% per annum of the Portfolio's
average daily net assets to compensate it and to permit the Advisor to
compensate banks and other financial institutions (the Advisor with such other
institutions, each a "Shareholder Servicing Agent") whose clients are Fund
shareholders for providing shareholder services. In addition, the Plan provides
that the Advisor may use the advisory fee or its own resources for distribution
and servicing purposes including defraying the costs of performing shareholder
servicing functions on behalf of the Portfolio, compensating others, including
banks, broker-dealers and other organizations whose customers or clients are
shareholders of the Portfolio for providing assistance in distributing the
Portfolio's shares and defraying the cost of shareholder servicing and other
promotional activities. See "Distribution and Service Plan."
The Portfolio is responsible for payment of its expenses, including,
without limitation, the following types of expenses: fees payable to the
Advisor, Distributor, Administrator, custodian, transfer agent and dividend
agent; brokerage and commission expenses; foreign, federal, state or local
taxes, including issuance and transfer taxes incurred by or levied on them;
commitment fees, certain insurance premiums and membership fees and dues in
investment company organizations; interest charges on borrowings;
telecommunications expenses; recurring and nonrecurring legal, accounting,
recordkeeping and auditing expenses; costs of organizing and maintaining the
Fund's existence as a corporation; compensation, including Directors' fees, of
any Directors, officers or employees who are not officers or employees of the
Advisor, the Administrator or their affiliates; costs of other personnel
providing administrative and clerical services; costs of shareholder services,
including charges and expenses of persons providing confirmations of
transactions in the Portfolio's shares, periodic statements to shareholders and
recordkeeping services and costs of shareholders' reports, proxy solicitations,
and corporate meetings; fees and expenses of registering their shares under the
appropriate federal securities laws and of qualifying their shares under
applicable state securities laws, including expenses attendant upon the initial
registration and qualification of these shares and attendant upon renewals of,
or amendments to, those registrations and qualifications; any other
distribution or promotional expenses contemplated by an effective plan adopted
by the Fund pursuant to Rule 12b-1 under the 1940 Act; and expenses of
preparing, printing and delivering the initial registration statement and of
preparing, printing and delivering the Prospectus to existing shareholders and
of printing shareholder application forms for shareholder accounts. The
Distributor pays the promotional and advertising expenses related to the
distribution of the Portfolio's shares and for the printing of all Portfolio
prospectuses used in connection with the distribution and sale of Portfolio
shares for which it may be reimbursed under the Plan. See "Distribution and
Service Plan" herein and in the Statement of Additional Information. The
Advisor has agreed to a reduction in the
414574.1
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<PAGE>
amounts payable to it and to reimburse the Portfolio, as necessary, if in any
fiscal year the sum of the Portfolio's expenses exceeds the limits set by
applicable regulations of state securities commissions.
THE ADMINISTRATOR
Federated Administrative Services, the Administrator, has its
principal office at Federated Tower, Pittsburgh, Pennsylvania 15222-3779. The
Administrator serves as administrator of other mutual funds. The Portfolio will
not invest in these funds or in any other fund which may in the future be
affiliated with the Administrator or any of its affiliates.
Pursuant to the Administrative Services Agreement with the Portfolio,
the Administrator provides the overall administration of the Portfolio, subject
to the supervision of the Fund's Board of Directors including, among other
responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the independent contractors and
agents of the Portfolio; the preparation and filing of all documents required
for compliance by the Portfolio with applicable laws and regulations; providing
equipment and clerical personnel necessary for maintaining the organization of
the Portfolio; preparation of certain documents in connection with meetings of
the Board of Directors and shareholders; and the maintenance of books and
records of the Portfolio. The Administrator provides persons satisfactory to
the Board of Directors of the Fund to serve as officers and directors of the
Fund, as the case may be. Such officers, as well as certain other employees and
directors of the Fund, may be directors, officers or employees of the
Administrator or its affiliates. For providing these services and for bearing
the related expenses, the Administrator receives from the Portfolio a fee
accrued daily and paid monthly at an annual rate equal to 0.15% of the average
daily net assets of the Portfolio up to $100 million of assets; 0.10% of such
assets from $100 million to $250 million; and 0.05% of such assets over $250
million.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with
a plan permitted by Rule 12b-1. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") for the Portfolio and, pursuant to
the Plan, the Portfolio has entered into a Distribution Agreement and a
Shareholder Servicing Agreement with the Distributor and a Shareholder
Servicing Agreement with the Advisor.
For its services under its Shareholder Servicing Agreement, the
Distributor is permitted to receive payments from the Portfolio to permit it to
make payments to broker-dealers, with which it has written agreements and whose
clients are Fund shareholders (each a "Broker-Dealer"), for providing
shareholder services up to 0.25% per annum of the Portfolio's average daily net
assets attributable to the clients of these Broker-Dealers. For its services
under its Shareholder Servicing Agreement, the Advisor is permitted to receive
a payment from the Portfolio of 0.25% per annum of the Portfolio's average
daily net assets attributable to the clients of the Advisor (and its
affiliates) to compensate it for providing shareholder services to such
clients. In addition, the Shareholder Servicing Agreement provides that the
Advisor is permitted to receive payments from the Portfolio (together with the
Distributor's fee the "Shareholder Servicing Fee") to actually permit it to
make payments to banks, savings and loans and other financial institutions with
which it has written agreements and whose clients are Fund shareholders (each
institution, a "Shareholder Servicing Agent") for providing shareholder
services up to 0.25% per annum of the Portfolio's average daily net assets
attributable to the clients of the other Shareholder Servicing Agents.
Therefore, the total of the Shareholder Servicing Fees in the aggregate payable
to the Distributor and the Advisor will not exceed 0.25% of the net assets of
the Portfolio.
Each Shareholder Servicing Agent and Broker-Dealer will, as agent for
its customers, among other things; answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Portfolio may be effected and certain other matters pertaining to the
Portfolio; assist shareholders in designating and changing dividend options,
account designations and addressees; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in
processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to
414574.1
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<PAGE>
purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in shareholder
designated accounts; furnish (either separately or on an integrated basis with
other reports sent to a shareholder by the Portfolio) monthly and year-end
statements and confirmation of purchases and redemptions; transmit, on behalf
of the Portfolio, proxy statements, annual reports, updating prospectuses and
other communications from the Portfolio to shareholders of the Portfolio;
receive, tabulate and transmit to the Portfolio proxies executed by
shareholders with respect to meeting of shareholders of the Portfolio; and
provide such other related services as the Portfolio or a shareholder may
request. As set forth in the preceding paragraph, for these services, each
Shareholder Servicing Agent and Broker-Dealer (either directly or from the
Distributor or Advisor) receives a fee, which may be paid periodically, on an
annual basis equal to 0.25% of the average daily net assets of the Portfolio
represented by shares owned during the period for which payment is being made
by investors with whom such Shareholder Servicing Agent or Broker-Dealer
maintains a servicing relationship. Shareholder Servicing Agents and
Broker-Dealers may waive all or a portion of their Shareholder Servicing Fees.
In addition, the Distribution Agreement with the Distributor provides for
reimbursement to the Distributor by the Portfolio for its distribution,
promotional and advertising costs incurred in connection with the distribution
of the Portfolio's shares in an amount not to exceed 0.10% per annum of the
Portfolio's average daily net assets (the "Distribution Reimbursement").
Under the Distribution Agreement, the Distributor, for nominal
consideration and as agent for the Portfolio, will solicit orders for the
purchase of the Portfolio's shares, provided that any subscriptions and orders
will not be binding on the Portfolio until accepted by the Portfolio as
principal. The Plan, the Distribution Agreement and the Shareholder Servicing
Agreement with the Distributor provide that, in addition to the Shareholder
Servicing Fee and the Distribution Reimbursement, the Portfolio will pay for
(i) telecommunications expenses including the cost of dedicated lines and CRT
terminals incurred by the Distributor in carrying out its obligations under the
Distribution Agreement and the Shareholder Servicing Agreement and by the
Advisor under its Shareholder Servicing Agreement, and (ii) typesetting,
printing and delivering the Portfolio's prospectus to existing shareholders of
the Portfolio and preparing and printing subscription application forms for
shareholder accounts. The expenses enumerated in this paragraph shall not
exceed an amount equal to 0.05% per annum of the Portfolio's average daily net
assets.
The maximum amount payable under the Plan is 0.40% per annum of the
average net assets of the Portfolio.
The Plan, the Shareholder Servicing Agreements and the Distribution
Agreement each provide that the Advisor and the Distributor may make payments
from time to time from their own resources, which may include past profits for
the following purposes: to defray the costs of and to compensate others,
including financial intermediaries with whom the Distributor or Advisor has
entered into written agreements, for performing shareholder servicing and
related administrative functions on behalf of the Portfolio; to compensate
certain financial intermediaries for providing assistance in distributing the
Portfolio's shares; to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Portfolio's shares. The Distributor or the Advisor, as
the case may be, in their sole discretion, will determine the amount of such
payments made pursuant to the Plan with the Shareholder Servicing Agents and
Broker-Dealers they have contracted with, provided that such payments made
pursuant to the Plan will not increase the amount which the Portfolio is
required to pay to the Distributor or Advisor for any fiscal year under the
Shareholder Servicing Agreements or otherwise.
Shareholder Servicing Agents and Broker-Dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the Shareholder Servicing Agents and
Broker-Dealers. In addition, Shareholder Servicing Agents and Broker-Dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the Portfolio directly may impose charges,
limitations, minimums and restrictions in addition to or different from those
applicable to shareholders who invest in the Portfolio directly. Accordingly,
the net yield to investors who invest through Shareholder Servicing Agents and
Broker-Dealers may be less than by investing in the Portfolio directly. An
investor should read this Prospectus
414574.1
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<PAGE>
in conjunction with the materials provided by the Shareholder Servicing Agent
and Broker-Dealer describing the procedures under which Portfolio shares may be
purchased and redeemed through the Shareholder Servicing Agent and
Broker-Dealer.
The Glass-Steagall Act limits the ability of a depository institution
to become an underwriter or distributor of securities. However, it is the
Fund's position that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Distributor
for providing such services. However, this is an unsettled area of the law and
if a determination contrary to the Fund's position is made by a bank regulatory
agency or court concerning shareholder servicing and administration payments to
banks from the Distributor, any such payments will be terminated and any shares
registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to the Portfolio or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased only through a Shareholder
Servicing Agent or through a broker-dealer that has an agreement with the
Distributor. The minimum initial investment is $1,000. Initial investments may
be made in any amount equal to or in excess of the minimum. The minimum amount
for subsequent investments is $100. Orders received as of the earlier of 4:00
p.m., New York time, or the close of regular trading on any day on which the
New York Stock Exchange ("NYSE") is open for trading ("Fund Business Day") will
be executed at the public offering price determined on that day. Orders
received after the earlier of 4:00 p.m., New York time, or the close of the
NYSE on any Fund Business Day, will be executed at the public offering price
determined on the next Fund Business Day. Shares will be issued upon receipt of
payment by the Portfolio. The Portfolio or the Distributor each reserves the
right to reject any subscription for its shares. Certificates for Portfolio
shares will not be issued to those who invest in the Portfolio.
The price paid for shares of the Portfolio is the public offering
price, that is, the next determined net asset value of the shares plus a sales
load. The sales load is a one-time charge paid at the time of purchase of
shares, most of which ordinarily goes to the investor's broker-dealer to
compensate him or her for the services provided the investor.
Sales loads are determined in accordance with the following sales load
schedule:
<TABLE>
<CAPTION>
Sales Sales Load as % of Dealer Discount as
<S> <C> <C> <C>
Amount of Purchase Load Net Amount Invested % of Offering Price
Less than $50,000. . . . . . . . 4.50% 4.71% 4.00%
$50,000 up to $99,999. . . . . 3.50% 3.63% 3.00%
$100,000 up to $249,999. . . 2.50% 2.56% 2.00%
$250,000 up to $499,999. . . 2.00% 2.04% 1.50%
$500,000 up to $999,999. . . 1.50% 1.52% 1.25%
$1,000,000 and over. . . . . . .00% .00% .00%
</TABLE>
The Distributor reserves the right to change the dealer's concession
from time to time. Dealers who receive 90% or more of the sales load may be
deemed to be underwriters under the 1933 Act. On sales of $1 million or more,
the Distributor or the Advisor may make payment, out of its own resources to
compensate the dealer for such sale, provided that the dealer has an executed
dealer agreement with respect to the Portfolio with the Distributor.
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<PAGE>
How to Purchase Shares
All funds received by the Portfolio are invested in full and
fractional shares of the Portfolio. Certificates for shares are not issued. The
Fund maintains records of each shareholder's holdings of Portfolio shares, and
each Shareholder Servicing Agent and Broker-Dealer maintains records of each of
their customer's account and each shareholder receives a statement of
transactions, holdings and dividends. The Portfolio reserves the right to
reject any purchase. Shares of the Portfolio may be purchased only in those
states where they may lawfully be sold.
An investment may be made using any of the following methods:
By Mail. Contact your Shareholder Servicing Agent or Broker-Dealer for
further instructions. Checks are accepted subject to collection at full value.
Shares will be issued upon receipt of payment by the Portfolio. If shares are
purchased by check and redeemed before the check has cleared, the transmittal
of redemption proceeds will be delayed until funds are collected, which may
take up to 7 days from the date of purchase.
For shareholders who do not maintain a relationship with a Shareholder
Servicing Agent or Broker-Dealer, shares of the Portfolio may be purchased
directly from the Distributor. Purchase orders will be effected at the public
offering price next determined after acceptance of the order by the
Distributor.
Shareholders wishing to purchase shares of the Portfolio through the
Distributor must complete a Purchase Application accompanying this Prospectus
and mail it together with a check payable to "Old Westbury Growth Opportunity
Fund" to:
Old Westbury Growth Opportunity Fund
P.O. Box 119
New York, NY 10274-0119
Subsequent investments in the Portfolio do not require a Purchase
Application, however, the shareholder's account number must be clearly marked
on the check to ensure proper credit. Subsequent purchases may also be made by
sending a check with the detachable coupon that regularly accompanies the
confirmation of a previous transaction.
Accounts of Shareholders who purchase shares directly from the
Distributor will be maintained by the transfer agent for the Fund, Fundamental
Shareholder Service, Inc. ("FSSI" or the "Transfer Agent"). For account balance
information and shareholder services, shareholders may call FSSI at (800)
607-2200.
By Wire. Investments may be made directly through the use of wire
transfers of federal funds. Shares purchased by wire will be effected at the
public offering price next determined after acceptance of the order by the
Distributor. Contact your bank and request it to wire federal funds to the
Portfolio. In most cases, your bank will either be a member of the Federal
Reserve Banking System or have a relationship with a bank that is. Your bank
will normally charge you a fee for handling the transaction. Contact your
Shareholder Servicing Agent or Broker-Dealer for further instructions.
For Shareholders who do not maintain a relationship with a Shareholder
Servicing Agent or Broker-Dealer, shares may be purchased directly from the
Distributor by federal funds wire. Please contact the Transfer Agent at (800)
607-2200 for specific instructions.
Investors making initial investments by wire must promptly complete
the Purchase Application accompanying this Prospectus and forward it to FSSI,
the Fund's Transfer Agent. No Purchase Application is required for subsequent
purchases. Completed applications should be directed to the address listed
above under "How to Purchase Shares--By Mail." The application may also be sent
by facsimile. Please contact FSSI at (800) 607-2200 for complete instructions.
414574.1
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<PAGE>
Reduction or Elimination of Sales Load
Volume Discounts. Volume discounts are provided if the total amount
being invested in shares of the Portfolio reaches the levels indicated in the
above sales load schedule. Volume discounts are also available to investors
making sufficient additional purchases of Portfolio shares. The applicable
sales charge may be determined by adding to the total current value of shares
already owned in the Portfolio the value of new purchases computed at net asset
value on the day the additional purchase is made. For example, if an investor
previously purchased, and still holds, shares of the Portfolio worth $95,000 at
the current net asset value and purchases an additional $5,000 worth of shares
of the Portfolio, the sales charge applicable to the new purchase would be that
applicable to the $100,000 to $249,999 bracket in the above sales load
schedule. For the purposes of determining volume discounts, (i) an investment
adviser who is registered with the Securities and Exchange Commission or
appropriate state authorities and who purchases shares of the Portfolio for
more than one account may aggregate all such accounts, (ii) a bank, trust
company or thrift institution which is acting as fiduciary with respect to more
than one account may aggregate all such accounts and (iii) a financial planner
who purchases shares of the Portfolio for more than one account may aggregate
all such accounts. The Shareholder Servicing Agent or Broker-Dealer must be
notified at the time of purchase that the purchase is entitled to a reduced
sales charge which will be granted subject to confirmation of the purchaser's
holdings. The volume discount option may be modified or discontinued at any
time and may not be available through all Shareholder Servicing Agents or
Broker-Dealers.
Reinvestment of Dividends and Distributions. There is no sales load on
purchases of Portfolio shares made by reinvestment of dividends and
distributions paid by the Portfolio. Reinvestment will be made at net asset
value as of the ex-dividend date (i.e., without the imposition of a sales load)
on the day on which the dividend or distribution is payable.
Letter of Intent. Any investor may sign a Letter of Intent, available
from the Distributor, stating an intention to make purchases of shares totaling
a specified amount within a period of thirteen months. Purchases within the
thirteen-month period can be made at the reduced sales load applicable to the
total amount of the intended purchase noted in the Letter of Intent. If a
larger purchase is actually made during the period, then a downward adjustment
will be made to the sales charge based on the actual purchase size. Any shares
purchased within 90 days preceding the actual signing of the Letter of Intent
are eligible for the reduced sales charge and the appropriate price adjustment
will be made on those share purchases. A number of shares equal to 4.5% of the
dollar amount of intended purchases specified in the Letter of Intent may be
held in escrow by the Distributor in the form of shares registered in the
purchaser's name until the Letter of Intent is completed. Escrowed shares are
not available for redemption or transfer until the Letter of Intent is
completed, or the higher sales charge is paid. Any redemptions made by the
purchaser during the thirteen month period will be subtracted from the amount
of the purchases for purposes of determining whether the Letter of Intent has
been completed. Dividends and distributions on the escrowed shares are paid to
the investor. Dividends and distributions taken in additional shares of the
Portfolio will not apply toward completion of the Letter of Intent. If the
intended purchases are not completed during the Letter of Intent period, the
investor is required to pay the Distributor an amount equal to the difference
between the regular sales load applicable to a single purchase of the number of
shares actually purchased and the sales load actually paid. If such payment is
not made within 20 days after written request by the Distributor, then the
Distributor has the right to redeem a sufficient number of escrowed shares to
effect payment of the amount due. Any remaining escrowed shares are released to
the investor's account. Agreeing to a Letter of Intent does not obligate you to
buy, or the Portfolio to sell, the indicated amount of shares. You should read
the Letter of Intent carefully before signing. The Letter of Intent option may
not be available through all Shareholder Servicing Agents or Broker-Dealers.
Directors of the Fund, Employees and Clients of the Advisor. Directors
of the Fund, Employees (and their relatives) of Bessemer Trust Company, N.A.,
the Shareholder Servicing Agents and Broker-Dealers, and their affiliates, may
also purchase shares of the Portfolio at no sales load. In addition, clients of
the Advisor and its affiliates may purchase shares of the Portfolio at no sales
load. The absence of a sales load reflects the reduced sales effort required to
sell shares to this group of investors.
414574.1
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<PAGE>
REDEMPTION OF SHARES
Upon receipt by the Portfolio of a redemption request in proper form,
shares of the Portfolio will be redeemed at their next determined net asset
value. Checks for redemption proceeds will be mailed to the shareholder's
address of record within seven days, but will not be mailed until all checks in
payment for the purchase of the shares to be redeemed have been honored, which
may take up to 7 days. The proceeds of a redemption may be more or less than
the amount invested and, therefore, a redemption may result in gain or loss for
income tax purposes.
By Telephone. Redemptions may be made by calling your Shareholder
Servicing Agent or Broker-Dealer. The Shareholder Servicing Agents or
Broker-Dealers may accept telephone redemption requests from any person with
respect to accounts of shareholders who have previously elected this service
and thus such shareholders risk possible loss of principal and interest in the
event of a telephone redemption not authorized by them. The Portfolio will
employ reasonable procedures to confirm that telephone redemption instructions
are genuine and will require that shareholders electing such option provide a
form of personal identification. The failure by the Portfolio to employ such
procedures may cause the Portfolio to be liable for any losses incurred by
investors due to telephone redemptions based upon unauthorized or fraudulent
instructions. The telephone redemption option may be modified or discounted at
any time upon 60-days notice to shareholders and may not be available through
all Shareholder Servicing Agents or Broker-Dealers.
For Shareholders whose accounts are maintained by the Transfer Agent
and who have previously selected the telephone redemption option, telephone
redemptions may be made by calling (800) 607-2200.
By Mail. Redemption requests may be made by letter to the Shareholder
Servicing Agents or Broker-Dealers, specifying the name of the Portfolio, the
dollar amount or number of shares to be redeemed, and the account number. The
request must be signed in exactly the same way the account is registered (if
there is more than one owner of the shares, all must sign). In all cases, all
the signatures on a redemption request must be guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange; pursuant to the
Portfolio's transfer agent's standards and procedures. (Guarantees by notaries
public are not acceptable.) Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
Shareholders may also redeem Portfolio shares through participating
organizations holding such shares who have made arrangements with the Portfolio
permitting them to redeem such shares by telephone or facsimile transmission
and who may charge a fee for this service.
For Shareholders whose accounts are maintained by the Transfer Agent,
redemptions may be made by sending a written redemption request to:
Old Westbury Growth Opportunity Fund
P.O. Box 119
New York, NY 10274-0119
The redemption request must be signature guaranteed as noted above.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after the shares are
tendered for redemption, except for any period when (i) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closing; (ii) the Securities and Exchange Commission has by order permitted
such suspension for the protection of the shareholders of the Portfolio; or
(iii) an emergency, as defined by rules of the Securities and Exchange
Commission, exists making disposal of portfolio investments or determination of
the value of the net assets of the Portfolio not reasonably practicable.
414574.1
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<PAGE>
To minimize expenses, the Portfolio reserves the right to redeem, upon
not less than 30 days written notice to shareholders, all shares of the
Portfolio in an account (other than an Individual Retirement Account) which has
a value below $500 caused by reason of a redemption by a shareholder of shares
of the Portfolio. However, a shareholder will be allowed to make additional
investments prior to the date fixed for redemption to avoid liquidation of the
account.
The proceeds of a redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for federal
income purposes.
EXCHANGE OF SHARES
An investor may, without cost, exchange shares of the Portfolio of the
Fund into Old Westbury International Fund and any other portfolio of the Fund,
when and if created, subject to the $1,000 minimum initial investment
requirement for the Portfolio. See "Purchase of Shares." Shares may be
exchanged only if the portfolios are registered in the states where the
portfolio is offered for sale. The Fund will provide shareholders with 60 days'
written notice prior to any modification of the exchange privilege. Shares are
exchanged on the basis of relative net asset value per share. Exchanges are in
effect redemptions from one portfolio and purchases of another portfolio; and
the Portfolio's purchase and redemption procedures and requirements are
applicable to exchanges. An exchange pursuant to this exchange privilege is
treated for federal income tax purposes as a sale on which a shareholder may
realize a taxable gain or loss. See "Purchase of Shares" and "Redemption of
Shares."
RETIREMENT PLANS
The Fund has available a form of Individual Retirement Account ("IRA")
for investment in Portfolio shares. Self-employed investors may purchase shares
of the Portfolio through tax-deductible contributions to existing retirement
plans for self-employed persons, known as Keogh or H.R. 10 plans. Portfolio
shares may also be a suitable investment for other types of qualified pension
or profit-sharing plans which are employer-sponsored, including deferred
compensation or salary reduction plans known as "401(k) Plans" which give
participants the right to defer portions of their compensation for investment
on a tax-deferred basis until distributions are made from the plans.
The minimum initial investment for all such retirement plans is
$1,000. The minimum for all subsequent investments is $100.
Under the Internal Revenue Code of 1986, as amended (the "Code"),
individuals may make wholly or partly tax deductible IRA contributions of up to
$2,000 annually, depending on whether they are active participants in an
employer-sponsored retirement plan and on their income level. However,
dividends and distributions held in the account are not taxed until withdrawn
in accordance with the provisions of the Code. An individual with a non-working
spouse may establish a separate IRA for the spouse under the same conditions
and contribute a combined maximum of $2,250 annually to either or both IRA's
provided that no more than $2,000 may be contributed to the IRA of either
spouse.
Investors should be aware that they may be subject to penalties or
additional tax on contributions or withdrawals from IRAs or other retirement
plans which are not permitted by the applicable provisions of the Code, and,
prior to a withdrawal, shareholders may be required to certify their age and
awareness of such restrictions in writing. Persons desiring information
concerning investments through IRAs or other retirement plans should write or
telephone his or her Shareholder Servicing Agent or Broker-Dealer. For
Shareholders who do not maintain a relationship with a Shareholder Servicing
Agent or Broker-Dealer, information on an IRA account may be obtained by
calling the Distributor at ____________.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the
Portfolio on its outstanding shares will, at the election of each shareholder,
be paid on the payment date fixed by the Board of Directors in additional
shares
414574.1
18
<PAGE>
of the Portfolio having an aggregate net asset value as of the ex-dividend date
of such dividend or distribution equal to the cash amount of such dividend or
distribution. An election to receive dividends and distributions in cash or
shares is made at the time shares are subscribed for and may be changed by
notifying the Portfolio in writing at any time prior to the record date for a
particular dividend or distribution. There are no sales or other charges in
connection with the reinvestment of dividends and capital gains distributions.
Shareholders may change this election by notifying their Shareholder Servicing
Agent or Broker-Dealer. There is no fixed dividend rate, and there can be no
assurance that the Portfolio will pay any dividends or realize any capital
gains. The Portfolio anticipates paying income and capital gains distributions,
if any, on an annual basis.
The following is a general discussion of certain of the federal income
tax consequences of the purchase, ownership and disposition of shares of the
Portfolio. The summary is limited to investors who hold the shares as "capital
assets" (generally, property held for investment), and to whom special
categories of rules do not apply, such as foreign investors and tax-exempt
investors. Shareholders should consult their tax advisers in determining the
federal, state, local and any other tax consequences of the purchase, ownership
and disposition of shares.
The Portfolio intends to qualify for and elect the special tax
treatment applicable to "regulated investment companies." To qualify as a
regulated investment company, the Portfolio must meet certain complex tests
concerning its investments and distributions. It is anticipated that the
Portfolio will not be subject to federal income or excise tax.
Dividends from net investment income and distributions of realized
short-term capital gains will be taxable to the recipient shareholders as
ordinary income. In the case of corporate shareholders, distributions
attributable to dividends received from foreign corporations will not be
eligible for the dividends-received deduction. Distributions of long-term
capital gains will be taxable to shareholders as long-term capital gain. If an
investor purchases shares shortly before a distribution date, the distribution
may be taxable to the investor as income, even though, in effect, it is a
return of principal.
A shareholder may recognize a taxable gain or loss if the shareholder
sells or redeems his shares. If the securities held by the Portfolio appreciate
in value, purchasers of shares of the Portfolio after the occurrence of such
appreciation will acquire such shares subject to the tax obligation that may be
incurred in the future when there is a sale of such securities.
The federal tax status of each year's distributions will be reported
to shareholders and to the Internal Revenue Service. Distributions may also be
subject to state and local taxation and shareholders should consult their own
tax advisers in this regard.
The Portfolio is required by federal law to withhold 31% of reportable
payments paid to certain shareholders who have not complied with Internal
Revenue Service regulations. In connection with this withholding requirement, a
shareholder will be asked to certify on his application that the social
security or tax identification number provided is correct and that the
shareholder is not subject to the 31% backup withholding for previous
underreporting to the Internal Revenue Service.
CALCULATION OF INVESTMENT PERFORMANCE
The Portfolio may from time to time include its yield, total return,
and average annual total return in advertisements or information furnished to
present or prospective shareholders. The Portfolio may also from time to time
include in advertisements the ranking of those performance figures relative to
such figures for groups of mutual funds categorized by the Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar Inc.,
Wiesenberger Investment Company Service, Barron's, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Personal Investor, Bank Rate
Monitor, and The Wall Street Journal as having the same investment objectives.
The performance of the Portfolio may be compared to the Standard & Poor's 500
Stock Index and the Dow Jones Industrial Average, both of which are recognized
indices of domestic stocks performance, as well as Wilshire 2000, a recognized
index of small and mid capitalization companies and emerging growth companies.
414574.1
19
<PAGE>
Average annual total return is a measure of the average annual
compounded rate of return of $1,000 invested at the maximum public offering
price over a specified period, which assumes that any dividends or capital
gains distributions are automatically reinvested in the Portfolio rather than
paid to the investor in cash. Total return is calculated with the same
assumptions and shows the aggregate return on an investment over a specified
period.
The formula for total return used by the Portfolio includes three
steps: (1) adding to the total number of shares purchased by the hypothetical
investment in the portfolio of $1,000 (assuming the investment is made at a
public offering price that includes the current maximum sales load of 4.5%) all
additional shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial investment as
of the end of the period by multiplying the total number of shares owned at the
end of the period by the net asset value per share on the last trading day of
the period; and (3) dividing this account value for the hypothetical investor
by the amount of the initial investment and annualizing the result for periods
of less than one year.
The Portfolio computes yield by annualizing net investment income per
share for a recent 30-day period and dividing that amount by a Portfolio's
share's maximum public offering price (reduced by any undeclared earned income
expected to be paid shortly as a dividend) on the last trading day of that
period. The Portfolio's yield will vary from time to time depending upon market
conditions, the composition of the Portfolio and operating expenses of the
Portfolio.
Total return and yield may be stated with or without giving effect to
any expense limitations in effect for the Portfolio.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on
August 26, 1993 and is registered with the Securities and Exchange Commission
as a diversified, open-end, management investment company. The Portfolio was
designated as a separate series of the Fund on , 1996.
The Fund prepares semi-annual unaudited and annual audited reports
which include a list of investment securities held by the Portfolio and which
are sent to shareholders.
As a general matter, the Fund will not hold annual or other meetings
of the Portfolio's shareholders. This is because the By-laws of the Fund
provide for meetings only (a) for the election of directors as required by the
1940 Act, (b) for approval of revised investment advisory contracts with
respect to a particular class or series of stock, (c) for approval of revisions
to the Fund's distribution plan as required by the 1940 Act with respect to a
particular class or series of stock, and (d) upon the written request of
holders of shares entitled to cast not less than twenty-five percent of all the
votes entitled to be cast at such meeting. The Portfolio's shareholders retain
the right to remove directors. Furthermore, the Fund will assist in shareholder
communications.
The Fund's Board of Directors is authorized to divide the unissued
shares into separate series of stock, each series representing a separate,
additional investment portfolio. Shares of all series will have identical
voting rights, except where, by law, certain matters must be approved by a
majority of the shares of the affected series. Each share of any series of
shares when issued has equal dividend, distribution, liquidation and voting
rights within the series for which it was issued, and each fractional share has
those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares will be voted in the aggregate. There are
no conversion or preemptive rights in connection with any shares of the
Portfolio. See "Description of Common Stock" in the Statement of Additional
Information.
Annual and other meetings may be required with respect to such
additional matters relating to the Fund as may be required by the 1940 Act, any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Directors may consider necessary or desirable. Each Director
serves until the next meeting of the shareholders called for the purpose of
considering the election or reelection of such Director or of a successor
414574.1
20
<PAGE>
to such Director, and until the election and qualification of his or her
successor, elected at such a meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
For further information with respect to the Portfolio and the shares
offered hereby, reference is made to the Fund's registration statement filed
with the Securities and Exchange Commission, including the exhibits thereto.
The Registration Statement and the exhibits thereto may be examined at the
Commission and copies thereof may be obtained upon payment of certain
duplicating fees.
NET ASSET VALUE
The net asset value of the Portfolio's shares is determined as of the
earlier of 4:00 p.m., New York time, or as of the close of regular trading on
the NYSE on each Fund Business Day. Fund Business Day means any day on which
the NYSE is open for business. It is computed by dividing the value of the
Portfolio's net assets (i.e., the value of its securities and other assets less
its liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares outstanding. Portfolio
securities for which market quotations are readily available are valued at
market value. All other investment assets of the Portfolio are valued in such
manner as the Board of Directors in good faith deems appropriate to reflect
their fair value.
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Bessemer Trust Company (New Jersey) is custodian for the Portfolio's
cash and securities. The Portfolio's custodian does not assist in, and is not
responsible for, investment decisions involving assets of the Portfolio.
Fundamental Shareholder Services, Inc., whose principal address 29 Dogwood
Drive, Chester, New Jersey 07930, is the Portfolio's transfer and dividend
disbursing agent.
414574.1
21
<PAGE>
OLD WESTBURY FUNDS, INC.
OLD WESTBURY GROWTH OPPORTUNITY FUND
PROSPECTUS
, 1996
Advisor:
Bessemer Trust Company, N.A.
630 Fifth Avenue
New York, New York 10111
(212) 708-9100
Distributor and Administrator:
Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania
(---) --------
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus,
and if given or made, such information and representation may not be relied
upon as authorized by the Fund, its Advisor, Distributor or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of any offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such offer in such state.
TABLE OF CONTENTS
Page
Prospectus Summary........................................
Table of Fees and Expenses................................
Investment Objective and Policies.........................
Additional Investment Information and Risk Factors........
Investment Restrictions...................................
Management of the Fund....................................
The Administrator.........................................
Distribution and Service Plan.............................
Purchase of Shares........................................
Redemption of Shares......................................
Exchange of Shares........................................
Retirement Plans..........................................
Dividends, Distributions and Taxes........................
Calculation of Investment Performance.....................
General Information.......................................
Net Asset Value...........................................
Custodian, Transfer Agent and
Dividend Disbursing Agent.................................
414574.1
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OLD WESTBURY FUNDS, INC.
OLD WESTBURY INTERNATIONAL FUND
OLD WESTBURY GROWTH OPPORTUNITY FUND
(each a "Portfolio" and collectively the "Portfolios")
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone: (___) ___-____
Statement of Additional Information
December , 1996
This Statement of Additional Information is not a prospectus and is
only authorized for distribution when preceded or accompanied by the prospectus
(each a "Prospectus") for the Portfolios listed above. This Statement of
Additional Information contains additional and more detailed information than
that set forth in each Prospectus and should be read in conjunction with each
Prospectus, additional copies of which may be obtained without charge by
writing or telephoning the Portfolios at the address and telephone number set
forth above.
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES...................................
DESCRIPTION OF EACH PORTFOLIO'S INVESTMENT SECURITIES...............
AND RISK FACTORS....................................................
INVESTMENT RESTRICTIONS.............................................
DIRECTORS AND OFFICERS .............................................
ADVISOR ............................................................
ADMINISTRATOR.......................................................
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT .......................
DISTRIBUTION AND SERVICE PLAN.......................................
BROKERAGE AND PORTFOLIO TURNOVER ...................................
COUNSEL AND INDEPENDENT AUDITORS ...................................
PURCHASE AND REDEMPTION OF SHARES...................................
DESCRIPTION OF COMMON STOCK.........................................
PERFORMANCE.........................................................
NET ASSET VALUE.....................................................
TAX STATUS .........................................................
DESCRIPTION OF CORPORATE DEBT RATINGS...............................
FINANCIAL STATEMENTS ...............................................
414568.1
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INVESTMENT OBJECTIVE AND POLICIES
Each Portfolio will normally invest its assets primarily in common
stocks, but may, however, increase its holdings in equity securities other than
common stocks including convertible securities, preferred stock and warrants
when the Advisor believes it is advisable to do so. Each Portfolio may also
invest in debt securities as described in their respective Prospectus.
Investments in debt securities are consistent with the Portfolios' investment
objective because they could result in capital appreciation due to an increase
in the value of such securities caused by changes in interest rates and
currency values.
Each Portfolio intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Each Portfolio will be restricted in that, at the close of each
quarter of the taxable year, at least 50% of the value of each Portfolio's
total assets must be represented by cash, Government securities, investment
company securities and other securities limited in respect of any one issuer to
not more than 5% in value of the total assets of each Portfolio and to not more
than 10% of the outstanding voting securities of such issuer. In addition, at
the close of each quarter of its taxable year, not more than 25% in value of
each Portfolio's total assets may be invested in the securities of one issuer
other than Government securities. The limitations described in this paragraph
regarding qualifications as a "regulated investment company" are not
fundamental policies and may be revised to the extent applicable federal income
tax requirements are revised.
DESCRIPTION OF EACH PORTFOLIO'S INVESTMENT SECURITIES AND RISK FACTORS
The following discussion is additional disclosure that supplements
each Portfolio's respective Prospectus and should be read in conjunction with
the current Prospectus. The material relating to the risk factors pertaining to
the securities invested by each Portfolio set forth in its Prospectus is herein
incorporated by reference. Capitalized terms not otherwise defined herein have
the meanings accorded to them in the Portfolios' Prospectus. In addition,
hereinafter, Old Westbury International Fund shall be referred to as the
"International Fund" and Old Westbury Growth Opportunity Fund shall be referred
to as the "Growth Fund". The Fund's executed offices are located at Federated
Tower, Pittsburgh, Pennsylvania 15222-3779.
Foreign Securities
Investments are made primarily in those regions where, in the opinion
of the International Fund's Advisor, there are opportunities to achieve
superior investment returns relative to other investment opportunities outside
the United States. The International Fund does not, however, generally invest
in debt or equity securities of U.S. issuers. The International Fund emphasizes
those industrial sectors of the world's market which, in the opinion of its
Advisor, offer the most attractive risk/reward relationships. Securities of any
given issuer are evaluated on the basis of such measures as price/earnings
ratios, price/book ratios, cash flows and dividends and interest income.
Since investments in foreign securities may involve foreign
currencies, the value of a fund's assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations, including currency blockage. The International Fund may
enter into forward commitments for the purchase or sale of foreign currencies
in connection with the settlement of foreign securities transactions or to
manage the International Fund's currency exposure related to foreign
investments as described in its Prospectus.
-2-
414568.1
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The Portfolios may invest in certain foreign securities; however, the
only foreign securities the Growth Fund may invest in are securities of
Canadian based companies (see "Canadian Companies" in the Growth Fund
Prospectus). Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment risks
from those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic
companies. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on
foreign investments as compared to dividends and interest paid to the
Portfolios by domestic companies.
Investors should realize that the value of the Portfolios' investments
in foreign securities may be adversely affected by changes in political or
social conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolios' operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it
may also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolios must be made in
compliance with U.S. foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign
stock exchanges has increased in recent years, in most cases it remains
appreciably below that of domestic security exchanges. Accordingly, the
Portfolios' foreign investments may be less liquid and their prices may be more
volatile than comparable investment in securities of U.S. companies. Moreover,
the settlement periods for foreign securities, which are often longer than
those for securities of U.S. issuers, may affect portfolio liquidity. In buying
and selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged
in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers located
in foreign countries than in the United States.
The International Fund may invest in securities of foreign issuers
directly or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") or other similar securities of foreign issuers.
These securities may not necessarily be dominated in the same currency as the
securities they represent. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying foreign securities.
Certain such institutions issuing ADRs may not be sponsored by the issuer of
the underlying foreign securities. A non-sponsored depository may not provide
the same shareholder information that a sponsored depository is required to
provide under its contractual arrangements with the issuer of the underlying
foreign securities. EDRs are receipts issued by a European financial
institution evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets, and EDRs, in bearer
form, are designed for use in European securities markets.
-3-
414568.1
<PAGE>
Money Market Instruments
As discussed in each Portfolio's respective Prospectus, a Portfolio
may invest in money market instruments to the extent consistent with its
investment objective and policies. A description of the various types of money
market instruments that may be purchased by a Portfolio appears below.
U.S. Treasury Securities. The Growth Fund may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds,
all of which are backed as to principal and interest payments by the full faith
and credit of the United States.
Additional U.S. Government Obligations. The Portfolios may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full
faith and credit" of the United States. In the case of securities not backed by
the full faith and credit of the United States, the Portfolios must look
principally to the federal agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitments. Securities in which the Portfolios may invest that are not backed
by the full faith and credit of the United States include, but are not limited
to, obligations of [the Federal Home Loan Mortgage Corporation and the U.S.
Postal Service], each of which has the right to borrow from the U.S. Treasury
to meet its obligations. Securities in which the Portfolios may invest that are
not backed by the full faith and credit of the United States include
obligations of the Federal Farm Credit System and the Federal Home Loan Banks,
both of whose obligations may be satisfied only by the individual credits of
each issuing agency. Securities which are backed by the full faith and credit
of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank.
Bank Obligations. The Portfolios, unless otherwise noted in their
Prospectus or below, may invest in negotiable certificates of deposit, time
deposits and bankers' acceptances of (i) banks, savings and loan associations
and savings banks which have more than $2 billion in total assets (the "Asset
Limitation") and are organized under the laws of the United States or any
state, (ii) foreign branches of these banks or of foreign banks of equivalent
size (Euros) and (iii) U.S. branches of foreign banks of equivalent size
(Yankees). The Portfolios will not invest in obligations for which the Advisor,
or any of its affiliated persons, is the ultimate obligor or accepting bank.
[The Portfolios may also invest in obligations of international banking
institutions designated or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the
European Investment Bank, the Inter-American Development Bank, or the World
Bank)].
Commercial Paper. The Portfolios may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Bessemer Trust Company, N.A. acting as agent,
for no additional fee, in its capacity as investment advisor to the Portfolios
and as fiduciary for other clients for whom it exercises investment discretion.
The monies loaned to the borrower come from accounts managed by the Advisor or
its affiliates, pursuant to arrangements with such accounts. Interest and
principal payments are credited to such accounts. The Advisor, acting as a
fiduciary on behalf of its clients, has the right to increase or decrease the
amount provided to the borrower under an obligation. The borrower has the right
to pay without penalty all or any part of the principal amount then outstanding
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on an obligation together with interest to the date of payment. Since these
obligations typically provide that the interest rate is tied to the Federal
Reserve commercial paper composite rate, the rate on master demand obligations
is subject to change. Repayment of a master demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand which is continuously monitored by the
Advisor. Since master demand obligations typically are not rated by credit
rating agencies, the Portfolios may invest in such unrated obligations only if
at the time of an investment the obligation is determined by the Advisor to
have a credit quality which satisfies the Portfolios' quality restrictions.
Although there is no secondary market for master demand obligations, such
obligations are considered by the Portfolios to be liquid because they are
payable upon demand. The Portfolios do not have any specific percentage
limitation on investments in master demand obligations.
Money Market Mutual Funds. The Growth Fund may invest in securities of
money market mutual funds. See "Investment Company Securities" below.
Foreign Government Obligations. The International Fund, subject to its
applicable investment policies, may also invest in short-term obligations of
foreign sovereign governments or of their agencies, instrumentalities,
authorities or political subdivisions. These securities may be denominated in
the U.S. dollar or in another currency.
Foreign Currency Exchange Transactions and Options
Because each Portfolio may buy and sell securities and receive
interest and dividends in currencies other than the U.S. dollar, a Portfolio
may enter from time to time into foreign currency exchange transactions. A
Portfolio either enters into these transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market or uses
forward contracts to purchase or sell foreign currencies. The cost of a
Portfolio's spot currency exchange transactions is generally the difference
between the bid and offer spot rate of the currency being purchased or sold.
A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract. Forward foreign
currency exchange contracts establish an exchange rate at a future date. These
contracts are derivative instruments, as their value derives from the spot
exchange rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usually
large commercial banks) and their customers. A foreign currency exchange
contract generally has no deposit requirement and is traded at a net price
without commission. The Portfolios will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
Each Portfolio may enter into foreign currency exchange transactions
in an attempt to protect against changes in foreign currency exchange rates
between the trade and settlement dates of specific securities transactions or
anticipated securities transactions. A Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, a Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollar or in exchange
for another foreign
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<PAGE>
currency. A Portfolio will only enter into forward contracts to sell a foreign
currency in exchange for another foreign currency if the Advisor expects the
foreign currency purchased to appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
limit any potential gain that might be realized should the value of the hedged
currency increase. In addition, forward contracts that convert a foreign
currency into another foreign currency will cause the Portfolio to assume the
risk of fluctuations in the value of the currency purchased vis a vis the
hedged currency and the U.S. dollar. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
In using options as a hedge against changes in the value of foreign
currencies relative to the U.S. dollar, each Portfolio may trade
exchange-traded options on foreign currencies. Each Portfolio may write (sell)
covered call options and secured put options on up to 25% of net assets and may
purchase put and call options provided that no more than 5% of net assets may
be invested in premiums on such options.
A separate account of the Portfolio will be established with the
Portfolio's custodian consisting of cash or U.S. Government or other high-grade
liquid debt obligations equal to the amount of the Portfolio's assets that
could be required to consummate forward contracts or put options entered into
to hedge against movements in the value of foreign currencies with respect to
the Portfolio's portfolio positions. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market or fair value. If the market or fair value of such securities
declines, additional cash or high grade liquid debt securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Portfolio.
Investments in Warrants and Rights
Warrants basically are options to purchase equity securities at a
specified price valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer. Each Portfolio does not intend to purchase warrants and rights in
excess of 5% of each Portfolio's total assets.
Convertible Securities
Each Portfolio may, as an interim alternative to investment in common
stocks, purchase investment grade convertible debt securities having a rating
of, or equivalent to, at least "BBB" by Standard & Poor's Corporation ("S&P")
or "Baa" by Moody's Investors Service, Inc. ("Moody's") or, if unrated, judged
by the Advisor to be of comparable quality. Securities rated BBB or Baa have
speculative characteristics. Although lower rated bonds generally have higher
yields, they are more speculative and subject to a greater risk of default with
respect to the issuer's capacity to pay interest and repay principal than are
higher rated debt securities.
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In selecting convertible securities for each Portfolio, the Advisor
relies primarily on its own evaluation of the issuer and the potential for
capital appreciation through conversion. It does not rely on the rating of the
security or sell because of a change in rating absent a change in its own
evaluation of the underlying common stock and the ability of the issuer to pay
principal and interest or dividends when due without disrupting its business
goals. Interest or dividend yield is a factor only to the extent it is
reasonably consistent with prevailing rates for securities of similar quality
and thereby provides a support level for the market price of the security. Each
Portfolio will purchase the convertible securities of highly leveraged issuers
only when, in the judgment of the Advisor, the risk of default is outweighed by
the potential for capital appreciation. Each Portfolio does not intend to
purchase convertible securities in excess of 5% of each Portfolio's total
assets.
The issuers of debt obligations having speculative characteristics may
experience difficulty in paying principal and interest when due in the event of
a downturn in the economy or unanticipated corporate developments. The market
prices of such securities may become increasingly volatile in periods of
economic uncertainty. Moreover, adverse publicity or the perceptions of
investors over which the Advisor has no control, whether or not based on
fundamental analysis, may decrease the market price and liquidity of such
investments. Although the Advisor will attempt to avoid exposing each Portfolio
to such risks, there is no assurance that it will be successful or that a
liquid secondary market will continue to be available for the disposition of
such securities. Each Portfolio will not purchase or hold more that 5% of its
net assets in securities rated below investment grade.
The market for unrated securities may not be as liquid as the market
for rated securities, which may result in depressed prices for each Portfolio
in the disposal of such nonrated securities. There is no established secondary
market for many of these securities. The Advisor cannot anticipate whether
these securities could be sold other than to institutional investors. There is
frequently no secondary market for the resale of those debt obligations that
are in default. The limited market for these securities may affect the amount
actually realized by each Portfolio upon such sale. Such sale may result in a
loss to each Portfolio. There are certain risks involved in applying credit
ratings as a method of evaluating high yield securities. For example, while
credit rating agencies evaluate the safety of principal and interest payments,
they do not evaluate the market risk of the securities and the securities may
decrease in value as a result of credit developments. See "Description of
Corporate Debt Ratings" for a comparison of investment grade and speculative
ratings issued by Standard & Poor's and Moody's.
Lower rated and nonrated securities tend to offer higher yields than
higher rated securities with the same maturities because the creditworthiness
of the obligors of lower rated securities may not have been as strong as that
of other issuers. Since there is a general perception that there are greater
risks associated with the lower-rated securities in each Portfolio, the yields
and prices of such securities tend to fluctuate more with changes in the
perceived quality of the credit of their obligors. In addition, the market
value of high yield securities may fluctuate more than the market value of
higher rated securities since high yield securities tend to reflect short-term
market developments to a greater extent than higher rated securities, which
fluctuate primarily in response to the general level of interest rates,
assuming that there has been no change in the fundamental credit quality of
such securities. High yield securities are also more sensitive to adverse
economic changes and events affecting specific issuers than are higher rated
securities. Periods of economic uncertainty can be expected to result in
increased market price volatility of the high yield securities. High yield
securities may also be directly and adversely affected by variables such as
interest rates, unemployment rates, inflation rates and real growth in the
economy and may be more susceptible to variables such as adverse publicity and
negative investor perception than are more
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<PAGE>
highly rated securities, particularly in a limited secondary market. Lower
rated securities generally involve greater risks of loss of income and
principal than higher rated securities. The obligors of lower rated securities
possess less creditworthy characteristics than the obligors of higher rated
securities, as is evidenced by those securities that have experienced a
downgrading in rating or that are in default. The evaluation of the price of
such securities is highly speculative and volatile. As such, these evaluations
are very sensitive to the latest available public information relating to
developments concerning such securities.
Investments in Unseasoned Companies
The securities of unseasoned companies (i.e., issuers, which including
predecessors, have been in business less than three years) may have a limited
trading market, which may adversely affect their disposition and can result in
their being priced lower than might otherwise be the case. If other investment
companies and investors who invest in such issuers trade the same securities
when each Portfolio attempts to dispose of its holdings, that Portfolio may
receive lower prices than might otherwise be obtained. [Each Portfolio does not
intend to purchase securities of unseasoned companies in excess of 5% of that
Portfolio's net assets.]
Corporate Reorganizations
Each Portfolio may invest in securities for which a tender or exchange
offer has been made or announced and in securities of companies for which a
merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of the Advisor, there is reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved. The primary risk of such investments is that if
the contemplated transaction is abandoned, revised, delayed or becomes subject
to unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Portfolios.
In general, securities which are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior to
the announcement of the offer or proposal. However, the increased market price
of such securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Advisor which must appraise not only the value of the issuer and
its component businesses as well as the assets or securities to be received as
a result of the contemplated transaction, but also the financial resources and
business motivation of the offerer as well as the dynamics of the business
climate when the offer or proposal is in process.
In making such investments, each Portfolio will not violate any of its
diversification requirements or investment restrictions (see below, "Investment
Restrictions") including the requirement that, with respect to 75% of its total
assets not more than 5% of its total assets may be invested in the securities
of any one issuer. Since such investments are ordinarily short term in nature,
they will increase the turnover ratio of the Portfolios thereby increasing its
brokerage and other transaction expenses as well
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<PAGE>
as make it more difficult for the Portfolios to meet the tests for favorable
tax treatment as a "Regulated Investment Company" specified by the Code (see
the Prospectus, "Dividends, Distributions and Taxes"). The Advisor intends to
select investments of the type described which, in its view, have a reasonable
prospect of capital appreciation which is significant in relation to both the
risk involved and the potential of available alternate investments as well as
monitor the effect of such investments on the tax qualification tests of the
Code. Each Portfolio does not intend to purchase these securities in excess of
5% of that Portfolio's total assets.
Repurchase Agreements
Each Portfolio may engage in repurchase agreements with U.S. sellers
as set forth in the Prospectus. A repurchase agreement is an instrument under
which the purchaser (i.e., a Portfolio) acquires a debt security and the seller
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of return insulated
from market fluctuations during such period. The underlying securities are
ordinarily U.S. Treasury or other government obligations or high quality money
market instruments. A Portfolio will require that the value of such underlying
securities, together with any other collateral held by the Portfolio, always
equals or exceeds the amount of the repurchase obligations of the vendor. While
the maturities of the underlying securities in repurchase agreement
transactions may be more than one year, the term of such repurchase agreement
will always be less than one year. A Portfolio's risk is primarily that, if the
seller defaults, the proceeds from the disposition of underlying securities and
other collateral for the seller's obligation are less than the repurchase
price. If the seller becomes bankrupt, the Portfolio might be delayed in
selling the collateral. Under the Investment Company Act of 1940, as amended
(the "1940 Act"), repurchase agreements are considered loans. Repurchase
agreements usually are for short periods, such as one week or less, but could
be longer. The Portfolios will not enter into repurchase agreements of a
duration of more than seven days if, taken together with other illiquid
securities, more than 15% of that Portfolio's net assets would be so invested.
Under normal market conditions, the Portfolios do not intend to purchase
repurchase agreements in excess of 5% of that Portfolio's net assets.
Loans of Portfolio Securities
To increase income, the International Fund may lend its securities to
securities broker-dealers or financial institutions if (1) the loan is
collateralized in accordance with applicable regulatory requirements including
collateralization continuously at no less than 100% by marking to market daily,
(2) the loan is subject to termination by the Portfolio at any time, (3) the
Portfolio receives reasonable interest or fee payments on the loan, (4) the
Portfolio is able to exercise all voting rights with respect to the loaned
securities and (5) the loan will not cause the value of all loaned securities
to exceed one-third of the value of the Portfolio's assets.
If the borrower fails to maintain the requisite amount of collateral,
the loan automatically terminates and the Portfolio could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over the value of the collateral. As with any extension of
credit, there are risks of delay in recovery and in some cases even loss of
rights in collateral should the borrower of the securities fail financially.
The International Fund does not currently intend to lend portfolio securities
in excess of 5% of its total assets. The Growth Fund does not currently intend
to lend portfolio securities.
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<PAGE>
Investment Company Securities
Securities of other investment companies may be acquired by each of
the Portfolios to the extent permitted under the 1940 Act. These limits require
that, as determined immediately after a purchase is made, (i) not more than 5%
of the value of a Portfolio's total assets will be invested in the securities
of any one investment company, (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group, and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by a Portfolio, provided however, that a
Portfolio may invest all of its investable assets in an open-end investment
company that has the same investment objective as the Portfolio. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that a Portfolio bears directly in connection with
its own operations.
Privately Placed and Certain Unregistered Securities
The Portfolios may invest in privately placed, restricted, Rule 144A
or other unregistered securities as described in the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that
should the Portfolio decide to sell them when a ready buyer is not available at
a price the Portfolio deems representative of their value, the value of the
Portfolio's net assets could be adversely affected. Where an illiquid security
must be registered under the Securities Act of 1933, as amended (the "1933
Act") before it may be sold, a Portfolio may be obligated to pay all or part of
the registration expenses, and a considerable period may elapse between the
time of the decision to sell and the time the Portfolio may be permitted to
sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a Portfolio might obtain a
less favorable price than prevailed when it decided to sell.
INVESTMENT RESTRICTIONS
Each Portfolio has adopted the following investment restrictions which
may not be changed without the approval of the "majority of the outstanding
shares" of that Portfolio (as defined in the Prospectus). Under such
fundamental restrictions, each Portfolio may not:
1. Purchase securities on margin or borrow money, except (a) from banks
for extraordinary or emergency purposes (not for leveraging or
investment) or (b) by engaging in reverse repurchase agreements,
provided that (a) and (b) in the aggregate do not exceed an amount
equal to one-third of the value of the total assets of the Portfolio
less its liabilities (not including the amount borrowed) at the time
of the borrowing, and further provided that 300% asset coverage is
maintained at all times;
2. Lend portfolio securities of value exceeding in the aggregate
one-third of the market value of the Portfolio's total assets less
liabilities other than obligations created by these transactions;
3. Mortgage, pledge or hypothecate any assets except that a Portfolio may
pledge not more than one-third of its total assets to secure
borrowings made in accordance with paragraph 1 above. However,
although not a fundamental policy of the Portfolio, as a matter of
operating policy in
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order to comply with certain state statutes, no Portfolio will pledge
its assets in excess of an amount equal to 10% of total net assets;
4. Act as an underwriter of securities of other issuers, except insofar
as the Portfolio may be deemed an underwriter under the 1933 Act in
disposing of a portfolio security;
5. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests, including limited partnership interests,
in oil, gas or other mineral exploration, leasing or development
programs;
6. Purchase or acquire commodities, commodity contracts or futures except
that the Portfolio may purchase and write options on foreign
currencies or enter into forward delivery contracts for foreign
currencies and may also purchase foreign index contracts;
7. Issue senior securities, except insofar as the Portfolio may be deemed
to have issued a senior security in connection with any permitted
borrowing;
8. [With respect to the International Fund only, invest 25% or more of
the value of its total assets in any particular industry or groups of
related industries;] and
9. Participate on a joint, or a joint and several, basis in any
securities trading account.
The following are investment restrictions that may be changed by a
vote of the majority of the Board of Directors. Each Portfolio will not:
1. Invest more than 15% of the market value of the Portfolio's net assets
in illiquid investments including repurchase agreements maturing in
more than seven days;
2. Invest in securities of other investment companies, except the
Portfolio may purchase securities of other investment companies which
meet the investment objectives of the Portfolio and then only up to 5%
of the Portfolio's net assets, except as they may be acquired as part
of a merger, consolidation or acquisition of assets and further except
as permitted by Section 12(d) of the 1940 Act.
3. Purchase securities while borrowings exceed 5% of its total assets;
4. Invest in companies for the purpose of exercising control.
If a percentage restriction (except paragraph 3 of the fundamental
restrictions) is adhered to at the time an investment is made, a later change
in percentage resulting from changes in the value of the Portfolio's investment
securities will not be considered a violation of the Portfolio's restrictions.
DIRECTORS AND OFFICERS
The Directors and principal officers of the Fund, their age and
principal occupations for the past five years, are listed below. Directors
deemed to be "interested persons" of the Fund for purposes of the 1940 Act are
indicated by an asterisk. Unless otherwise indicated below, the address of each
Director
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<PAGE>
and officer is Old Westbury Funds, Inc. c/o Edgewood Services, Inc., Federated
Tower, Pittsburgh, Pennsylvania 15222-3779.
ROBERT M. KAUFMAN (age 66) - Chairman of the Board and Director;
Partner, Proskauer Rose Goetz & Mendelsohn, Attorneys at Law. His principal
address is 1585 Broadway, New York, NY 10036.
JOHN KEVIN KENNY (age 60) - Director; President and Chief Executive
Officer, Christina Holdings, Inc. (since June 1995); Principal, Real Estate
Investments (since 1992); President and Chief Executive Officer, J.J. Kenny
Co., Inc. Kenny Information Services, Inc. (from 1961 to 1992). His principal
address is 2000 PGA Boulevard, Suite 3220, P.O. Box 13076, North Palm Beach, FL
33408.
HOWARD D. GRAVES (age 57) - Director; Chairman of the Board, Recycling
Holdings, Inc. (since 1996); Director, Recycling Holdings, Inc. (from 1995 to
1996); and Superintendent, United States Military Academy, West Point, New York
(Lieutenant General, U.S. Army) (from 1991 to 1996). His principal address is
2101 Kings Mill Court, Falls Church, VA 22043.
EDWARD C. GONZALES (age __) - President, Treasurer and Principal
Financial Officer.
RONALD M. PETNUCH (age __) - Vice President;
C. CHRISTINE THOMSON (age __) - Vice President and Assistant
Treasurer;
JUDITH J. MACKIN (age __) - Vice President;
PETER J. GERMAIN (age __) - Secretary;
S. ELLIOTT COHAN (age __) - Assistant Secretary;
C. GRANT ANDERSON (age __) - Assistant Secretary;
C. TODD GIBSON (age __) - Assistant Secretary;
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COMPENSATION TABLE
Name of Aggregate Pension or Estimated Total
Director Compensation Retirement Annual Compensation
from Benefits Benefits Upon From Fund
the Fund Accrued as Retirement Complex Paid
Part of Portfolio to Directors
Expenses
- -------- -------- -------- ------------ ------------
Howard D. $----- none none $-----
Graves
Robert M. $----- none none $-----
Kaufman
John Kevin $----- none none $-----
Kenny
The compensation table above reflects the fees received by the
Directors from the Fund for fiscal year ended October 31, 1996. All the
Directors are not "interested persons" (as defined in the 1940 Act) of the Fund
and each will receive an annual retainer of $_____ to be paid in quarterly
installments of $_____ plus reasonable expenses.
As of __________, 1996, all Directors and officers as a group owned
less than 1% of each Portfolio's outstanding shares. As of that date, there
were no shareholders of record of the Growth Fund and the following
shareholders of record owned more than 5% of the International Fund's
outstanding shares: Bessemer Trust Company (Cayman) Limited, P.O. Box 694,
Edward Street, Grand Cayman, Cayman Islands, B.W.I., 9.4%. Bessemer Trust
Company, 100 Woodbridge Center Drive, Woodbridge, New Jersey 07095-1191 held
94.0% of the outstanding shares of the Portfolio under the nominee name Naidot
& Co. for its customers. Bessemer Trust Company (Cayman) Limited is a
subsidiary of The Bessemer Group Incorporated.
ADVISOR
The Advisor to each Portfolio is Bessemer Trust Company, N.A., a
national banking association. Pursuant to the Advisory Contract for each
Portfolio, the Advisor manages the portfolio of securities and makes decisions
with respect to the purchase and sale of investments, subject to the general
control of the Board of Directors of the Fund.
The Advisor also provides each Portfolio with supervisory personnel
who are responsible for supervising the performance of the Portfolios'
Administrator. The Administrator will provide personnel who will be responsible
for performing the operational components of such supervisory services and who
may be employees of the Advisor, of its affiliates or of other organizations.
The Advisory Contracts for the International Fund and for the Growth Fund were
approved by their shareholders at meetings held on October 12, 1993 and _______
__, 1996, respectively, and the continuance of the Advisory Contract for the
International Fund was most recently approved on August 8, 1996 by the Board of
Directors, including a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of the
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Fund or the Advisor. The Advisory Contract for the Growth Fund was approved on
August 8, 1996 by the Board of Directors, including a majority of the
disinterested directors.
The Advisory Contract will be continued in force for successive
twelve-month periods beginning each October 1, provided that such continuance
is specifically approved annually by a vote of a "majority of the outstanding
shares" of the Portfolio (as defined in the Prospectus) or by the Fund's Board
of Directors, and in either case by a majority of the directors who are not
parties to the Advisory Contract or interested persons of any such party, by
votes cast in person at a meeting called for the purpose of voting on such
matter.
The Advisory Contract is terminable without penalty by a Portfolio on
sixty days' written notice when authorized either by a vote of a "majority of
the outstanding shares" of the Portfolio (as defined in the Prospectus) or by a
vote of a majority of the Fund's Board of Directors, or by the Advisor on sixty
days' written notice, and will automatically terminate in the event of an
"assignment" (as defined in the 1940 Act). The Advisory Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the
part of the Advisor, or of reckless disregard of its obligations thereunder,
the Advisor shall not be liable for any action or failure to act in accordance
with its duties thereunder.
Each Portfolio has, under the Advisory Contract, confirmed its
obligation for payment of all its other expenses, including without limitation:
fees payable to the Advisor, Administrator, custodian, transfer agent and
dividend agent; brokerage and commission expenses; foreign, federal, state or
local taxes, including issuance and transfer taxes incurred by or levied on it;
commitment fees, certain insurance premiums and membership fees and dues in
investment company organizations; interest charges on borrowings;
telecommunications expenses; recurring and nonrecurring legal, accounting and
record-keeping expenses; costs of organizing and maintaining the Fund's
existence as a corporation; compensation, including directors' fees, of any
directors, officers or employees who are not also officers or employees of the
Advisor, the Administrator or their affiliates and costs of other personnel
providing administrative and clerical services; costs of stockholders' services
and costs of stockholders' reports, proxy solicitations, and corporate
meetings; fees and expenses of registering its shares under the appropriate
federal securities laws and of qualifying its shares under applicable state
securities laws, including expenses attendant upon the initial registration and
qualification of these shares and attendant upon renewals of, or amendments to,
those registrations and qualifications; any other distribution or promotional
expenses contemplated by an effective plan adopted by the Fund pursuant to Rule
12b-1 under the 1940 Act; and expenses of preparing, printing and delivering
the Prospectus to existing shareholders and of printing shareholder application
forms for shareholder accounts. The Distributor pays the promotional and
advertising expenses related to the distribution of each Portfolio's shares and
for the printing of all Portfolio prospectuses used in connection with the
distribution and sale of Portfolio shares for which it may be reimbursed under
the Plan. See "Distribution and Service Plan." Each Portfolio also reimburses
the Advisor for all of that Portfolio's operating costs, including rent,
depreciation of equipment and facilities, interest and amortization of loans
financing equipment used by the Portfolio and all the expenses incurred to
conduct that Portfolio's affairs. The amounts of such reimbursements must be
agreed upon between each Portfolio and the Advisor. The Advisor at its
discretion may voluntarily waive all or a portion of the advisory fee and the
operating expense reimbursement.
The Fund may from time to time hire its own employees or contract to
have management services performed by third parties, and the management of the
Fund intends to do so whenever it appears
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advantageous to the Fund. The Fund's expenses for employees and for such
services are among the expenses subject to the expense limitation described
below under "Distribution and Service Plan."
For its services under the Advisory Contract, the Advisor receives
from each Portfolio an advisory fee, computed daily and payable monthly, in
accordance with the following schedule: (i) 0.80% of the first $100 million of
that Portfolio's average net assets; (ii) 0.75% of the second $100 million of
that Portfolio's average net assets; and (iii) 0.70% of that Portfolio's
average net assets exceeding $200 million. For the period October 22, 1993
(commencement of operations) to October 31, 1993 the International Fund accrued
$1,046, all of which were permanently and irrevocably waived. For the fiscal
years ended October 31, 1994 and 1995, the International Fund accrued $570,189
and $771,294, respectively, in advisory fees, of which $134,868 and $91,974,
respectively, were permanently and irrevocably waived.
Any portion of the total fees received by the Advisor may be used by
the Advisor to provide distribution, shareholder and administrative services.
Pursuant to the Funds' Distribution and Service Plan, the Advisor will also act
as a shareholder servicing agent for each Portfolio pursuant to which the
Portfolios are permitted to pay the Advisor a maximum of 0.25% per annum of
that Portfolio's average daily net assets to compensate it and to permit the
Advisor to compensate banks, savings and loans and other financial institutions
(the Advisor with such other institutions, each a "Shareholder Servicing
Agent") whose clients are Fund shareholders for providing shareholder services.
The Advisor may irrevocably waive its rights to any portion of the advisory
fees and may use any portion of the advisory fee for distribution and servicing
purposes including defraying the costs of performing shareholder servicing
functions on behalf of each Portfolio, compensating others, including banks,
broker-dealers and other organizations whose customers or clients are
shareholders of the Portfolios for providing assistance in distributing each
Portfolio's shares and defraying the costs of shareholder servicing and other
promotional activities. See "Distribution and Service Plan." There can be no
assurance that such fees will be waived in the future.
ADMINISTRATOR
The Administrator for each Portfolio is Federated Administrative
Services ("Federated" or the "Administrator"), which has its principal office
at Federated Tower, Pittsburgh, Pennsylvania 15222-3779. The Administrator
serves as administrator of other mutual funds. Each Portfolio will not invest
in these funds or in any other fund which may in the future be affiliated with
the Administrator or any of its affiliates. In addition, the Administrator
provides persons satisfactory to the Board of Directors of the Fund to serve as
officers and directors of the Fund, as the case may be. Such officers, as well
as certain other employees and directors of the Fund, may be directors,
officers or employees of the Administrator or its affiliates.
Pursuant to the Administrative Services Agreement for the Portfolios,
the Administrator provides all management and administrative services
reasonably necessary for each Portfolio, other than those provided by the
Advisor, subject to the supervision of the Fund's Board of Directors. Because
of the services rendered each Portfolio by the Administrator and the
Portfolios' Advisor, the Fund itself may not require any employees other than
its officers, none of whom receive compensation from the Fund. For the services
rendered to each Portfolio by the Administrator, the Portfolios pays the
Administrator a fee, accrued daily and payable monthly, equal, on an annual
basis, to 0.15% of the average daily net assets of that Portfolio, up to $100
million of assets; 0.10% of such assets from $100 million to $250
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million; and 0.05% of such assets over $250 million. For the period October 22,
1993 (commencement of operations) to October 31, 1993 the International Fund
accrued $196 in administrative services fees under the former Administrative
Services Agreement with Signature Broker-Dealer Services, Inc. ("Signature"),
all of which was permanently and irrevocably waived. For the fiscal years ended
October 31, 1994 and 1995 the International Fund accrued $106,932 and $143,716,
respectively, in administrative services with Signature, of which $5,989 and
$84, respectively, was permanently and irrevocably waived.
Under the Administrative Services Agreement with the Portfolios, the
Administrator provides all administrative services including, without
limitation: (i) provides services of persons competent to perform such
administrative and clerical functions as are necessary to provide effective
administration of each Portfolio, including maintaining certain books and
records described in Rule 31a-1 under the 1940 Act (except for those records
maintained by each Portfolio's Shareholder Servicing Agents or each Portfolio's
transfer agent), and reconciling account information and balances among each
Portfolio's custodian and Advisor; (ii) oversees the performance of
administrative and professional services to each Portfolio by others, including
each Portfolio's custodian; (iii) prepares, but does not pay for, the periodic
updating of the Fund's Registration Statement, Prospectus and Statement of
Additional Information in conjunction with Fund counsel, including the printing
or reproduction of such documents for the purpose of filings with the
Securities and Exchange Commission and state securities administrators,
prepares the Fund's tax returns, and prepares reports to the Portfolio's
shareholders and the Securities and Exchange Commission; (iv) prepares in
conjunction with Fund counsel, but does not pay for, all filings under the
securities or "Blue Sky" laws of such states or countries as are designated by
the Distributor, which may be required to register or qualify, or continue the
registration or qualification, of the Fund and/or each Portfolio's shares under
such laws; (v) prepares (but does not pay for reproduction or mailing costs)
notices and agendas for meetings of the Fund's Board of Directors and minutes
of such meetings in all matters required by the 1940 Act to be acted upon by
the Board; (vi) monitors daily and periodic compliance with respect to all
requirements and restrictions of the 1940 Act, the Code and the Prospectuses;
and (vii) monitors and evaluates daily income and expense accruals, and sales
and redemptions of shares of the Portfolios.
The Administrative Services Agreement is terminable at any time,
without the payment of any penalty, by a vote of the majority of a Portfolio's
shareholders, by the Fund on behalf of the Portfolios or the Administrator on
sixty days' written notice and automatically in the event of an "assignment" as
defined by the 1940 Act. The Administrative Services Agreement shall remain in
effect for the same periods as the Advisory Contract subject to annual approval
by the Fund's Board of Directors. The Administrative Services Agreement
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or reckless disregard of its
obligations thereunder, the Administrator shall not be liable for any action or
failure to act in accordance with its duties thereunder.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Bessemer Trust Company (New Jersey), 100 Woodbridge Center Drive,
Woodbridge, New Jersey 07095, is the Portfolios' custodian. Pursuant to a
Custodian Agreement with the Portfolios, it is responsible for maintaining the
books and records of each Portfolio's securities and cash. Subject to the
supervision of the Advisor and Administrator, the custodian maintains each
Portfolio's accounting and portfolio transaction records. Fundamental
Shareholder Services, Inc. whose principal address is 29 Dogwood Drive,
Chester, New Jersey 07930 is the Portfolios' transfer and dividend disbursing
agent.
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DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a distribution and service plan, pursuant to Rule
12b-1 under the 1940 Act (the "Rule") for the Portfolios. The Rule provides
that an investment company which bears any direct or indirect expense of
distributing its shares must do so only in accordance with a plan permitted by
the Rule. The Plan provides that each Portfolio may bear certain expenses and
costs which in the aggregate are subject to a maximum of 0.40% per annum of
that Portfolio's average daily net assets. Pursuant to the Plan, the Portfolios
entered into a Distribution Agreement and a Shareholder Servicing Agreement
with Edgewood Services, Inc. (the "Distributor") and the Portfolios also
entered into a Shareholder Servicing Agreement with the Advisor. For its
services under its Shareholder Servicing Agreement, the Distributor is
permitted to receive payments from each Portfolio up to 0.25% per annum of the
average daily net assets of that Portfolio to permit it to make payments to
broker-dealers with which it has written agreements and whose clients are Fund
shareholders (each a "Broker-Dealer"), for providing shareholder services. For
its service under its Shareholder Servicing Agreement, the Advisor is permitted
to receive a payment from each Portfolio equal to 0.25% per annum of that
Portfolio's average daily net assets attributable to the clients of the Advisor
(and its affiliates) to compensate it for providing shareholder services to
such clients. In addition, the Shareholder Servicing Agreement provides that
the Advisor is permitted to receive payments from each Portfolio (together with
the Distributor's fee, the "Shareholder Servicing Fee") to actually permit it
to make payments made to banks, savings and loans and other financial
institutions with which it has written agreements and whose clients are Fund
shareholders (each institution, a "Shareholder Servicing Agent") for providing
shareholder services up to 0.25% per annum of that Portfolio's average daily
net assets attributable to the clients of the other Shareholder Servicing
Agents. Therefore, the total of the Shareholder Servicing Fees in the aggregate
payable to the Distributor and the Advisor will not exceed 0.25% of the total
net assets of that Portfolio. For the period October 22, 1993 (commencement of
operations) to October 31, 1993, the International Fund accrued $327 in
shareholder servicing fees under the former Shareholder Servicing Agreement
with Signature, all of which was permanently and irrevocably waived. For the
fiscal years ended October 31, 1994 and 1995, the International Fund accrued
$176,227 and $237,518, respectively, in shareholder servicing fees with
Signature.
Each Shareholder Servicing Agent and Broker-Dealer will, as agent for
its customers, among other things; answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
each Portfolio may be effected and certain other matters pertaining to each
Portfolio; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in
processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to
purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in shareholder
designated accounts; furnish (either separately or on an integrated basis with
other reports sent to a shareholder by a Portfolio) monthly and year-end
statements and confirmations of purchases and redemptions, as required by Rule
10b-10 under the Securities Exchange Act of 1934; transmit, on behalf of each
Portfolio, proxy statements, annual reports, updating prospectuses and other
communications from each Portfolio to shareholders of that Portfolio; receive,
tabulate and transmit to each Portfolio proxies executed by shareholders with
respect to meeting of shareholders of that Portfolio; and provide such other
related services as each Portfolio or a shareholder may request. As set forth
herein for these services, each Shareholder Servicing Agent and Broker-Dealer
(either directly or from the Distributor or Advisor) receives a fee, which may
be paid periodically, on an annual basis equal to
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0.25% of the average daily net assets of that Portfolio represented by shares
owned during the period for which payment is being made by investors with whom
such Shareholder Servicing Agent or Broker- Dealer maintains a servicing
relationship. Shareholder Servicing Agents and Broker-Dealers may waive all or
a portion of their Shareholder Servicing Fees. In addition, the Distribution
Agreement with the Distributor provides for reimbursement to the Distributor by
that Portfolio for its distribution, promotional and advertising costs incurred
in connection with the distribution of that Portfolio's shares in an amount not
to exceed 0.10% per annum of that Portfolio's average daily net assets (the
Distribution Reimbursement"). For the period October 22, 1993 (commencement of
operations) to October 31, 1993, no fees were paid under the former
Distribution Agreement with Signature. For the fiscal years ended October 31,
1994 and 1995, the International Fund paid $16,100 and $7,002, respectively,
under the former Distribution Agreement with Signature.
Under the Distribution and Shareholder Servicing Agreement, the
Distributor, for nominal consideration and as agent for each Portfolio, will
solicit orders for the purchase of each Portfolio's shares, provided that any
subscriptions and orders will not be binding on a Portfolio until accepted by
that Portfolio as principal. The Plan, the Distribution Agreement and the
Shareholder Servicing Agreement provide that, in addition to the Shareholder
Servicing Fee and the Distribution Reimbursement, each Portfolio will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor in carrying out its obligations under
the Distribution Agreement and the Shareholder Servicing Agreement, and by the
Advisor under its Shareholder Servicing Agent and (ii) preparing, printing and
delivering each Portfolio's prospectus to existing shareholders of that
Portfolio and preparing and printing subscription application forms for
shareholder accounts. The expenses enumerated in this paragraph shall not
exceed an amount equal to 0.05% per annum of that Portfolio's average daily net
assets. For the fiscal years ended October 31, 1994 and 1995, the International
Fund paid $26,566 and $4,080, respectively, for such expenses with Signature.
The Plan, the Shareholder Servicing Agreements and the Distribution
Agreement each provide that the Advisor and the Distributor may make payments
from time to time from their own resources which may include past profits for
the following purposes: to defray the costs of and to compensate others,
including financial intermediaries with whom the Distributor or Advisor has
entered into written agreements, for performing shareholder servicing and
related administrative functions on behalf of a Portfolio; to compensate
certain financial intermediaries for providing assistance in distributing a
Portfolio's shares; to pay the costs of printing and distributing a Portfolio's
prospectus to prospective investors; and to defray the cost of the preparation
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of a Portfolio's shares. The Distributor or the Advisor, as
the case may be, in their sole discretion, will determine the amount of such
payments made pursuant to the Plan with the Shareholder Servicing Agents and
Broker- Dealers they have contracted with, provided that such payments made
pursuant to the Plan will not increase the amount which a Portfolio is required
to pay to the Distributor or the Advisor for any fiscal year under the
Shareholder Servicing Agreements or otherwise.
Shareholder Servicing Agents and Broker-Dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the Shareholder Servicing Agents and
Broker-Dealers. In addition, Shareholder Servicing Agents and Broker-Dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in a
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Portfolio directly may impose charges, limitations, minimums and restrictions
in addition to or different from those applicable to shareholders who invest in
a Portfolio directly. Accordingly, the net yield to investors who invest
through Shareholder Servicing Agents and Broker-Dealers may be less than by
investing in a Portfolio directly. An investor should read the respective
Prospectus in conjunction with the materials provided by the Shareholder
Servicing Agent and Broker-Dealer describing the procedures under which
Portfolio shares may be purchased and redeemed through the Shareholder
Servicing Agent and Broker-Dealer.
The Glass-Steagall Act limits the ability of a depository institution
to become an underwriter or distributor of securities. However, it is the
Fund's position that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Distributor
for providing such services. However, this is an unsettled area of the law and
if a determination contrary to the Fund's position is made by a bank regulatory
agency or court concerning shareholder servicing and administration payments to
banks from the Distributor, any such payments will be terminated and any shares
registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to a Portfolio or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into by each Portfolio, the Distributor
or the Advisor, and the Shareholder Servicing Agents, Broker-Dealers, or other
organizations must be in a form satisfactory to the Fund's Board of Directors.
In addition, the Plan requires each Portfolio and the Distributor to prepare,
at least quarterly, written reports setting forth all amounts expended for
distribution purposes by each Portfolio and the Distributor pursuant to the
Plan and identifying the distribution activities for which those expenditures
were made.
The Plan provides that it may continue in effect for successive annual
periods provided it is approved by the shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan or in the agreements related to the Plan. The shareholders of the
International Fund approved the Plan at a meeting held on October 12, 1993. The
Board of Directors most recently approved the continuation of the Plan and
amended it to include the Growth Fund on August 8, 1996. In addition, the Board
of Directors approved an amendment and restatement of the Plan to reflect the
Distributor, Edgewood Services, Inc., at a special meeting held on October 18,
1996. The Plan further provides that it may not be amended to increase
materially the costs which may be spent by a Portfolio for distribution
pursuant to the Plan without shareholder approval, and the other material
amendments must be approved by the directors in the manner described in the
preceding sentence. The Plan may be terminated at any time by a vote of a
majority of the disinterested directors of each Portfolio or the shareholders.
The Advisor has agreed to reimburse each Portfolio for its expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which that Portfolio's shares are qualified for sale. For the purpose
of this obligation to reimburse expenses, each Portfolio's annual expenses are
estimated and accrued daily, and any appropriate estimated payments are made to
it on a monthly basis. From time to time, the Advisor and the Distributor may
voluntarily assume certain expenses of a Portfolio. This would have
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the effect of lowering the overall expense ratio of that Portfolio and of
increasing yield to investors in that Portfolio.
BROKERAGE AND PORTFOLIO TURNOVER
Brokerage
The Advisor makes each Portfolio's portfolio decisions and determines
the broker to be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and the best price
obtainable on each transaction (generally defined as best execution). When
consistent with the objective of obtaining best execution, brokerage may be
directed to persons or firms supplying investment information to the Advisor or
portfolio transactions may be effected by the Advisor. Neither a Portfolio nor
the Advisor has entered into agreements or understandings with any brokers
regarding the placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply investment
information to the Advisor for use in rendering investment advice to a
Portfolio, such information may be supplied at no cost to the Advisor and,
therefore, may have the effect of reducing the expenses of the Advisor in
rendering advice to that Portfolio. While it is impossible to place an actual
dollar value on such investment information, its receipt by the Advisor
probably does not reduce the overall expenses of the Advisor to any material
extent. Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best execution, the Advisor
may consider sales of shares of a Portfolio as a factor in the selection of
brokers to execute portfolio transactions for the Portfolios.
For the period from October 22, 1993 (commencement of operations) to
October 31, 1993 and for the fiscal years ended October 31, 1994 and 1995, the
aggregate commissions paid from the International Fund were $0, $516,020 and
$325,787, respectively.
The investment information provided to the Advisor is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and is
designed to augment the Advisor's own internal research and investment strategy
capabilities. Research services furnished by brokers through which each
Portfolio effects securities transactions are used by the Advisor in carrying
out its investment management responsibilities with respect to all its clients'
accounts. There may be occasions where the transaction cost charged by a broker
may be greater than that which another broker may charge if the Advisor
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services provided by the
executing broker. The Advisor may consider the sale of shares of a Portfolio by
brokers including the Distributor as a factor in its selection of brokers of
Portfolio transactions.
A Portfolio may deal in some instances in securities which are not
listed on a national securities exchange but are traded in the over-the-counter
market. It may also purchase listed securities through the third market. Where
transactions are executed in the over-the-counter market or third market, that
Portfolio will seek to deal with the primary market makers; but when necessary
in order to obtain best execution, it will utilize the services of others. In
all cases each Portfolio will attempt to negotiate best execution.
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Portfolio Turnover
Each Portfolio's average annual portfolio turnover rate, i.e., the
ratio of the lesser of sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less) is expected to
be high. Purchases and sales are made for each Portfolio whenever necessary in
the Advisor's opinion, to meet that Portfolio's objective. In order to qualify
as a regulated investment company, less than 30% of a Portfolio's gross income
(including tax exempt income) must be derived from the sale or other
disposition of stock, securities or certain investments held for less than
three months. Although increased Portfolio turnover (over 100%) may increase
the likelihood of additional capital gains for a Portfolio, each Portfolio
expects to satisfy the 30% income test.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters for the Fund are passed upon by Battle Fowler LLP, 75
East 55th Street, New York, New York 10022.
Deloitte & Touche LLP, Two World Financial Center, New York, New York
10281, have been selected as independent auditors for each Portfolio.
PURCHASE AND REDEMPTION OF SHARES
The material relating to the purchase and redemption of shares in each
Prospectus is herein incorporated by reference.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on
August 26, 1993 in the State of Maryland, consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the unissued shares into separate
series of stock, each series representing a separate, additional investment
portfolio. The Growth Fund was designated as a separate series of the Fund on
_____________ __, 1996, by the filing of Articles Supplementary in the State of
Maryland. Shares of all series will have identical voting rights, except where,
by law, certain matters must be approved by a majority of the shares of the
affected series. Each share of any series of shares when issued has equal
dividend, distribution, liquidation and voting rights within the series for
which it was issued, and each fractional share has those rights in proportion
to the percentage that the fractional share represents of a whole share. Shares
will be voted in the aggregate. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued in accordance
with the terms of the offering, will be fully paid and nonassessable. Shares
are redeemable at net asset value, at the option of the shareholder.
Under its Articles of Incorporation, the Fund has the right to redeem
for cash shares of stock owned by any shareholder to the extent and at such
times as the Fund's Board of Directors determines to be necessary or
appropriate to prevent an undue concentration of stock ownership which would
cause the Fund to become a "personal holding company" for federal income tax
purposes. In this regard, the Fund may also exercise its right to reject
purchase orders.
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The shares of each Portfolio have noncumulative voting rights, which
means that the holders of more than 50% of the shares outstanding voting for
the election of directors can elect 100% of the directors if the holders choose
to do so, and, in that event, the holders of the remaining shares will not be
able to elect any person or persons to the Board of Directors. The Fund will
not issue certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings
of the Fund's shareholders. This is because the By-laws of the Fund provide for
annual meetings only (a) for the election of directors, (b) for approval of the
revised investment advisory contracts with respect to a particular class or
series of stock, (c) for approval of revisions to the Fund's distribution plan
as required by the 1940 Act with respect to a particular class or series of
stock, and (d) upon the written request of holders of shares entitled to cast
not less than 25 percent of all the votes entitled to be cast at such meeting.
Annual and other meetings may be required with respect to such additional
matters relating to the Fund as may be required by the 1940 Act, any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Directors may consider necessary or desirable. Each Director
serves until the next meeting of the shareholders called for the purpose of
considering the election or re-election of such Director or of a successor to
such Director, and until the election and qualification of his or her
successor, elected at such a meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
PERFORMANCE
The material relating to the International Fund's performance in the
Prospectus is herein incorporated by reference. The Advisor may also include
performance information in such advertisements or information furnished to
current or prospective shareholders not only regarding the Advisor's
performance since John Trott, the International Fund's portfolio manager,
joined the Advisor in 1992, but also regarding Mr. Trott's personal investment
performance since 1988 when, as chief investment officer for Klienwart Benson
International Investment LTD., he managed investments for clients with similar
objectives to those of the International Fund. In addition, the Advisor may
also include performance information regarding the Advisor's performance since
Harry Rekas, the Growth Fund's portfolio manager, joined the Advisor in 1996,
but also regarding Mr. Rekas' personal investment performance since
_____________ when he managed the Capital Appreciation portfolio of AIG
Investment Management Corporation, a portfolio which was focused on small and
mid-capitalization equities.
NET ASSET VALUE
For purposes of determining each Portfolio's net asset value per
share, readily marketable portfolio securities listed on an exchange are
valued, except as indicated below, at the last sale price reflected at the
close of the regular trading session of the exchange on the business day as of
which such value is being determined. If there has been no sale on such day,
the securities are valued at the mean of the closing bid and asked prices on
such day. If no bid or asked prices are quoted on such day, then the security
is valued by such method as the Board of Directors shall determine in good
faith to reflect its fair market value. Portfolio securities traded on more
than one national securities exchange are valued at the last sale price on the
business day as of which such value is being determined as reflected on the
tape at the close of the exchange representing the principal market for such
securities.
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Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Advisor to
be over-the-counter are valued at the mean of the current bid and asked prices
from such sources as the Board of Directors deems appropriate to reflect their
fair value.
United States Government obligations and other debt instruments having
sixty days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted
and not readily marketable securities, are valued under procedures established
by and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.
As indicated in each Prospectus, the net asset value per share of each
Portfolio's shares will be determined as of the close of the regular trading
session of the New York Stock Exchange (the "NYSE") on each day that the NYSE
is open for trading. The NYSE annually announces the days on which it will not
be open for trading; the most recent announcement indicates that it will not be
open on the following days: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
However, the NYSE may close on days not included in that announcement.
TAX STATUS
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of shares of a
Portfolio (the "Shares") and holders of the Shares (the "Shareholders"). The
summary is limited to investors who hold the Shares as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. Shareholders should consult their tax advisers in determining the
federal, state, local and any other tax consequences of the purchase, ownership
and disposition of Shares.
A Portfolio intends to qualify for and elect the special tax treatment
applicable to "regulated investment companies" under Sections 851-855 of the
Code. If a Portfolio qualifies as a "regulated investment company" and
distributes to Shareholders 90% or more of its investment company taxable
income (without regard to its net capital gain, i.e., the excess of its net
long-term capital gain over its net short-term capital loss), it will not be
subject to federal income tax on the portion of its investment company taxable
income (including any net capital gain) it distributes to Shareholders in a
timely manner. In addition, to the extent a Portfolio distributes to
Shareholders in a timely manner at least 98% of its taxable income (including
any net capital gain) it will not be subject to the 4% excise tax on certain
undistributed income of a regulated investment company. In order to maintain
its status as a regulated investment company, a Portfolio must derive less than
30% of its gross income from the sale or other disposition of securities held
less than three months. It is anticipated that each Portfolio will not be
subject to federal income tax or the excise tax. Distribution of each
Portfolio's investment company taxable income (including any net capital gain)
is expected to occur in a timely manner. Although all or a portion of each
Portfolio's taxable income (including any net capital gain) for a calendar year
may be distributed shortly after the end of the calendar year, such a
distribution will be treated for federal income tax purposes as having been
received by Shareholders during the calendar year.
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Each Portfolio intends to qualify as a publicly offered regulated
investment company and as such will not be subject to the 2% limitation on
itemized expense deductions. Thus, distributions will take into account all of
the itemized expenses incurred by each Portfolio. Additionally, Section 68 of
the Code, which limits the amount of allowable itemized deductions of
individuals with an adjusted gross income in excess of specified amounts, does
not appear to apply to indirect deductions incurred by a pass through entity,
such as a regulated investment company. However, regulations may be promulgated
in the future that could alter this result.
Distributions to Shareholders of each Portfolio's taxable income
(other than its net capital gain) for a year will be taxable as ordinary income
to Shareholders. To the extent that distributions to a Shareholder in any year
are not taxable as ordinary income, they will be treated as a return of capital
and will reduce the Shareholder's basis in his Shares and, to the extent that
they exceed his basis, will be treated as a gain from the sale of his Shares as
discussed below. It is anticipated that substantially all of the distributions
of each Portfolio's taxable income (other than net capital gain distributions)
will be taxable as ordinary income to Shareholders.
Distributions of each Portfolio's net capital gain (designated as
capital gain dividends by that Portfolio) will be taxable to Shareholders as
long-term capital gain, regardless of the length of time the Shares have been
held by a Shareholder. A Shareholder may recognize a taxable gain or loss if
the Shareholder sells or redeems his Shares. Any gain or loss arising from (or
treated as arising from) the sale or redemption of Shares will be a capital
gain or loss, except in the case of a dealer in securities. The excess of net
long-term capital gains over net short-term capital losses may be taxed at a
lower rate than ordinary income for certain noncorporate taxpayers. A capital
gain or loss is long-term if the asset is held for more than one year and
short-term if held for one year or less. To the extent that a capital gain
dividend with respect to the Shares is afforded long-term capital gain
treatment, a Shareholder who realizes a capital loss upon the sale of such
Shares that were owned for six months or less must treat the loss as long-term.
The deduction of capital losses is subject to limitations. If the securities
appreciate in value, purchasers of Shares after the occurrence of such
appreciation will acquire their Shares subject to the tax obligation that may
be incurred in the future when there is a sale of such Shares. If a Shareholder
incurs a load charge in acquiring a Share and a reinvestment right and disposes
of the Share within 90 days and subsequently acquires an interest in a
regulated investment company for no load charge, any loss recognized on the
first disposition will be disallowed to the extent of the load charge.
Distributions that are taxable as ordinary income to Shareholders will
constitute dividends for federal income tax purposes but will be eligible for
the dividends-received deduction for corporations (other than corporations such
as "S" corporations that are not eligible for such deduction because of their
special characteristics and other than for purposes of special taxes such as
the accumulated earnings tax and the personal holding company tax) only to the
extent of dividends received from domestic issuers by each Portfolio with
respect to stock held by that Portfolio for more than 45 days and only if the
Shareholder has held his Shares for more than 45 days. The requirement that
dividends must be received from domestic issuers in order to qualify for the
dividends received deduction will reduce, or eliminate, the availability of
this deduction to Shareholders. The dividends-received deduction is currently
70%. However, Congress from time to time considers proposals to reduce the
rate, and enactment of such a proposal would adversely affect the after-tax
return to investors who can take advantage of the deduction. Sections 246 and
246A of the Code contain limitations on the eligibility of dividends for the
corporate dividends-received deduction (in addition to the limitations
discussed above). Depending upon the corporate Shareholder's circumstances
(including whether it has a more than 45-day holding period for
-24-
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<PAGE>
its Shares and whether its Shares are debt financed), these limitations may be
applicable to dividends received by a corporate Shareholder from that Portfolio
that would otherwise qualify for the dividends-received deduction under the
principles discussed above. Accordingly, Shareholders should consult their own
tax advisers in this regard. A corporate Shareholder should be aware that the
receipt of dividend income for which the dividends-received deduction is
available may give rise to an alternative minimum tax liability (or increase an
existing liability) because the dividend income will be included in the
corporation's "adjusted current earnings" for purposes of the adjustment to
alternative minimum taxable income required by Section 56(g) of the Code.
Dividends and interest received by each Portfolio from foreign issuers
will in most cases be subject to foreign withholding taxes. A Portfolio may
qualify to make an election that will enable Shareholders to credit foreign
withholding taxes against their federal income tax liability on distributions
by that Portfolio.
The federal tax status of each year's distributions will be reported
to Shareholders and to the Internal Revenue Service. The foregoing discussion
relates only to the federal income tax status of a Portfolio and to the tax
treatment of distributions by that Portfolio to U.S. Shareholders. Shareholders
who are not United States citizens or residents should be aware that
distributions from each Portfolio will generally be subject to a withholding
tax of 30%, or a lower treaty rate, and should consult their own tax advisers
to determine whether an investment in a Portfolio is appropriate. Distributions
may also be subject to state and local taxation and Shareholders should consult
their own tax advisers in this regard.
Sections 1291-1297 of the Code impose certain additional taxes and
interest on Shareholders of a "passive foreign investment company," defined as
a foreign corporation 75% or more of the gross income of which is from passive
investments or at least 50% of the adjusted basis of the assets of which are
assets that produce passive income. The additional tax and interest are imposed
on the Shareholders of the passive foreign investment company in the event of a
distribution of accumulated earnings or the holder's recognition of gain from
the sale of stock of the company. In the case of a "regulated investment
company" that is the Shareholder, this tax and interest will be imposed on the
"regulated investment company," not on the Shareholders of the "regulated
investment company."
Entities that generally qualify for an exemption from federal income
tax, such as many pension trusts, are nevertheless taxed under Section 511 of
the Code on "unrelated business taxable income." Unrelated business taxable
income is income from a trade or business regularly carried on by the
tax-exempt entity that is unrelated to the entity's exempt purpose. Unrelated
business taxable income generally does not include dividend or interest income
or gain from the sale of investment property, unless such income is derived
from property that is debt-financed or is dealer property. A tax-exempt
entity's dividend income from a Portfolio and gain from the sale of Shares in
that Portfolio or that Portfolio's sale of securities is not expected to
constitute unrelated business taxable income to such tax-exempt entity unless
the acquisition of the Shares itself is debt-financed or constitutes dealer
property in the hands of the tax-exempt entity.
Before investing in each Portfolio, the trustee or investment manager
of an employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee Retirement Income Security Act of 1974 ("ERISA"), taking into
account the needs of the plan and all of the facts and circumstances of the
investment in a Portfolio; (b) whether the investment satisfies the
diversification requirement of Section 404(a)(1)(C) of ERISA; and
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<PAGE>
(c) whether the assets of a Portfolio are deemed "plan assets" under ERISA and
the Department of Labor regulations regarding the definition of "plan assets."
Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in a Portfolio.
DESCRIPTION OF CORPORATE DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's Investors Services, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's Corporation ("S&P"). Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest
rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
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<PAGE>
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
FINANCIAL STATEMENTS
The Annual Report of the International Fund dated October 31, 1995 has
been filed with the Securities and Exchange Commission pursuant to Section
30(b) of the 1940 Act and Rule 30b2-1 thereunder and is hereby incorporated
herein by reference. A copy of such Annual Report and the Annual Report for the
Growth Fund will be provided, without charge, to each person receiving this
Statement of Additional Information.
The Prospectus and the Statement of Additional Information
constituting Parts A and B, respectively, of Post-Effective Amendment No. 3 to
the Registration Statement No. 33-66528 filed on February 28, 1996 is
incorporated herein by reference.
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<PAGE>
OLD WESTBURY FUNDS, INC.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Financial Statements.
(1) Portfolio of Investments, dated October 31, 1995
(2) Statement of Assets and Liabilities, dated October 31, 1995.
(3) Statement of Operations for the fiscal year ended October 31,
1995.
(4) Statement of Changes in Net Assets for the fiscal years ended
October 31, 1995 and October 31, 1994.
(5) Financial Highlights for the fiscal years ended October 31,
1995 and October 31, 1994 and the period October 22, 1993
(commencement of operations) through October 31, 1993.
(6) Notes to Financial Statements, dated October 31, 1995.
(7) Independent Auditors' Report, dated December 11, 1995.
(B) Exhibits.
***(99.1) Form of Articles of Incorporation of the Registrant.
***(99.2) By-laws of the Registrant.
(99.3) Not applicable.
(99.4) Not applicable.
***(99.5) Advisory Contract between the Registrant, on behalf of the
International Fund, and Bessemer Trust Company, N.A.
+(99.5.1) Form of Advisory Contract between the Registrant, on behalf
of the Growth Fund, and Bessemer Trust Company, N.A.
+(99.6) See Form of Distribution Agreement filed as Exhibit 15.2
herein.
(99.7) Not applicable.
*(99.8) Custody Agreement between the Registrant and Bessemer Trust
Company (New Jersey)
+(99.9) Form of Administrative Services Agreement between the
Registrant and Federated Administrative Services for the
Fund, on behalf of the Portfolios of the Registrant.
*(99.10) Opinion of Messrs. Battle Fowler, as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the heading
"Dividends, Distributions and Taxes" in the Prospectus.
***(99.11) Consent of Independent Auditors.
(99.12) Not applicable.
*(99.13) Written assurance of SFG Investors II Limited
Partnership, that its purchase of shares of the Registrant
was for investment purposes without any present intention of
redeeming or reselling.
(99.14) Not applicable.
+(99.15.1) Amended and Restated Distribution and Service Plan adopted by
the Registrant, on behalf of the International Fund, Pursuant
to Rule 12b-1 under the Investment Company Act of 1940.
(99.15.1.1) Distribution and Service Plan adopted by the Registrant, on
behalf of the Growth Opportunity Fund, Pursuant to Rule 12b-1
under the Investment Company Act of 1940.
+(99.15.2) Form of Distribution Agreement between the Registrant, on
behalf of the Portfolios, and Edgewood Services, Inc.
*(99.15.3) Shareholder Servicing Agreement between the Registrant, on
behalf of the International Fund, and Bessemer Trust Company,
N.A.
+(99.15.3.1) Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Bessemer Trust
Company, N.A.
+(99.15.4) Form of Amended and Restated Shareholder
Servicing Agreement between the Registrant, on behalf of the
International Fund, and Edgewood Services, Inc.
+(99.15.4.1) Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Edgewood
Services, Inc.
**(99.16) Schedules of Computation of Performance Quotations.
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<PAGE>
+(99.18) Power of Attorney.
+(27) Financial Data Schedule [for EDGAR filing only].
* Incorporated herein by reference from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on October 5, 1993.
** Incorporated herein by reference from Post-Effective Amendment No. 1
to this Registration Statement as filed with the SEC on March 1, 1994.
*** Incorporated herein by reference from Post-Effective Amendment No. 3
to this Registration Statement as filed with the SEC on February 28,
1996.
+ Incorporated herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
TITLE OF CLASS AS OF AUGUST 15, 1996
Common Stock
(par value $0.001)
ITEM 27. INDEMNIFICATION.
In accordance with Section 2-418 of the General Corporation
Law of the State of Maryland, Article EIGHTH of the
Registrant's Articles of Incorporation provides as follows:
"NINTH: (a) The Corporation shall indemnify (i) its currently
acting and former directors and officers, whether serving the
Corporation or at its request any other entity, to the
fullest extent required or permitted by the General Laws of
the State of Maryland now or hereafter in force, including
the advance of expenses under the procedures and to the
fullest extent permitted by law, and (ii) other employees and
agents to such extent as shall be authorized by the Board of
Directors or the ByLaws and as permitted by law. Nothing
contained herein shall be construed to protect any director
or officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The foregoing rights
of indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time such
by-laws, resolutions or contracts implementing such
provisions or such indemnification arrangements as may be
permitted by law. No amendment of the charter of the
Corporation or repeal of any of its provisions shall limit or
eliminate the right of indemnification provided hereunder
with respect to acts or omissions occurring prior to such
amendment or repeal.
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<PAGE>
(b) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment
Company Act of 1940, no director or officer of the
Corporation shall be personally liable to the Corporation or
its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment of the
charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the limitation of liability provided
to directors and officers hereunder with respect to any act
or omission occurring prior to such amendment or repeal."
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be
permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than a payment by the Registrant of expenses incurred
or paid by a director, officer or the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
Insofar as the Investment Company Act of 1940 may be
concerned, in the event that a claim for indemnification is
asserted by a director, officer or controlling person of the
Registrant in connection with the securities being
registered, the Registrant will not make such indemnification
unless (i) the Registrant has submitted, before a court or
other body, the question of whether the person to be
indemnified was liable by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties, and
has obtained a final decision on the merits that such person
was not liable by reason of such conduct or (ii) in the
absence of such decision, the Registrant shall have obtained
a reasonable determination, based upon a review of the facts,
that such person was not liable by virtue of such conduct, by
(a) the vote of a majority of directors who are neither
interested persons as such term is defined in the Investment
Company Act of 1940, nor parties to the proceeding or (b) an
independent legal counsel in a written opinion.
The Registrant will not advance attorneys' fees or other
expenses incurred by the person to be indemnified unless the
Registrant shall have (i) received an undertaking by or on
behalf of such person to repay the advance unless it is
ultimately determined that such person is entitled to
indemnification and one of the following conditions shall
have occurred: (x) such person shall provide security for his
undertaking, (y) the Registrant shall be insured against
losses arising by reason of any lawful advances or (z) a
majority of the disinterested, non-party directors of the
Registrant, or an independent legal counsel in a written
opinion, shall have determined that based on a review of
readily available facts there is reason to believe that such
person ultimately will be found entitled to indemnification.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
The description of Bessemer Trust Company, N.A. under the
caption "Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting parts A and
B, respectively, of the Registration Statement are
incorporated herein by reference.
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414578.1
<PAGE>
To the knowledge of Registrant, none of the directors or
officers of the Investment Advisor, except those set forth
below, is or has been, at any time during the past two fiscal
years employed by any entity other than the Investment
Advisor.
<TABLE>
<CAPTION>
POSITION WITH
NAME INVESTMENT ADVISOR OTHER BUSINESS CONNECTIONS
<S> <C> <C>
Stuart S. Janney, III Chairman of the Board Managing Director & Head of Asset
Management, Alex, Brown & Sons, Inc.
William Acquavella Director President & Owner of Acquavella
Galleries, Inc./Acquavella Contemporary
Art, Inc. Partner w/Sotheby's in
Acquavella Modern Art
Stanley C. Bodell, Jr. Senior Vice President Senior Vice President, Fleet Investment
Services, Rhode Island
Brooks Carey Senior Vice President Vice President, T. Rowe Price
John D. Chadwick Executive Vice Senior Vice President and President
Senior Portfolio Manager, Kidder Peabody
& Co.
W. David Dary Senior Vice President Vice President and Senior Portfolio
Manager, Citicorp Trust, N.A.
Jesse H. Davis Vice President Director Systems and
Programming-Brokerage Group, ADP
Thomas J. Frank, Jr. Vice President Vice President, U.S. Trust
F. Malcolm Graff, Jr. Senior Vice President Client Account Manager, Bankers Trust
Company
Glenn E. Gray Vice President Area Manager - Corporate Finance,
Finova Capital Corporation
Robert J. Hughes Vice President Vice President and Assistant Department
Head, Fiduciary Special Services, Inc.
Timothy J. Morris Senior Executive Vice President, CEO and Chief President
Investment Officer, The Portfolio Group
Jane Reilly Vice President Vice President, U.S. Trust
Frederick H. Sandstrom Senior Vice President Executive Vice President and Managing
Director, Fleet Financial Group
</TABLE>
Item 29. PRINCIPAL UNDERWRITERS.
-7-
414578.1
<PAGE>
(a) Edgewood Services, Inc. is the Registrant's distributor.
(b) The following are the directors and officers of the
Distributor. The principal business address of each of
these persons is Federated Tower, Pittsburgh,
Pennsylvania 15222-3779 unless otherwise noted.
POSITIONS & OFFICES POSITIONS & OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are maintained in the
physical possession of the Registrant at, Bessemer Trust
Company, N.A., 630 Fifth Avenue, New York, New York 10111,
the Registrant's advisor Federated Administrative Services
Federated Tower, Pittsburgh, Pennsylvania 15222-3779, the
Registrant's administrator; and Fundamental Shareholder
Services, Inc., 29 Dogwood Drive, Chester, New Jersey 07930,
the Registrant's transfer and dividend disbursing agent.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's annual report, upon request, without
charge.
(d) The Registrant undertakes to call a meeting of the
stockholders for purposes of voting upon the
question of removal of a director or directors, if
requested to do so by the holders of at least 10% of
the Portfolio's outstanding shares, and the
Registrant shall assist in communications with other
stockholders.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(5.1) Form of Advisory Contract between the Registrant, on behalf
of the Growth Fund, and Bessemer Trust Company, N.A.
(6) See Form of Distribution Agreement filed as Exhibit 15.2
(9) Form of Administrative Services Agreement between
the Registrant and Federated Administrative Services
for the Fund, on behalf of the Portfolios of the
Registrant.
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414578.1
<PAGE>
(15.1) Amended and Restated Distribution and Service Plan
adopted by the Registrant, on behalf of the International
Fund, pursuant to Rule 12b-1 under the Investment Company
Act of 1940.
(15.1.1) Distribution and Service Plan adopted by the Registrant,
on behalf of the Growth Opportunity Fund, Pursuant to
Rule 12b-1 under the Investment Company Act of 1940.
(15.2) Form of Distributor's Contract between the Registrant, on
behalf of the Portfolios, and Edgewood Services, Inc.
(15.3.1) Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Bessemer
Trust Company, N.A.
(15.4) Form of Amended and Restated Shareholder Servicing
Agreement between the Registrant, on behalf of the
International Fund, and Edgewood Services, Inc.
(15.4.1) Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Edgewood
Services, Inc.
(18) Power of Attorney
(27) Financial Data Schedule [for EDGAR filing only].
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414578.1
<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 Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized on the 18th day of November, 1996.
OLD WESTBURY FUNDS, INC.
By: EDWARD C. GONZALES
/s/ EDWARD C. GONZALES
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
ROBERT M. KAUFMAN* Director and
------------------
Robert M. Kaufman Chairman of the Board
HOWARD D. GRAVES* Director
------------------
Howard D. Graves
Director
------------------
John Kevin Kenny
/s/ EDWARD C. GONZALES President and Treasurer November 18, 1996
Edward C. Gonzales (Chief Executive Officer
and Principal Financial
and Accounting Officer)
*By /s/ EDWARD C. GONZALES November 18, 1996
-----------------------
Edward C. Gonzales
as Attorney-in-Fact pursuant to a Power of Attorney filed herewith.
414578.1
ADVISORY CONTRACT
OLD WESTBURY FUNDS, INC. (the "Fund")
Old Westbury Growth Opportunity Fund (the "Portfolio")
6 St. James Avenue
Boston, Massachusetts 02116
August 8, 1996
Bessemer Trust Company, N.A.
630 Fifth Avenue
New York, New York 10111
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
extent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the management and other services
specified below.
(b) Subject to the general control of our Board of Directors,
you will make decisions with respect to all purchases and sales of our
portfolio securities. To carry out such decisions, you are hereby authorized,
as our agent and attorney-in-fact, for our account and at our risk and in our
name, to place orders for the investment and reinvestment of our assets. In all
purchases, sales and other transactions in our portfolio securities you are
authorized to exercise full discretion and act for us in the same manner and
with the same force and effect as our corporation itself might or could do with
respect to such purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions. In furtherance of such and subject
to applicable law and procedures adopted by the Fund's Board of Directors, you
may (i) pay commissions to brokers other than yourself which are
C/M 11316.0001 428079.1
<PAGE>
higher than such that might be charged by another qualified broker to obtain
brokerage and/or research services considered by you to be useful or desirable
for your investment management of the Portfolio and/or other advisory accounts
of yours and any investment advisor affiliated with you; and (ii) consider the
sales of shares of the Portfolio by brokers including your affiliates as a
factor in your selection of brokers for Portfolio transactions.
(c) You will report to our Board of Directors at each meeting
thereof all changes in our portfolio since your prior report, and will also
keep us in touch with important developments affecting our portfolio and, on
your own initiative, will furnish us from time to time with such information as
you may believe appropriate for this purpose, whether concerning the individual
entities whose securities are included in our portfolio, the activities in
which such entities engage, Federal income tax policies applicable to our
investments, or the conditions prevailing in the money market or the economy
generally. You will also furnish us with such statistical and analytical
information with respect to our portfolio securities as you may believe
appropriate or as we may reasonably request. In making such purchases and sales
of our portfolio securities, you will comply with the policies set from time to
time by our Board of Directors as well as the limitations imposed by our
Amended Articles of Incorporation, the provisions of the Internal Revenue Code
relating to regulated investment companies and the 1940 Act, and the
limitations contained in the Registration Statement.
(d) It is understood that you will from time to time employ,
subcontract with or otherwise associate yourself with, entirely at your expense
such persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder.
(e) You or your affiliates will also provide supervisory
personnel who will be responsible for supervising and monitoring the
performance of our Administrator in connection with its duties under our
Administrative Services Agreement and for supervising the performance of other
administrative services, accounting and related services, net asset value and
yield calculations, reports to and filings with regulatory authorities, and
services relating to such functions. Such personnel may be your employees or
employees of your affiliates or of other organizations. It is understood that
we have retained, at our expense, an Administrator to perform the operational
components of the functions and services listed herein.
(f) You or your affiliates will also furnish us such
additional administrative supervision and such office facilities as you may
believe appropriate or as we may reasonably
-2-
C/M 11316.0001 428079.1
<PAGE>
request subject to the requirements of any regulatory authority to which you
may be subject. We will reimburse you for all of our operating costs incurred
by you, including rent, depreciation of equipment and facilities, interest and
amortization of loans financing equipment used by us and all the expenses
incurred to conduct our affairs. The amounts of such reimbursements shall from
time to time be agreed upon between us.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses including: (a) brokerage and commission expenses; (b) foreign,
federal, state or local taxes, including issuance and transfer taxes incurred
by or levied on us; (c) commitment fees, certain insurance premiums and
membership fees and dues in investment company organizations; (d) interest
charges on borrowings; (e) charges and expenses of our custodian; (f) charges
and expenses relating to the issuance, redemption, transfer and dividend
disbursing functions for us; (g) telecommunications expenses; (h) recurring and
non-recurring legal, accounting and recordkeeping expenses; (i) costs of
organizing and maintaining the Fund's existence as a corporation; (j)
compensation, including directors' fees, of any of our directors, officers or
employees who are not your officers or officers employees of the Administrator
or their affiliates, and costs of other personnel Providing administrative and
clerical services to us; (k) costs of providing shareholders' services,
including charges and expenses of persons providing confirmations of
transactions in the Portfolio's shares, periodic statements to shareholders and
recordkeeping services, and costs of shareholders' reports, proxy
solicitations, and corporate meetings; (1) fees and expenses of registering our
shares under the appropriate federal securities laws and of qualifying our
shares under applicable state securities laws, including expenses attendant
upon the initial registration and qualification of these shares and attendant
upon renewals of, or amendment to, those registrations and qualifications; (m)
expenses of preparing, printing and delivering the initial registration
statement and of preparing, printing and delivering the Prospectus to existing
shareholders and of printing shareholder application forms for shareholder
accounts; (n) fees and expenses payable to the Advisor, Distributor,
Administrator, custodian, transfer agent and dividend agent; and (o) any other
distribution or promotional expenses contemplated by an effective plan adopted
by us pursuant to Rule 12b-1 under the Act. Our obligation for the foregoing
expenses is limited by your agreement to be responsible, while this Agreement
is in effect, for any amount by which our annual operating expenses, including
distribution expenses, (excluding taxes, brokerage, interest and extraordinary
expenses) exceed the limits on investment company expenses prescribed by any
state in which the Portfolio's shares are qualified for sale.
-3-
C/M 11316.0001 428079.1
<PAGE>
4. We will expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard
of your obligations and duties hereunder.
5. (a) In consideration of the foregoing we will pay you a fee
computed daily and payable monthly, in accordance with the following schedule:
.80% of the first $100 million of the Portfolio's average net assets; .75% of
the second $100 million of the Portfolio's average net assets; and .70% of the
Portfolio's average net assets exceeding $200 million. Your fee will be accrued
by us daily, and will be payable on the last day of each calendar month for
services performed hereunder during that month or on such other schedule as you
shall request of us in writing. You may waive your right to any fee to which
you are entitled hereunder, provided such waiver is delivered to us in writing.
Any reimbursement of our expenses, to which we may become entitled pursuant to
paragraph 3 hereof, will be paid to us at the end of the month for which those
expenses are accrued, at the same time as we pay you your fee.
(b) Pursuant to the Portfolio's Distribution and Service
Plan, the Advisor will also act as a shareholder servicing agent for the
Portfolio pursuant to which the Portfolio is permitted to pay the Advisor a
maximum of .25% per annum of the Portfolio's average daily net assets to
compensate it and to permit the Advisor to compensate banks, savings and loans
and other financial institutions (the Advisor with such other institutions,
each a "Shareholder Servicing Agent") whose clients are Portfolio shareholders
for providing shareholder services. In addition, the Advisor may use the
advisory fee for distribution and servicing purposes including defraying the
costs of performing shareholder servicing functions on behalf of the Portfolio,
compensating others, including banks, broker-dealers and other organizations
whose customers or clients are shareholders of the Portfolio for providing
assistance in distributing the Portfolio's shares and defraying the cost of
shareholder servicing and other promotional activities. To the extent that you
or your affiliates directly may make payments to banks, securities dealers and
other third parties who engage in the sale of our shares or who render
shareholder support services, and that such payments may be deemed indirect
financing of an activity primarily intended to result in the sale of shares of
the Portfolio within the context of Rule 12b-1 under the 1940 Act (the "Rule"),
then such payments by you shall be deemed to be authorized under the
Portfolio's Distribution and Service Plan
-4-
C/M 11316.0001 428079.1
<PAGE>
adopted pursuant to the Rule. You, will, in your sole discretion, determine the
amount of such payments and may from time to time in your sole discretion
increase or decrease the amount of such payments; provided, however, that no
such payment will increase the amount the Portfolio is required to pay you or
any person under this Agreement or any agreement. Any payments made by you for
such purposes are subject to compliance with the terms of written agreements in
a form satisfactory to the Fund's Board of Directors to be entered into by you
and the participating organization.
6. This Agreement will become effective on August 8, 1996 and shall
continue in effect until August 8, 1998 and thereafter for successive
twelve-month periods (computed from each August 1), provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities, as defined in the 1940 Act, and, in either case, by a majority of
those of our directors who are neither party to this Agreement nor, other than
by their service as directors of the corporation, interested persons, as
defined in the 1940 Act, of any such person who is party to this Agreement.
Upon the effectiveness of this Agreement, it shall supersede all previous
Agreements between us covering the subject matter hereof. This Agreement may be
terminated at any time, without the payment of any penalty, by vote of a
majority of our outstanding voting securities, as defined in the 1940 Act, or
by a vote of a majority of our entire Board of Directors, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any-such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by governing
law and in applicable rules or regulations of the Securities and Exchange
Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
-5-
C/M 11316.0001 428079.1
<PAGE>
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
OLD WESTBURY FUNDS, INC.
Old Westbury Growth Opportunity Fund
By:
Name: Thomas M. Lenz
Title: Secretary
ACCEPTED: August 8, 1996
BESSEMER TRUST COMPANY, N.A.
By: ______________________
Name: Robert C. Elliott
Title: Senior Executive Vice President
-6-
C/M 11316.0001 428079.1
OLD WESTBURY FUNDS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this day
of , 1996, between Old Westbury Funds, Inc., a Maryland Corporation (herein
called the "Fund"), and Federated Administrative Services, a Delaware business
trust (herein called "FAS").
WHEREAS, the Fund is a Maryland Corporation consisting of one
or more portfolios, which operates as an open-end management investment company
and will so register under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain FAS as its Administrator
to provide it with Administrative Services (as herein defined), and FAS is
willing to render such services;
NOW THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby appoints FAS
as Administrator of the Fund on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 5 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Fund's Board of Directors FAS, or its delegatee,
will provide facilities, equipment and personnel to carry out the following
administrative services for operation of the business and affairs of the Fund
and each of its portfolios:
(a) in conjunction with counsel for the Fund, prepare,
file and maintain the Fund's governing documents and
any amendments thereto, including the Articles of
Incorporation (which has already been prepared and
filed), the By-laws and minutes of meetings of
Directors and shareholders;
(b) in conjunction with counsel for the Fund, prepare
and file with the Securities and Exchange Commission
and the appropriate state securities authorities the
registration statements for the Fund and the Fund's
shares and all amendments thereto, reports to
regulatory authorities and shareholders,
prospectuses, proxy statements, and such other
documents all as may be necessary to enable the Fund
to make a continuous offering of its shares;
(c) in conjunction with counsel for the Fund, prepare,
negotiate, and administer contracts on behalf of the
Fund with, and coordinate the activities of, among
others, the Fund's investment adviser, distributor,
custodian, portfolio accountant, transfer agent and
independent accountants;
(d) supervise the Fund's portfolio accountant in the
maintenance of the Fund's general ledger and in the
preparation of the Fund's financial statements,
including periodic (i) review and evaluation of
expense accruals; (ii) review, evaluation and
authorization of expenses payments; (iii) projection
of future expenses; and (iv) periodic review of the
determination of the net asset value of the Fund and
of the declaration and payments of dividends and
other distributions to shareholders;
C/M 11316.0001 427735.1
<PAGE>
(e) calculate performance data of the Fund for
dissemination to information services covering the
investment company industry;
(f) prepare and file the Fund's tax returns;
(g) examine and review the operations of the Fund's
custodian and transfer agent;
(h) coordinate the layout and printing of publicly
disseminated prospectuses and reports;
(i) perform internal audit examinations in accordance
with a charter to be adopted by FAS and the Fund;
(j) assist with the design, development, and operation
of the Fund;
(k) provide individuals reasonably acceptable to the
Fund's Board of Directors for nomination,
appointment, or election as officers of the Fund,
who will be responsible for the management of
certain of the Fund's affairs as determined by the
Fund's Board of Directors;
(l) consult with the Fund and its Board of Directors on
matters concerning the Fund and its affairs; and
(m) make periodic reports to the Fund's Board of
Directors in the performance of its obligations
under this Agreement.
The foregoing, along with any additional services that FAS shall agree in
writing to perform for the Fund hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for the Fund by the Fund's
investment adviser, distributor, custodian, portfolio accountant, transfer
agent or independent accountants pursuant to their respective agreements with
the Fund.
3. Records. FAS shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by the 1940 Act and the rules
thereunder, as the same may be amended from time to time, pertaining to the
Administrative Services performed by it and not otherwise created and
maintained by another party pursuant to contract with the Fund. Where
applicable, such records shall be maintained by FAS for the periods and in the
places required by Rule 31a-2 under the 1940 Act. The books and records
pertaining to the Fund which are in the possession of FAS shall be the property
of the Fund. The Fund, or the Fund's authorized representatives, shall have
access to such books and records at all times during FAS's normal business
hours. Upon the reasonable request of the Fund, copies of any such books and
records shall be provided promptly by FAS to the Fund or the Fund's authorized
representatives.
4. Expenses. FAS shall be responsible for expenses incurred
in providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including the
compensation of FAS employees who serve as Directors or officers of the Fund.
The Fund shall be responsible for all other expenses incurred by FAS on behalf
of the Fund, including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees, filing fees, fees of
outside counsel and independent accountants, insurance premiums, fees payable
to Directors who are not FAS employees, and trade associate dues.
C/M 11316.0001 427735.1
-2-
<PAGE>
5. Compensation. For the Administrative Services provided,
the Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at an
annual rate per portfolio of the Fund's shares, payable daily, as specified
below:
Max. Admin. Average Daily Net Assets
Fee of the Fund
.15% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
However, in no event shall the administrative fee received during any year of
this Agreement be less than, or be paid at a rate less than, would aggregate
$75,000, per portfolio.
6. Responsibility of Administrator
(a) FAS shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund
in connection with the matters to which this
Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from
reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled
to rely on and may act upon advice of counsel (who
may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any
person, even though also an officer, trustee,
partner, employee or agent of FAS, who may be or
become an officer, Director, employee or agent of
the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund
(other than services or business in connection with
the duties of FAS hereunder) to be rendering such
services to or acting solely for the Fund and not as
an officer, trustee, partner, employee or agent or
one under the control or direction of FAS even
though paid by FAS.
(b) FAS shall be kept indemnified by the Fund and be
without liability for any action taken or thing done
by it in performing the Administrative Services in
accordance with the above standards. In order that
the indemnification provisions contained in this
Section 6 shall apply, however, it is understood
that if in any case the Fund may be asked to
indemnify or save FAS harmless, the Fund shall be
fully and promptly advised of all pertinent facts
concerning the situation in question, and it is
further understood that FAS will use all reasonable
care to identify and notify the Fund promptly
concerning any situation which presents or appears
likely to present the probability of such a claim
for indemnification against the Fund. The fund shall
have the option to defend FAS against any claim
which may be the subject of this indemnification. In
the event that the Fund so elects, it will so notify
FAS and thereupon the Fund shall take over complete
defense of the claim, and FAS shall in such
situation initiate no further legal or other
expenses for which it shall seek indemnification
under this Section. FAS shall in no case confess any
claim or make
C/M 11316.0001 427735.1
-3-
<PAGE>
any compromise in any case in which the Fund will be
asked to indemnify FAS except with the Fund's
written consent.
7. Duration and Termination.
(a) The term of this Agreement shall commence on the
date hereof, and extend until August 31, 1998 and
thereafter for successive twelve-month periods,
provided that such continuation is specifically
approved at least annually by the Board of Directors
and by a majority of those Directors who are neither
parties to this Agreement nor, other than by their
service as directors of the Fund, interested
persons, as defined in the 1940 Act, if any such
person is party to this Agreement.
(b) During any term of this Agreement, each time the
Fund adds a New Portfolio, an additional term shall
commence on the first date upon which the New
Portfolio has sufficient average daily net assets
such that FAS will begin to earn a sum not less than
its minimum ("annualized") administrative fee in
connection with the New Portfolio pursuant to
Section 5 of this Agreement ("Additional Term").
Such Additional Term shall extend to the later to
occur of (i) the second anniversary of the
commencement of the Additional Term, or (ii) the
expiration of the Initial Term.
(c) During any term of this Agreement, each time the
Fund adds a class of shares to any portfolio, an
additional term shall commence on the later to occur
of (i) the first date upon which the relevant
portfolio has sufficient average daily net assets
such that FAS will begin to earn a sum not less than
its minimum ("annualized") administrative fee
pursuant to Section 5 of this Agreement or (ii) the
effective date of the registration statement or
post-effective amendment registering the new class
of shares ("Class Term"). Such Class Term shall
extend to the third anniversary of the commencement
of the Class Term.
(d) This Agreement may be terminated at any time after
August 31, 1998, without penalty, by a vote of a
majority of the outstanding voting securities as
defined in the 1940 Act, or by a vote of a majority
of the entire Board of Directors, on six months'
written notice to FAS, or by FAS upon six months'
written notice to the Fund.
8. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
9. Limitations of Liability of Directors and Shareholders of
FAS. The execution and delivery of this Agreement have been authorized by the
Directors of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Directors nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Directors or
shareholders of FAS, but bind only the trust property of FAS as provided in the
Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall
be in writing (including facsimile communication) and shall be duly given if
delivered to the Fund, to its investment adviser and to FAS at the following
addresses: Old Westbury Funds, Inc. (Fund), 630 Fifth Avenue, New York, NY
10111, Attention: Robert Elliot, Bessemer Trust Company, N.A. (Adviser), 630
Fifth Avenue, New York, NY 10111, Attention: Robert Elliot; and if delivered to
FAS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
C/M 11316.0001 427735.1
-4-
<PAGE>
11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 6
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein shall be construed in
a manner inconsistent with the 1940 Act or any rule or regulation promulgated
by the Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
Old Westbury Funds, Inc. Federated Administrative Services
By:__________________________ By: _____________________________
[Title] [Title]
Attest: _____________________ Attest: ________________________
Secretary
C/M 11316.0001 427735.1
-5-
OLD WESTBURY FUNDS, INC.
Old Westbury International Fund
Amended and Restated
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
This Distribution and Service Plan (the "Plan") is hereby
amended to reflect that Edgewood Services, Inc. is the Distributer (the
"Distributer"). The Board of Directors of the Fund has approved unanimously
this amendment to the Plan and has authorized the Fund to re-execute the
Distribution Agreement and Shareholder Servicing Agreement with the Distributor
to reflect the foregoing. The Plan is hereby amended in its entirety as set
forth herein and as authorized under Section 9 of the previous Plan.
The Plan is adopted by Old Westbury Funds, Inc. (the "Fund"),
on behalf of Old Westbury International Fund (the "Portfolio") in accordance
with the provisions of Rule 12b-1 under the Investment Company Act of 1940 (the
"Act").
The Plan
1. The Portfolio and the Distributor have entered into a
Distribution Agreement, in a form satisfactory to the Fund's Board of
Directors, under which the Distributor will act as distributor of the
Portfolio's shares. Pursuant to the Distribution Agreement, the Distributor,
for nominal consideration and as agent of the Portfolio, will solicit orders
<PAGE>
for the purchase of the Portfolio's shares, provided that any subscriptions and
orders for the purchase of the Portfolio's shares will not be binding on the
Portfolio until accepted by the Portfolio as principal.
2. (a) The Portfolio and the Distributor have entered into a
Shareholder Servicing Agreement, in a form satisfactory to the Fund's Board of
Directors, which provides that the Distributor is permitted to receive payments
from the Portfolio to permit it to make payments to broker-dealers (each, a
"Broker-Dealer") with which it has written agreements and whose clients are
Portfolio shareholders, for performing shareholder servicing functions on
behalf of the Portfolio.
(b) In addition, the Portfolio and Bessemer Trust Company,
N.A. (the "Advisor") have also entered into a Shareholder Servicing Agreement,
in a form satisfactory to the Fund's Board of Directors, which provides that
the Advisor is permitted to receive a payment from the Portfolio to compensate
it for performing shareholder servicing functions for its clients. In addition,
the Shareholder Servicing Agreement provides that the Advisor is permitted to
receive payments from the Portfolio to permit it to make payments to banks,
savings and loans and other financial institutions with which it has written
agreements and whose clients are Portfolio shareholders (each institution, a
"Shareholder Servicing Agent") for performing shareholder servicing functions
on behalf of the Portfolio.
<PAGE>
(c) The Advisor or the Distributor, as the case may be, may
make payments from time to time from their own resources (which may include the
advisory fees of the Advisor) and past profits for the following purposes:
(i) to defray the costs of, and to compensate others,
including financial intermediaries with whom the Distributor or the
Advisor has entered into written agreements, for performing
shareholder servicing and related administrative functions on behalf
of the Portfolio;
(ii) to compensate certain financial intermediaries for
providing assistance in distributing the Portfolio's shares;
(iii) to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and
(iv) to defray the costs of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel in connection with the
distribution of the Portfolio's shares.
Each of the Shareholder Servicing Agreements will further provide that the
Distributor or the Advisor, as the case may be, in their sole discretion, will
determine the amount of such payments made pursuant to the Plan with the
Shareholder Servicing Agents and Broker-Dealers they have contracted with,
provided that such payments will not increase the amount which the Portfolio is
<PAGE>
required to pay to the Distributor or the Advisor for any fiscal
year under the Shareholder Servicing Agreements.
(d) In addition, the Advisor may make payments from time to
time from its fees under the Shareholder Servicing Agreement to Shareholder
Servicing Agents for the purpose enumerated in paragraph (c)(1) above.
3. The Portfolio will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT terminals, incurred by
the Distributor and the Advisor in carrying out their obligations under their
respective Shareholder Servicing Agreements and (ii) typesetting, printing and
delivering the Portfolio's prospectus to existing shareholders of the Portfolio
and preparing and printing subscription application forms for shareholder
accounts.
4. Payments by the Distributor to Broker-Dealers and payments
by the Advisor to Shareholder Servicing Agents for the purpose of distributing
the Portfolio's shares and providing shareholder servicing are subject to
compliance by them with the terms of written agreements in a form satisfactory
to the Fund's Board of Directors to be entered into between the Distributor and
the Broker-Dealers, and between the Advisor and the Shareholder Servicing
Agents.
5. The Portfolio and the Distributor will prepare and
furnish to the Fund's Board of Directors, at least quarterly,
written reports setting forth all amounts expended for these
purposes by the Portfolio, the Distributor and the Advisor,
<PAGE>
pursuant to the Plan and identifying the activities for which
such expenditures were made.
6. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Portfolio (as defined in the Act),
and (ii) a majority of the Board of Directors of the Fund, including a majority
of the Directors who are not interested persons (as defined in the Act) of the
Portfolio and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement entered into in connection with the
Plan, pursuant to a vote cast in person at a meeting called for the purpose of
voting on the approval of the Plan.
7. The Plan will remain in effect until October 12, 1994
unless earlier terminated in accordance with its terms, and thereafter may
continue in effect for successive annual periods if approved each year in the
manner described in clause (ii) of paragraph 6 hereof.
8. The Plan may be amended at any time with the approval of
the Board of Directors of the Portfolio, provided that (i) any material
amendments of the terms of the Plan will be effective only upon approval as
provided in clause (ii) of paragraph 6 hereof, and (ii) any amendment which
increases materially the amount which may be spent by the Portfolio pursuant to
the Plan will be effective only on the additional approval as provided in
clause (i) of paragraph 6 hereof.
<PAGE>
9. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Portfolio and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
the Plan, or (ii) by a vote of a majority of the outstanding voting securities
of the Portfolio (as defined in the Act).
OLD WESTBURY FUNDS, INC.
Old Westbury Growth Opportunity Fund
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
Old Westbury Funds, Inc. (the "Fund"), on behalf of Old Westbury Growth
Opportunity Fund (the "Portfolio") in accordance with the provisions of Rule
12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
1. The Portfolio and Edgewood Services, Inc. (the
"Distributor") have entered into a Distribution Agreement, in a form
satisfactory to the Fund's Board of Directors, under which the Distributor will
act as distributor of the Portfolio's shares. Pursuant to the Distribution
Agreement, the Distributor, for nominal consideration and as agent of the
Portfolio, will solicit orders for the purchase of the Portfolio's shares,
provided that any subscriptions and orders for the purchase of the Portfolio's
shares will not be binding on the Portfolio until accepted by the Portfolio as
principal.
2. (a) The Portfolio and the Distributor have entered into a
Shareholder Servicing Agreement, in a form satisfactory to the Fund's Board of
Directors, which provides that the Distributor is permitted to receive payments
from the Portfolio to permit it to make payments to broker-dealers (each,
<PAGE>
a "Broker-Dealer") with which it has written agreements and whose clients are
Portfolio shareholders, for performing shareholder servicing functions on
behalf of the Portfolio.
(b) In addition, the Portfolio and Bessemer Trust Company,
N.A. (the "Advisor") have also entered into a Shareholder Servicing Agreement,
in a form satisfactory to the Fund's Board of Directors, which provides that
the Advisor is permitted to receive a payment from the Portfolio to compensate
it for performing shareholder servicing functions for its clients. In addition,
the Shareholder Servicing Agreement provides that the Advisor is permitted to
receive payments from the Portfolio to permit it to make payments to banks,
savings and loans and other financial institutions with which it has written
agreements and whose clients are Portfolio shareholders (each institution, a
"Shareholder Servicing Agent") for performing shareholder servicing functions
on behalf of the Portfolio.
(c) The Advisor or the Distributor, as the case may be, may
make payments from time to time from their own resources (which may include the
advisory fees of the Advisor) and past profits for the following purposes:
(i) to defray the costs of, and to compensate others,
including financial intermediaries with whom the Distributor or the
Advisor has entered into written agreements, for performing
shareholder servicing and related administrative functions on behalf
of the Portfolio;
<PAGE>
(ii) to compensate certain financial intermediaries for
providing assistance in distributing the Portfolio's shares;
(iii) to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and
(iv) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel in connection with the
distribution of the Portfolio's shares.
Each of the Shareholder Servicing Agreements will further provide that the
Distributor or the Advisor, as the case may be, in their sole discretion, will
determine the amount of such payments made pursuant to the Plan with the
Shareholder Servicing Agents and Broker-Dealers they have contracted with,
provided that such payments will not increase the amount which the Portfolio is
required to pay to the Distributor or the Advisor for any fiscal year under the
Shareholder Servicing Agreements.
(d) In addition, the Advisor may make payments from time to
time from its fees under the Shareholder Servicing Agreement to Shareholder
Servicing Agents for the purpose enumerated in paragraph (c)(1)(above.
3. The Portfolio will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and the Advisor in
carrying out their obligations under their respective Shareholder
<PAGE>
Servicing Agreements and (ii) typesetting, printing and delivering the
Portfolio's prospectus to existing shareholders of the Portfolio and preparing
and printing subscription application forms for shareholders accounts.
4. Payments by the Distributor to Broker-Dealers and payments
by the Advisor to Shareholder Servicing Agents for the purpose of distributing
the Portfolio's shares and providing shareholder servicing are subject to
compliance by them with the terms of written agreements in a form satisfactory
to the Fund's Board of Directors to be entered into between the Distributor and
the Broker-Dealers, and between the Advisor and the Shareholder Servicing
Agents.
5. The Portfolio and the Distributor will prepare and furnish
to the Fund's Board of Directors, at least quarterly, written reports setting
forth all amounts expended for these purposes by the Portfolio, the Distributor
and the Advisor, pursuant to the Plan and identifying the activities for which
such expenditures were made.
6. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Portfolio (as defined in the Act),
and (ii) a majority of the Board of Directors of the Fund, including a majority
of the Directors who are not interested persons (as defined in the Act) of the
Portfolio and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement entered into in connection with the
Plan, pursuant to a vote cast in person at a
<PAGE>
meeting called for the purpose of voting on the approval of the
Plan.
7. The Plan will remain in effect until August 8, 1997 unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 6 hereof.
8. The Plan may be amended at any time with the approval of
the Board of Directors of the Portfolio, provided that (i) any material
amendments of the terms of the Plan will be effective only upon approval as
provided in clause (ii) of paragraph 6 hereof, and (ii) any amendment which
increases materially the amount which may be spent by the Portfolio pursuant to
the Plan will be effective only upon the additional approval as provided in
clause (i) of paragraph 6 hereof.
9. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Portfolio and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
the Plan, or (ii) by a vote of a majority of the outstanding voting securities
of the Portfolio (as defined in the Act).
Old Westbury Funds, Inc.
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of September, 1996, by and
between Old Westbury Funds, Inc. (the "Fund"), a Maryland
Corporation, and EDGEWOOD SERVICES, INC. ("Edgewood"), a New York
Corporation.
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints Edgewood as its agent to sell and
distribute shares of the Fund which may be offered in one or
more series (the "Funds") consisting of one or more classes
(the "Classes") of shares (the "Shares"), as described and
set forth on one or more exhibits to this Agreement, at the
current offering price thereof as described and set forth in
the current Prospectuses of the Fund. Edgewood hereby
accepts such appointment and agrees to provide such other
services for the Fund, if any, and accept such compensation
from the Fund, if any, as set forth in the applicable
exhibits to this Agreement. The Agreement is being entered
into pursuant to the Distribution and Service Plan (the
"Plan") adopted by the Fund on behalf of each portfolio
series in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. The sale of any Shares may be suspended whenever in the
judgment of the Board of Directors of the Fund it is in its
best interest to do so and upon notice of such suspension.
3. Neither Edgewood nor any other person is authorized by the
Fund to give any information or to make any representation
relative to any Shares other than those contained in the
Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities
and Exchange Commission, as the same may be amended from
time to time, or in any supplemental information to said
Prospectuses, or SAIs approved in writing by the Fund.
Edgewood agrees that any other information or
representations other than those specified above which it or
any dealer or other person who purchases Shares through
Edgewood may make in connection with the offer or sale of
Shares shall be made entirely without liability on the part
of the Fund. No person or dealer, other than Edgewood, is
authorized to act as agent for the Fund for any purpose
without the prior written consent of the Fund. Edgewood
427698.1
<PAGE>
agrees that, in offering or selling Shares as agent of the Fund, it
will, in all respect, duly conform to all applicable state and federal
laws and the rules and regulations of the National Association of
Securities Dealers, Inc., including its Rules of Fair Practice.
Edgewood will submit to the Fund copies of all sales literature before
using the same and will not use such sales literature if disapproved
by the Fund.
4. This Agreement is effective with respect to each Class as of
the date of execution of the applicable exhibit and shall
continue in effect with respect to each Class presently set
forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such
continuance is approved at least annually by the Directors
of the Fund including a majority of the members of the Board
of Directors of the Fund who are not interested persons of
the Fund and have no direct or indirect financial interest
in the operation of any Distribution and Service Plan
relating to the Fund or in any related documents to such
Plan ("Disinterested Directors") cast in person at a meeting
called for that purpose. If a Class is added after the
first annual approval by the Directors as described above,
this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by
the Directors and thereafter for successive periods of one
year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular
Fund or Class at any time, without the payment of any
penalty, by the vote of a majority of the Disinterested
Directors or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than
sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to
a particular Fund or Class by Edgewood on sixty (60) days'
written notice to the Fund.
6. This Agreement may not be assigned by Edgewood and shall automatically
terminate in the event of an assignment by Edgewood as defined in the
1940 Act, provided, however, that Edgewood may employ such other
person, persons, corporation or corporations at its cost and expense
as it shall determine in order to assist it in carrying out its duties
under this Agreement.
7. Edgewood shall not be liable to the Fund for anything done
or omitted by it, except acts or omissions involving willful
427698.1
Page 2
<PAGE>
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Directors of the Fund including a majority of the
Disinterested Directors of the Fund cast in person at a meeting called
for that purpose.
9. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Fund
agrees to indemnify and hold harmless Edgewood and each
person, if any, who controls Edgewood within the
meaning of Section 15 of the Securities Act of 1933 and
Section 20 of the Securities Act of 1934, as amended,
against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any
and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any
litigation, commenced or threatened, or any claim
whatsoever) arising out of or based upon any untrue
statement or alleged untrue statement of a material
fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, unless such statement or omission was made
in reliance upon and in conformity with written
information furnished to the Fund about Edgewood by or
on behalf of Edgewood expressly for use in the
Registration Statement, any Prospectuses and SAIs or
any amendment or supplement thereof.
If any action is brought against Edgewood or any controlling
person thereof with respect to which indemnity may be sought
against the Fund pursuant to the foregoing paragraph,
Edgewood shall promptly notify the Fund in writing of the
institution of such action and the Fund shall assume the
defense of such action, including the employment of counsel
selected by the Fund and payment of expenses. Edgewood or any
such controlling person thereof shall have the right to
employ separate counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of Edgewood
or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Fund in
connection with the defense of such action or the Fund shall
not have employed counsel to have charge of the defense of
such action,
427698.1
Page 3
<PAGE>
in any of which events such fees and expenses shall be borne
by the Fund. Anything in this paragraph to the contrary
notwithstanding, the Fund shall not be liable for any
settlement of any such claim of action effected without its
written consent. The Fund agrees promptly to notify Edgewood
of the commencement of any litigation or proceedings against
the Fund or any of its officers or Directors or controlling
persons in connection with the issue and sale of Shares or in
connection with the Registration Statement, Prospectuses, or
SAIs.
(b) Edgewood agrees to indemnify and hold harmless against
any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in
investigating, preparing or defending against any
litigation, commenced or threatened, or any claim
whatsoever) the Fund, each of its Directors, each of
its officers who have signed the Registration Statement
and each other person, if any, who controls the Fund
within the meaning of Section 15 of the Securities Act
of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement
or any Prospectus, SAI, or any amendment or supplement
thereof in reliance upon, and in conformity with,
information furnished to the Fund about Edgewood by or
on behalf of Edgewood expressly for use in the
Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action
shall be brought against the Fund or any other person
so indemnified based on the Registration Statement or
any Prospectus, SAI, or any amendment or supplement
thereof, and with respect to which indemnity may be
sought against Edgewood, Edgewood shall have the rights
and duties given to the Fund, and the Fund and each
other person so indemnified shall have the rights and
duties given to Edgewood by the provisions of
subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any
person against liability to the Fund or its
shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith or
negligence in the performance of the duties of such
person or by reason of the reckless disregard by such
person of the obligations and duties of such person
under this Agreement.
(d) Insofar as indemnification for liabilities may be
permitted pursuant to Section 17 of the Investment
Company Act of 1940, as amended, for Directors,
427698.1
Page 4
<PAGE>
officers, Edgewood and controlling persons of the Fund by the
Directors pursuant to this Agreement, the Fund is aware of
the position of the Securities and Exchange Commission as set
forth in the Investment Company Act Release No.IC-11330.
Therefore, the Fund undertakes that in addition to complying
with the applicable provisions of this Agreement, in the
absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an
indemnification payment will not be made unless, in the
absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a
quorum of non-party Disinterested Directors, or (ii) by
independent legal counsel in a written opinion that the
indemnitee was not liable for an act of willful misfeasance,
bad faith, gross negligence or reckless regard of duties. The
Fund further undertakes that advancement of expenses incurred
in the defense of a proceeding (upon undertaking for
repayment unless it is ultimately determined that
indemnification is appropriate) against an officer,
Directors, Edgewood or controlling person of the Fund will
not be made absent the fulfillment of at least one of the
following conditions: (i) the indemnitee provides security
for his undertaking; (ii) the Fund is insured against losses
arising by reason of any lawful advances; or (iii) a majority
of a quorum of non-party Disinterested Directors or
independent legal counsel in a written opinion makes a
factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.
11. If at any time the Shares of any Fund are offered in two or more
Classes, Edgewood agrees to adopt compliance standards as to when a
class of shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto
upon the execution of the attached exhibits to the
Agreement.
427698.1
Page 5
<PAGE>
Exhibit A
to the
Distributor's Contract
OLD WESTBURY FUNDS, INC.
Fund Name
Class Share Name
In consideration of the mutual covenants set forth in the
Distributor's Contract dated September 30, 1996 between Old Westbury Fund and
Edgewood Services, Inc., Old Westbury Funds, Inc. executes and delivers this
Exhibit on behalf of Fund Name, and with respect to the Class Share Name
thereof, first set forth
in this Exhibit.
Witness the due execution hereof this __ day of
- --------, ----.
ATTEST: OLD WESTBURY FUNDS, INC.
- ----------------------------------- By:------------------------------
Secretary President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
- ----------------------------------- By:------------------------------
Secretary Executive Vice President
(SEAL)
427698.1
<PAGE>
Exhibit B
Distribution Agreement
OLD WESTBURY FUNDS, INC.
Old Westbury International Fund (the "Portfolio")
The following provisions are hereby incorporated and
made part of the Distribution Agreement dated the day of
1996, between Old Westbury Funds, Inc., on behalf of the
Portfolio, and Edgewood Services, Inc. ("ESI"):
1. The Portfolio hereby appoints ESI, as its agent, to offer,
and to solicit offers to subscribe to, the unsold balance of shares of the
series of common stock represented by the Portfolio as shall then be
effectively registered under the 1933 Act ("Common Stock"). All subscriptions
for shares of Common Stock obtained by ESI shall be directed to for acceptance
and shall not be binding on the Portfolio until accepted by the Portfolio. ESI
shall have no authority to make binding subscriptions on the Portfolio's
behalf. The Portfolio reserves the right to sell shares of each series of
Common Stock through other distributors or directly to investors through
subscriptions received by the Portfolio at its principal office. The right
given to ESI under this agreement shall not apply to any shares of Common Stock
issued in connection with (1) the merger or consolidation of any other
investment company with the Portfolio, (2) the Portfolio acquisition by
purchase or other wise of all or substantially all of the assets or stock of
any other investment company, or (3) the reinvestment in shares of Common Stock
by Portfolio stockholders of dividends or other distributions or any other
offering by the Fund of securities to its stockholders.
2. The Fund will also reimburse ESI in an amount not to
exceed .10% per annum of the Portfolio's average daily net assets for ESI's
costs incurred:
(i) to compensate broker-dealers with whom ESI has
contracts for providing assistance in distributing shares of
Common Stock; and
(ii) to pay the cost of the preparation and printing
of brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including the
salaries and/or commissions of ESI and other sales personnel, and of printing
and distributing the Portfolio's prospectus to prospective investors in
connection with the distribution of its shares.
3. ESI may sell shares of Common Stock to or through
qualified brokers, dealers and financial institutions under
selling and servicing agreements provided that no dealer,
427698.1
<PAGE>
financial institution or other person shall be appointed or authorized to act
as the Portfolio's agent without its written consent. The Portfolio acknowledge
that ESI as Distributor to the Portfolio pursuant to the Shareholder Servicing
Agreement with the Portfolio may arrange for broker-dealers whose customers or
clients are Portfolio shareholders (each a "Broker-Dealer") to enter into
agreements with ESI as the Distributor pursuant to which the Broker-Dealers
will be compensated directly by the Distributor for the performance of
shareholder servicing and related administrative functions not performed by the
Advisor or its Shareholder Servicing Agents, the Distributor, the Administrator
or the Transfer Agent. Such payments will be made only pursuant to written
agreements approved in form and substance by the Board of Directors to be
entered into by the Distributor and the Broker-Dealers. It is recognized that
the Portfolio shall have no obligation or liability to ESI, them or any
Broker-Dealer for any such payments under the agreements with Broker-Dealers.
The Portfolio's obligation is solely to make payments to the Advisor under the
Advisory Agreement and the Shareholder Servicing Agreement and to the
Distributor under the Shareholder Servicing Agreement.
4. Both the Portfolio and ESI will cooperate with each other
in taking such action as may be necessary to qualify shares of common stock for
sale under the securities laws of such states as the Portfolio may designate,
provided, that ESI shall not be required to register as a broker-dealer or file
a consent to service of process in any such state where you are not now so
registered. Pursuant to an Advisory Agreement dated October 12, 1993 between
the Portfolio and the Advisor, the Portfolio will pay all fees and expenses of
registering shares of all series of Common Stock under the 1933 Act and of
qualification of shares of all series of Common Stock, and to the extent
necessary, qualification under applicable state securities laws. ESI will pay
all expenses relating to its broker-dealer qualification.
5. ESI will prepare reports to the Board of Directors of the
Fund on a quarterly basis showing amounts expended hereunder, including amounts
paid to Brokers and the purpose of such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated September 30, 1996 between Old Westbury Fund and
Edgewood Services, Inc., Old Westbury Funds, Inc. executes and delivers this
Exhibit on behalf of Fund Name, and with respect to the Class Share Name
thereof, first set forth
in this Exhibit.
Witness the due execution hereof this __ day of
- --------, ----.
ATTEST: OLD WESTBURY FUNDS, INC.
- ----------------------------------- By:------------------------------
Secretary President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
- ----------------------------------- By:------------------------------
Secretary Executive Vice President
(SEAL)
427698.1
B-2
SHAREHOLDER SERVICING AGREEMENT
OLD WESTBURY FUNDS, INC. (the "Fund")
Old Westbury Emerging Growth Fund (the "Portfolio")
6 St. James Avenue
Boston, Massachusetts 02116
Bessemer Trust Company, N.A.
630 Fifth Avenue
New York, New York 10111
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan dated adopted by us in accordance with Rule 12b-1 (the "Plan")
under the Investment Company Act of 1940, as amended (the "Act"), to provide
the services listed below:
(a) You will perform, or arrange for others including banks,
savings and loans and other financial institutions with which you have written
agreements and whose clients are Fund shareholders (each institution a
"Shareholder Servicing Agent") to perform, all shareholder servicing functions
not performed by us, by the Distributor or Broker-Dealers, or by our Transfer
Agent.
(b) In consideration of the foregoing we will pay you a fee
at the annual rate of one quarter of one percent (0.25%) of the Portfolio's
average daily net assets attributable to your clients (and client's of your
affiliates) to compensate you for providing shareholder services to such
clients. In addition, we will pay you up to one quarter of one percent (.25%)
per annum of the Portfolio's average daily net assets attributable to the
clients of the other Shareholder Servicing Agents (together, the "Shareholder
Servicing Fees") to permit you to make payments to such Shareholder Servicing
Agents whose clients are Fund shareholders. Your payment will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as you shall
request us in writing. You may waive your right to any fee or payment to which
you are entitled hereunder, provided such waiver is delivered to us in writing.
(c) You make payments from time to time from your Shareholder
Servicing Fee attributable to your clients to defray the costs of, and to
compensate Shareholder Servicing Agents (not already receiving a Shareholder
Servicing Fee from you for which you are reimbursed) for performing shareholder
servicing and related administrative functions on behalf of the Portfolio.
C/M 11316.0001 427894.1
<PAGE>
You will in your sole discretion determine the amount of any payments made by
you pursuant to this Agreement, and you may from time to time in your sole
discretion increase or decrease the amount of such payments; provided, however,
that no such payment will increase the amount which we are required to pay to
you under either this Agreement or any advisory agreement between you and us,
or otherwise.
2. Except as otherwise provided herein, you will be
responsible for the payment of all expenses incurred by you in rendering the
foregoing services, except that we will pay (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by you the
Distributor, the Broker-Dealers and Shareholder Servicing Agents in rendering
such services, and (ii) the cost of typesetting, printing and delivering our
prospectus to existing shareholders of the Portfolio and of preparing and
printing subscription application forms for shareholder accounts. Our
obligation to be responsible for the expenses enumerated in this paragraph 2 is
limited to an amount equal to .05% per annum of the Portfolio's average daily
net assets.
3. (a) The written agreements between you and the Shareholder
Servicing Agents will provide that such Shareholder Servicing Agents receive a
fee, which may be paid periodically, on an annual basis equal to 0.25% of the
average daily net assets of the Portfolio represented by shares owned during
the period for which payment is being made by investors with whom such
Shareholder Servicing Agents maintains a servicing relationship, and will, as
agents for their customers perform the following, among other things: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Fund may be effected and certain
other matters pertaining to the Fund; assist shareholders in designating and
changing dividend options, account designations and addresses; provide
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assist in processing purchase and redemption
transactions; arrange for the wiring of funds; transmit and receive funds in
connection with customer orders to purchase or redeem shares; verify and
guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; furnish (either
separately or on an integrated basis with other reports sent to a shareholder
by the Fund) monthly and year-end statements and confirmation of purchases and
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updated prospectuses and other communications from the Fund to shareholders of
the Fund; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meeting of shareholders of the Fund; and provide
such other related services as the Fund or a shareholder may request.
Shareholder Servicing Agents may waive all or a portion of their Shareholder
Servicing Fees.
(b) Payments to Shareholder Servicing Agents to compensate
them for providing shareholder servicing and related administrative functions
are subject to compliance by them with the terms of written agreements
satisfactory to our Board of Directors to be entered into between you and the
Shareholder Servicing Agents.
C/M 11316.0001 427894.1
<PAGE>
4. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. This Agreement will become effective on the date hereof
and will remain in effect until August 8, 1997 and thereafter for successive
twelve-month periods (computed from each August 1), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those or our directors who are not interested
persons (as defined in the Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this Agreement.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of our entire Board of Directors, and by a vote
of a majority of our Directors who are not interested persons (as defined in
the Act) and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan, or by vote of a majority
of our outstanding voting securities, as defined in the Act, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you, and this Agreement shall
terminate automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge to you. The terms "transfer", "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by governing
law and in applicable rules or regulations of the Securities and Exchange
Commission thereunder.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
C/M 11316.0001 427894.1
AMENDED AND RESTATED
SHAREHOLDER SERVICING AGREEMENT
OLD WESTBURY FUNDS, INC. (the "Fund")
Old Westbury International Fund (the "Portfolio")
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan adopted by us in accordance with Rule 12b-1 (the "Plan") under the
Investment Company Act of 1940, as amended (the "Act"), to provide the services
listed below:
(a) You will perform, or arrange for others including
broker-dealers with which you have written agreements and whose clients are
Fund shareholders (each a "Broker-Dealer") to perform, all shareholder
servicing functions not performed by us, by the Advisor or its Shareholder
Servicing Agents, or by our Transfer Agent.
(b) In consideration of the foregoing we will pay you up to
one quarter of one percent (0.25%) per annum of the Portfolio's average daily
net assets attributable to the clients of the Broker-Dealers (the "Shareholder
Servicing Fee") to permit you to make payments to the Broker-Dealers for
providing shareholder services. Your payment will be accrued by us daily, and
will be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request us
in writing. You may waive your right to any payment to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
(c) You will make payments from time to time from your own
resources and past profits for the following purposes:
(i) to defray the costs of, and to compensate Broker-
Dealers for performing shareholder servicing and related
administrative functions on behalf of the Portfolio;
(ii) to compensate Broker-Dealers for providing
assistance in distributing Portfolio's shares;
<PAGE>
(iii) to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and
(iv) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel in connection with the
distribution of the Portfolio's shares.
You will in your sole discretion determine the amount of any payments made by
you pursuant to this Agreement, and you may from time to time in your sole
discretion increase or decrease the amount of such payments; provided, however,
that no such payment will increase the amount which we are required to pay to
you under either this Agreement or the distribution agreement between you and
us, or otherwise.
2. Except as otherwise provided herein, you will be
responsible for the payment of all expenses incurred by you in rendering the
foregoing services, except that we will pay (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by you, the
Advisor, the Shareholder Servicing Agents and Broker-Dealers in rendering such
services, and (ii) the cost of typesetting, printing and delivering our
prospectus to existing shareholders of the Portfolio and of preparing and
printing subscription application forms for shareholder accounts. Our
obligation to be responsible for the expenses enumerated in this paragraph 2 is
limited to an amount equal to .05% per annum of the Portfolio's average daily
net assets.
3. (a) The written agreements between you and Broker-Dealers
will provide that such Broker-Dealers receive a fee, which may be paid
periodically, on an annual basis, equal to up to 0.25% of the average daily net
assets of the Portfolio represented by shares owned during the period for which
payment is being made by investors with whom such Broker-Dealer maintains a
servicing relationship, and will, as agents for their customers, perform the
following, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addressees; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish (either separately or on
<PAGE>
an integrated basis with other reports sent to a shareholder by the Fund)
monthly and year-end statements and confirmation of purchases and redemptions;
transmit, on behalf of the Fund, proxy statements, annual reports, updating
prospectuses and other communications from the Fund to shareholders of the
Fund; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provide
such other related services as the Fund or a shareholder may request.
Broker-Dealers may waive all or a portion of their Shareholder Servicing Fees.
(b) Payments to Broker-Dealers to compensate them for
providing shareholder servicing and related administrative functions are
subject to compliance by them with the terms of written agreements satisfactory
to our Board of Directors to be entered into between you and the
Broker-Dealers.
4. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. This Agreement will become effective on the date hereof
and will remain in effect until October 12, 1994 and thereafter for successive
twelve-month periods (computed from each October 1), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this Agreement.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of our entire Board of Directors, and by a vote
of a majority of our Directors who are not interested persons (as defined in
the Act) and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan, or by vote of a majority
of our outstanding voting securities, as defined in the Act, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you, and this
Agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge by you. The
<PAGE>
terms "transfer," "assignment" and "sale" as used in this paragraph shall have
the meanings ascribed thereto by governing law and in applicable rules or
regulations of the Securities and Exchange Commission thereunder.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
OLD WESTBURY FUNDS, INC.
Old Westbury International Fund
By:________________________
Name: S. Elliott Cohan
Title: Secretary
ACCEPTED: October 18, 1996
EDGEWOOD SERVICES, INC.
By:_____________________________
Name:
Title:
SHAREHOLDER SERVICING AGREEMENT
OLD WESTBURY FUNDS, INC. (the "Fund")
Old Westbury Growth Opportunity Fund (the "Portfolio")
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
We hereby confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan adopted by us in accordance with Rule 12b-1 (the "Plan") under the
Investment Company Act of 1940, as amended (the "Act"), to provide the services
listed below:
(a) You will perform, or arrange for others including
broker-dealers with which you have written agreements and whose clients are
Fund shareholders (each a "Broker-Dealer") to perform, all shareholder
servicing functions not performed by us, by the Advisor or its Shareholder
Servicing Agents, or by our Transfer Agent.
(b) In consideration of the foregoing we will pay you up to
one quarter of one percent (0.25%) per annum of the Portfolio's average daily
net assets attributable to the clients of the Broker-Dealers (the "Shareholder
Servicing Fee") to permit you to make payments to the Broker-Dealers for
providing shareholder services. Your payment will be accrued by us daily, and
will be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request us
in writing. You may waive your right to any payment to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
(c) You will make payments from time to time from your own
resources and past profits for the following purposes:
(i) to defray the costs of, and to compensate Broker-
Dealers for performing shareholder servicing and related
administrative functions on behalf of the Portfolio;
(ii) to compensate Broker-Dealers for providing
assistance in distributing the Portfolio's shares;
(iii) to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and
<PAGE>
(iv) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel in connection with the
distribution of the Portfolio's shares.
You will in your sole discretion determine the amount of any payments made by
you pursuant to this Agreement, and you may from time to time in your sole
discretion increase or decrease the amount of such payments; provided, however,
that no such payment will increase the amount which we are required to pay to
you under either this Agreement or the distribution agreement between you and
us, or otherwise.
2. Except as otherwise provided herein, you will be
responsible for the payment of all expenses incurred by you in rendering the
foregoing services, except that we will pay (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by you, the
Advisor, the Shareholder Servicing Agents and Broker-Dealers in rendering such
services, and (ii) the cost of typesetting, printing and delivering our
prospectus to existing shareholders of the Portfolio and of preparing and
printing subscription application forms for shareholder accounts. Our
obligation to be responsible for the expenses enumerated in this paragraph 2 is
limited to an amount equal to .05% per annum of the Portfolio's average daily
net assets.
3. (a) The written agreements between you and Broker-Dealers
will provide that such Broker-Dealers receive a fee, which may be paid
periodically, on an annual basis, equal to up to 0.25% of the average daily net
assets of the Portfolio represented by shares owned during the period for which
payment is being made by investors with whom such Broker-Dealer maintains a
servicing relationship, and will, as agents for their customers, perform the
following, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addressees; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by the Fund) monthly and year-end statements and confirmation of
purchases and redemptions; transmit, on behalf of the Fund, proxy
<PAGE>
statements, annual reports, updating prospectuses and other communications from
the Fund to shareholders of the Fund; receive, tabulate and transmit to the
Fund proxies executed by shareholders with respect to meetings of shareholders
of the Fund; and provide such other related services as the Fund or a
shareholder may request. Broker-Dealers may waive all or a portion of their
Shareholder Servicing Fees.
(b) Payments to Broker-Dealers to compensate them for
providing shareholder servicing and related administrative functions are
subject to compliance by them with the terms of written agreements satisfactory
to our Board of Directors to be entered into between you and the
Broker-Dealers.
4. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. This Agreement will become effective on the date hereof
and will remain in effect until August 8, 1996 and thereafter for successive
twelve-month periods (computed from each August 1), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this Agreement.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of our entire Board of Directors, and by a vote
of a majority of our Directors who are not interested persons (as defined in
the Act) and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan, or by vote of a majority
of our outstanding voting securities, as defined in the Act, on sixty days'
written notice to you, or by you on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you, and this Agreement shall
terminate automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer," "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by governing
<PAGE>
law and in applicable rules or regulations of the Securities and
Exchange Commission thereunder.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
OLD WESTBURY FUNDS, INC.
Old Westbury Growth Opportunity Fund
By:________________________
Name: S. Elliott Cohan
Title: Secretary
ACCEPTED: October 18, 1996
EDGEWOOD SERVICES, INC.
By:____________________________
Name:
Title:
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC. and
the Deputy General Counsel of Federated Services Company, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and stead,
in any and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Edward C. Gonzales
- ------------------- President and Treasurer November 13, 1996
Edward C. Gonzales (Chief Executive
Officer and Principal
Financial and
Accounting Officer)
/s/ Howard D. Graves
- ------------------- Director November 13, 1996
Howard D. Graves
/s/ Robert K. Kaufman
- ------------------- Director November 13, 1996
Robert K. Kaufman
- ------------------ Director
John Kevin Kenny
Sworn to and subscribed before me this November 13, 1996 day of November, 1996
- -------------------
427736.1
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Old
Westbury International Annual Report dated October 31, 1995 and is qualified in
its entirety by reference to such annual report.
</LEGEND>
<CIK> 0000909994
<NAME> OLD WESTBURY FUNDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 103,095,276
<INVESTMENTS-AT-VALUE> 101,872,548
<RECEIVABLES> 545,322
<ASSETS-OTHER> 362,850
<OTHER-ITEMS-ASSETS> 3,540,873
<TOTAL-ASSETS> 106,321,593
<PAYABLE-FOR-SECURITIES> 1,814,290
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 312,817
<TOTAL-LIABILITIES> 2,127,107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,622,218
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (113,533)
<ACCUMULATED-NET-GAINS> (5,348,822)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (965,377)
<NET-ASSETS> 104,194,486
<DIVIDEND-INCOME> 2,582,047
<INTEREST-INCOME> 214,425
<OTHER-INCOME> 0
<EXPENSES-NET> 1,448,277
<NET-INVESTMENT-INCOME> 1,348,195
<REALIZED-GAINS-CURRENT> (4,939,089)
<APPREC-INCREASE-CURRENT> (5,283,692)
<NET-CHANGE-FROM-OPS> (8,874,586)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (755,605)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,725,287
<NUMBER-OF-SHARES-REDEEMED> (1,842,187)
<SHARES-REINVESTED> 78,231
<NET-CHANGE-IN-ASSETS> (334,334)
<ACCUMULATED-NII-PRIOR> 643,896
<ACCUMULATED-GAINS-PRIOR> (1,759,752)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 771,294
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,540,335
<AVERAGE-NET-ASSETS> 96,551,774
<PER-SHARE-NAV-BEGIN> 10.81
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (0.97)
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.80
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
