As filed with the Securities and Exchange Commission on June 26, 1997
1933 Act File No. 33-66528
1940 Act File No. 811-7912
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
----
Pre-Effective Amendment No. .....................
Post-Effective Amendment No. 8 ....................... X
----- ----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
----
Amendment No. 9_........................................ X
--- ----
OLD WESTBURY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Edgewood Services, Inc.
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-8160
(Registrant's Telephone Number)
Robert C. Elliott Copies To: Michael R. Rosella, Esquire
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:
X 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) 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.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on December 16, 1996; or
intends to file the Notice required by that Rule on or about; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and, pursuant to Rule 24f-2(b)(2), need not file the Notice.
<PAGE>
OLD WESTBURY FUNDS, INC.
Registration Statement on Form N-1A
------------------------
CROSS-REFERENCE SHEET
Pursuant to Rule 404(c)
------------------------
This Amendment to the Registration Statement of Old Westbury
Funds, Inc., which consists of two portfolios including: Old Westbury
International Fund and Old Westbury Growth Opportunity Fund; relates
only to one of the portfolios, Old Westbury Growth Opportunity Fund,
and is comprised of the following:
Part A
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS HEADING
<S> <C> <C> <C>
1. Cover Page................................................................................... Cover Page
2. Synopsis...............................................................................Prospectus Summary;
Summary of Fund Expenses
3 Condensed Financial Information.......................................................Financial Highlights
4. General Description of Registrant.....................................................Investment Objective
and Policies;
Investment Restrictions;
General Information
5. Management of the Fund.............................................................Management of the Fund;
The Administrator; Custodian,
Transfer Agent and Dividend Disbursing 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
<PAGE>
Part B Caption in Statement of
ITEM NO. Additional Information
10. Cover Page..................................................................................... Cover Page
11. Table of Contents........................................................................Table of Contents
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
</TABLE>
23. Financial Statements........The Financial Statements for the Old
Westbury International Fund for the fiscal period ended October 31,
1996, are incorporated by reference from the Portfolio's Annual Report
dated October 31, 1996. Financial Statements for the Old Westbury
Growth Opportunity Fund have been filed in Part A of this Registration
Statement.
Semi-Annual Report
and Supplement to
Prospectus dated
January 31, 1997
April 30, 1997
OLD WESTBURY GROWTH OPPORTUNITY FUND
INVESTMENT ADVISOR'S REPORT
May 1997
- --------------------------------------------------------------------------------
The Old Westbury Growth Opportunity Fund's total return, for the
period from January 31, 1997 (commencement of operations), through
April 30, 1997, was (4.80)% based on net asset value.* The Fund's
portfolio is comprised of a well-diversified group of small- and
mid-cap stocks which generally have above-average growth opportunities
and are selling at attractive price/valuation levels. However, over
the past six months, small-and mid-cap stocks as a class
underperformed large capitalization stocks by a significant amount.
The underperformance was so significant that the relative multiples of
small- and mid-cap stocks were selling at the low end of their
historical range. Small- and mid-cap stocks normally have earnings
multiples that range between one- and two-times the multiple of the
S&P 500.** With the recent declines in prices, this relative multiple
fell below 1.2 times the S&P 500 multiple. Given this low multiple, we
believe the period of relative underperformance is most likely over.
Most of the stocks in the Fund's portfolio had earnings growth
rates that were higher than the S&P 500 and sold at earnings multiples
below their growth rates. Although investor interest has been focused
on large capitalization stocks over the past few years, periods of
such significant underperformance tend to run their course. Subsequent
to these periods, the stocks that have underperformed tend to reverse
and regain more normal relative valuation levels. Given the quality of
the companies in the Fund's portfolio, we believe the stocks should
improve as investors seek the stocks of companies that have low
relative prices and above-average rates of growth.
- ------------------
* Performance quoted represents past performance and is not
indicative of future results. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The Fund's total
return based on offering price for the period was (9.07)%.
** The S&P 500 is an unmanaged index comprising stocks in industry,
transportation, and financial and public utility companies. Investments
cannot be made in an index.
The results of the March quarterly earnings announcements
provided strong evidence of the quality of the companies in the Fund's
portfolio. The average increase in earnings per share of the companies
in the Fund's portfolio was 37% after eliminating one extraordinary
increase of 1200%. This compares to the average increase for the S&P
500 of 13% and about 9% for small- and mid-cap stocks as a class. The
stocks in the Fund's portfolio have been selling at a price earnings
multiple of 19.5 times the estimated 1997 earnings and we believe
these companies will continue to increase earnings throughout 1997.
A. Please insert the following Financial Highlights table as page 5 of the
Prospectus. In addition, please add the heading "Financial Highlights" to
the Table of Contents as the third entry.
OLD WESTBURY GROWTH OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE
PERIOD
ENDED
APRIL 30,
1997(A)
(UNAUDITED)
---------------
<S> <C>
Net asset value, beginning of period............................... $ 10.00
Income from investment operations:
Net investment loss.............................................. (0.01)
Net realized and unrealized gain (loss) on investments........... (0.47)
---------------
Total from investment operations................................. (0.48)
---------------
Net asset value, end of period..................................... $ 9.52
---------------
---------------
Total return*...................................................... (4.80%)
Ratios/Supplemental data:
Net assets, end of period (in 000's)............................. $ 2,982
Ratio of expenses to average net assets before waiver of
expenses...................................................... 14.97%**
Ratio of expenses to average net assets.......................... 1.50%**
Ratio of net investment loss to average net assets............... (0.55%)**
Portfolio turnover............................................... 25%
Average Commission rate paid..................................... 0.194
</TABLE>
- ------------------
* Total return is calculated without a sales charge assuming a
purchase of shares on the first day and a sale on the last day of
the period.
** Annualized.
(a) For the period from January 31, 1997 (commencement of operations)
to April 30, 1997.
See Notes to Financial Statements.
B. Please insert the following as the last sentence of the paragraph under
the subsection entitled "Portfolio Turnover" on page 12:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the turnover rate of the Portfolio
was 25%."
C. Please insert the following as the last sentence of the third paragraph
under the section entitled "Calculation of Investment Performance" on page
28:
"The Portfolio's cumulative total return for the period from
January 31, 1997, (commencement of operations) to April 30, 1997,
was (4.80)%."
D. Please insert the following as the fourth paragraph under the section
entitled "General Information" on page 29:
"As of June 16, 1997, Naidot & Co. c/o Bessemer Trust Co., owned
91.28% of the voting securities of the Portfolio, and, therefore,
may, for certain purposes, be deemed to control the Portfolio and
be able to affect the outcome of certain matters presented for a
vote of shareholders."
E. Please insert the following Financial Statements after the
section entitled "Custodian, Transfer Agent and Dividend
Disbursing Agent" on page 30. In addition, please add the heading
Financial Statements" to the Table of Contents as the last entry.
OLD WESTBURY GROWTH OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
April 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY VALUE
- --------- --------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--91.4%
BASIC INDUSTRY--3.9%
1,900 Newpark Resources, Inc. $ 85,262
1,110 OM Group, Inc. 30,664
-------------
TOTAL 115,926
-------------
CAPITAL GOODS--3.5%
4,850 Crompton & Knowles Corp. 105,488
-------------
CAPITAL GOODS--TECHNOLOGY--19.6%
1,850 ADC Telecommunications, Inc. 48,331
2,387 Burr Brown Corp. 70,417
1,400 Comdisco, Inc. 44,450
2,850 Digital Microwave Corp. 73,387
3,200 Fore Systems 48,800
3,600 Read-Rite Corp. 93,150
700 Sterling Commerce, Inc. 18,112
2,700 Trident Microsystems, Inc. 36,450
1,400 Univision Communications, Inc., Class A 47,600
2,100 Xilinx, Inc. 102,900
-------------
TOTAL 583,597
-------------
CONGLOMERATES &
MISCELLANEOUS--9.1%
2,500 Unifi, Inc. 77,500
2,600 USA Waste Services, Inc. 85,150
4,800 Royal Group Techs Ltd. Sub. Vtg. 107,400
-------------
TOTAL 270,050
-------------
CONSUMER CYCLICAL--10.4%
3,200 Borders Group, Inc. 68,000
3,900 Casey's General Stores, Inc. 73,612
2,200 Dominick's Supermarkets, Inc. 44,550
</TABLE>
OLD WESTBURY GROWTH OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
April 30, 1997 (unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY VALUE
- --------- --------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------
CONSUMER CYCLICAL (Continued)
3,500 Promus Hotel Corporation $ 123,375
-------------
TOTAL 309,537
-------------
CONSUMER GROWTH--2.1%
1,300 Electronic Arts 31,362
1,900 International Game Technology 30,163
-------------
TOTAL 61,525
-------------
DEFENSIVE CONSUMER STAPLES--7.1%
4,650 Flowers Industries, Inc. 113,344
3,550 Hormel Foods Corp. 86,975
600 Richfood Holdings, Inc. 12,225
-------------
TOTAL 212,544
-------------
ENERGY--8.4%
900 Barrett Resources 29,475
2,000 Ensco International, Inc. 95,000
2,350 Devon Energy Corp. Oklahoma 77,550
1,400 Nuevo Energy Co. 48,125
-------------
TOTAL 250,150
-------------
FINANCIAL--15.0%
1,200 Amresco, Inc. 17,475
1,600 Finova Group, Inc. 109,800
2,850 Financial Securities Assurance 92,269
1,050 Provident Cos., Inc. 58,669
6,700 Western National Corp. 172,525
-------------
TOTAL 450,738
-------------
PROFESSIONAL SERVICES--11.1%
2,000 Billing Info Concepts Corp. 47,750
2,925 Computer Learning Centers, Inc. 77,878
2,700 Health Care & Retirement 85,388
6,600 Novacare, Inc. 75,075
</TABLE>
OLD WESTBURY GROWTH OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
April 30, 1997 (unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY VALUE
- --------- --------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------
PROFESSIONAL SERVICES (Continued)
3,500 Physio-Control International Corp. 43,750
-------------
TOTAL 329,841
-------------
TRANSPORTATION--1.2%
1,300 Swift Transportation, Inc. 37,050
-------------
TOTAL COMMON STOCKS (identified cost $2,737,776)(a)
2,726,446
-------------
CASH AND EQUIVALENTS AND OTHER
ASSETS NET OF LIABILITIES--8.6% 255,757
-------------
NET ASSETS--100.0% $ 2,982,203
-------------
-------------
</TABLE>
- ------------------
(a) The cost of investments for federal tax purposes amounts to
$2,737,776. The net unrealized depreciation of investments on a
federal tax basis amounts to $11,330 which is comprised of $94,181
appreciation and $105,511 depreciation at April 30, 1997.
See Notes to Financial Statements.
OLD WESTBURY GROWTH OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at market value (identified cost $2,737,776)........... $ 2,726,446
Cash and equivalents............................................... 295,305
Income receivable.................................................. 2,306
-------------
Total assets................................................. 3,024,057
-------------
LIABILITIES:
Accrued expenses................................................... 41,854
-------------
NET ASSETS APPLICABLE TO 313,096 SHARES OF
CAPITAL STOCK OUTSTANDING.......................................... $ 2,982,203
-------------
-------------
Net Assets consist of:
Paid in capital.................................................... $ 3,040,162
Net investment loss................................................ (1,610)
Accumulated net realized loss on investments....................... (45,019)
Net unrealized depreciation on investments......................... (11,330)
-------------
Total Net Assets............................................. $ 2,982,203
-------------
-------------
NET ASSET VALUE, AND REDEMPTION PROCEEDS PER SHARE:
($2,982,203 / 313,096 SHARES OF CAPITAL STOCK OUTSTANDING)......... $9.52
MAXIMUM OFFERING PRICE PER SHARE ($9.52 / .955)...................... $9.97
</TABLE>
See Notes to Financial Statements.
OLD WESTBURY GROWTH OPPORTUNITY FUND
STATEMENT OF OPERATIONS
For the period ended April 30, 1997(a) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................ $ 1,134
Interest................................................. 1,611
----------
Total income....................................... $ 2,745
----------
EXPENSES:
Investment advisory...................................... 2,355
Custody.................................................. 589
Administration........................................... 442
Shareholder servicing.................................... 736
Registration............................................. 9,533
Distribution............................................. 882
Printing and postage..................................... 3,781
Legal.................................................... 2,520
Auditing................................................. 8,821
Insurance................................................ 3,781
Transfer agent........................................... 4,537
Directors................................................ 5,797
Miscellaneous............................................ 318
----------
Total expenses..................................... 44,092
Less fees waived and reimbursed:
Waiver of investment advisory fee.................. (2,355)
Reimbursement of other operating
expenses........................................ (37,382)
----------
Total waivers and reimbursement.................... (39,737)
----------
Net expenses....................................... 4,355
----------
NET INVESTMENT LOSS...................................... (1,610)
----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on investments......................... (45,019)
Net change in unrealized depreciation
on investments........................................ (11,330)
----------
NET REALIZED AND UNREALIZED LOSS........................... (56,349)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................................... $ (57,959)
----------
----------
</TABLE>
(a) For the period from January 31, 1997 (commencement of operations)
to April 30, 1997.
See Notes to Financial Statements.
OLD WESTBURY GROWTH OPPORTUNITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
APRIL 30,
1997(A)
(UNAUDITED)
<S> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss................................................ $ (1,610)
Net realized loss on investments................................... (45,019)
Net change in unrealized depreciation.............................. (11,330)
-------------
Net decrease in net assets from operations......................... (57,959)
-------------
FROM CAPITAL STOCK TRANSACTIONS:
Net proceeds from sale of capital stock............................ 3,040,162
Reinvestment of dividends.......................................... --
Net cost of capital stock redeemed................................. --
-------------
Net increase in net assets resulting
from capital stock transactions................................. 3,040,162
-------------
NET INCREASE IN NET ASSETS......................................... 2,982,203
NET ASSETS:
Beginning of period................................................ 0
-------------
End of period...................................................... $ 2,982,203
-------------
-------------
</TABLE>
- ------------------
(a) For the period from January 31, 1997 (commencement of operations)
to April 30, 1997.
See Notes to Financial Statements.
OLD WESTBURY GROWTH OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. Old Westbury
Growth Opportunity Fund (the "Portfolio") is a separate series of Old
Westbury Funds, Inc. (the "Fund"), a Maryland corporation registered
under the Investment Company Act of 1940 (the "Act"), as a
diversified, open-end management investment company. The Fund's
Articles of Incorporation permit the Directors to create an unlimited
number of series, each of which is a separate class of shares. At
April 30, 1997, the Fund consisted of the Portfolio and Old Westbury
International Fund. The Fund was incorporated under the laws of the
state of Maryland on August 26, 1993 and commenced operations on
October 22, 1993. The Portfolio's investment objective is to seek
capital appreciation.
The following is a summary of the significant accounting policies
followed by the Portfolio:
A. VALUATION OF INVESTMENTS. 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. If no bid or asked prices are quoted,
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 as the last sale price on the exchange
representing the principal market for such securities.
Securities traded in the over-the-counter market, including
listed securities whose primary market is believed by Bessemer Trust
Company, N.A. ("Bessemer"), the Portfolio's investment advisor (the
"Advisor"), to be over-the-counter, are valued at the mean of the last
reported bid and asked prices from such sources as the Board of
Directors deems appropriate to reflect their fair value.
Debt instruments having 60 days or less remaining until maturity
are valued at amortized cost. Debt instruments having a greater
remaining maturity will be valued at the 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 Board of Directors designed to reflect in good faith the fair
value of such securities.
OLD WESTBURY GROWTH OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (unaudited) (Continued)
- --------------------------------------------------------------------------------
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security
transactions are accounted for on the trade date. Realized gains and losses on
security transactions are determined on the identified cost method. Dividend
income and other distributions from portfolio securities are recorded on the
ex-dividend date. Interest income is accrued daily.
C. FEDERAL TAXES. It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income or excise tax provision is required.
D. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. The Portfolio
anticipates paying income dividends on an annual basis. Capital gains
distributions, if any, will be made on an annual basis. The treatment
for financial statement purposes of distributions made during the year
from net investment income or net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences
are caused primarily by: differences in the timing of the recognition
of certain components of income, expense, and capital gain. Where such
differences are permanent in nature, they are reclassified in the
components of net assets based on their characterization for federal
income tax purposes. Any such reclassifications will have no effect on
net assets, results of operations or net asset value per share of the
Portfolio.
2. TRANSACTIONS WITH AFFILIATES.
A. INVESTMENT ADVISORY FEES. Pursuant to an advisory contract,
dated August 8, 1996, the Fund has approved Bessemer to make
investment decisions for the Portfolio. The investment advisory fee
paid to the advisor is computed daily and paid 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
such assets and 0.70% of such assets exceeding $200 million.
B. ADMINISTRATION FEES. Federated Administrative Services ("FAS")
serves as administrator. FAS provides administrative services
necessary for the overall administration of the Portfolio 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 Portfolios, the preparation
and filing of all documents required for compliance by the Portfolio
with applicable laws and regulations; providing equipment and
personnel necessary for maintaining the organization
OLD WESTBURY GROWTH OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (unaudited) (Continued)
- --------------------------------------------------------------------------------
of the Portfolio; preparation of certain documents in connection with
meetings of the Board of Directors and shareholders; the maintenance
of books and records of the Portfolio; and paying the compensation of
the Portfolio's officers and Directors affiliated with FAS. For
providing these services, FAS 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; 0.10% of
such assets from $100 million to $250 million; and 0.05% of such
assets over $250 million.
C. DISTRIBUTION AND SERVICE PLAN AND DISTRIBUTION REIMBURSEMENT
FEES. The Directors adopted a distribution and service plan (the
"Plan") for the Portfolio pursuant to Rule 12b-1 of the Act, and
pursuant to the Plan, the Portfolio entered into a distribution
agreement and a shareholder servicing agreement with Edgewood
Services, Inc. and a shareholder servicing agreement with Bessemer.
Under its shareholder servicing agreement, Edgewood Services, Inc.
receives payments from the Portfolio to permit it to make payments to
broker-dealers for providing shareholder services. Under its
shareholder servicing agreement, Bessemer is permitted (i) to receive
a payment from the Portfolio attributable to Bessemer's clients (and
its affiliates) for providing shareholder services to such clients and
(ii) to receive payments to permit it to make payments to other
financial institutions as shareholder servicing agents. The total of
shareholder servicing fees in the aggregate payable to Edgewood
Services, Inc. and Bessemer will not exceed 0.25% per annum of the
Portfolio's average daily net assets.
The distribution agreement with Edgewood Services, Inc. provides
for reimbursement to Edgewood Services, Inc. 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.
In addition, the Portfolio will pay for certain other expenses
under the Plan. These expenses shall not exceed an amount equal to
0.05% per annum of the Portfolio's average daily net assets.
D. DIRECTOR'S FEES. Each Director who is not an "interested person" (as
defined in the Act) of the Portfolio receives a $5,000 annual retainer and is
reimbursed for out-of-pocket expenses incurred in connection with committee or
board meetings.
E. CUSTODY FEES. The Fund has retained Bessemer to serve as the Portfolio's
custodian. Bessemer is responsible for maintaining the books
OLD WESTBURY GROWTH OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (unaudited) (Continued)
- --------------------------------------------------------------------------------
and records of the Portfolio's securities and cash. For providing
these services, Bessemer receives from the Portfolio a fee accrued and
paid monthly at an annual rate equal to 0.20% of the average daily net
assets of the Portfolio.
3. CAPITAL STOCK. The Portfolio has authorized a total of 20 billion shares of
common stock (par value $0.001 per share) and is permitted to issue 4 billion of
the authorized shares in the Portfolio. Transactions in shares of capital stock
were as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD
ENDED
APRIL 30,
1997(A)
<S> <C>
Common stock sold........................................................ 313,096
Reinvestment of dividends................................................ 0
Common stock redeemed.................................................... 0
---------
Net increase............................................................. 313,096
---------
---------
</TABLE>
(a) For the period from January 31, 1997 (commencement of operations)
to April 30, 1997.
4. PURCHASE AND SALES OF SECURITIES. For the period ended April 30, 1997,
purchases and sales of investment securities other than short-term investments
aggregated $3,141,793 and $358,498 respectively.
INVESTMENT ADVISOR:
Bessemer Trust Company, N.A.
630 Fifth Avenue
New York, New York 10111
(212) 708-9100
DISTRIBUTOR AND SHAREHOLDER
SERVICING AGENT:
Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
ADMINISTRATOR:
Federated Administrative Services
Federated Investors Tower
Pittsburgh, PA 15222-3779
SHAREHOLDER SERVICING AGENT:
Bessemer Trust Company, N.A.
630 Fifth Avenue
New York, New York 10111
(212) 708-9100
Cusip 680414208
G01963-03 (6/97)
OLD WESTBURY GROWTH OPPORTUNITY FUND
(A PORTFOLIO OF OLD WESTBURY FUNDS, INC.)
FEDERATED TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE: (800) 607-2200
PROSPECTUS
JANUARY 31, 1997
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 equity securities of small and medium sized companies
that have the potential to become industry leaders. 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 January 31, 1997, 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, call
or write the Portfolio at the telephone number or address set forth
above.
Bessemer Trust Company, N.A. ("Bessemer") is the investment
adviser 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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 equity securities of
small and medium sized companies that have the potential to become
industry leaders. 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 "Adviser")
serves as the Portfolio's investment adviser 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 Adviser will act
as a shareholder servicing agent for the Portfolio, pursuant to which
the Portfolio is permitted to pay the Adviser 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 Adviser 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 Adviser will only be paid by the Portfolio with respect to the
value of shares of the Portfolio represented by the clients of the
Adviser and the other Shareholder Servicing Agents that have
agreements with the Adviser. Therefore, the total service fees in the
aggregate payable to the Distributor and the Adviser (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 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, and the value in U.S. dollars of
the Portfolio's assets denominated in Canadian currency may be
affected by changes in exchange rates and regulations. 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."
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
OLD WESTBURY GROWTH OPPORTUNITY FUND
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)...............4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)......................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable).......................... None
Exchange Fee................................................................................ None
ANNUAL FUND OPERATING EXPENSES *
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)........................................................... 0.44%
12b-1 Fee................................................................................... 0.25%
Total Other Expenses........................................................................ 0.81%
Total Fund Operating Expenses (2)...................................................... 1.50%
</TABLE>
(1) The estimated management fee has been reduced to reflect the
anticipated voluntary waiver of a portion of the management fee. The
adviser can terminate this voluntary waiver at any time at its sole
discretion. The
maximum management fee is 0.80%.
(2) The total Fund operating expenses are estimated to be 1.86% absent
the anticipated voluntary waiver of a portion of the management fee.
* Total Fund Operating Expenses are estimated based on average
expenses expected to be incurred during the period ending October 31,
1997. During the course of this period, expenses may be more or less
than the average amount shown.
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder of the
Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Purchase of
Shares." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
EXAMPLE ...................................1 YEAR...3 YEARS
- ------- ------ -------
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. The
Fund charges no
contingent deferred sales charge. .............................$60 $90
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S
FISCAL YEAR ENDING OCTOBER 31, 1997.
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 equity securities of small and medium-sized
companies that have the potential to become industry leaders. 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% to 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 Portfolio'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, 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. Further, in addition to exhibiting
greater volatility, the stocks of Small-Cap Companies may, to some
degree, fluctuate independently of the stocks of large companies. That
is, the stocks of Small-Cap Companies may decline in price as the
price of large company stocks rise or vice versa. 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 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 foreign and domestic
issuers, an investment in shares 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
shares). 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
The Portfolio may invest more than 10% of its total assets in Canadian
securities. 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. In addition, the value in U.S. dollars of
the Portfolio's assets denominated in Canadian currency may be
affected by changes in exchange rates and regulations. 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 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. The convertible securities in which the
Portfolio may invest must be rated, at the time of purchase, BBB or
higher by Standard & Poor's Ratings Group ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's"), or, if unrated, be of
comparable quality as determined by the Portfolio's Adviser. (If a
security's rating is reduced below the required minimum after the
Portfolio has purchased it, the Portfolio is not required to sell the
security, but may consider doing so.) Bonds rated BBB by S&P or Baa by
Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated
bonds.
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 Adviser and approved by the Directors.
The Directors will monitor the Adviser'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.
MONEY MARKET INSTRUMENTS
The Portfolio may maintain up to 100% 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. 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 Adviser
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 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.
INVESTMENT COMPANY SECURITIES
Securities of other investment companies may be acquired by the
Portfolio 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 the 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 the Portfolio, unless these limitations are
permitted to be exceeded by the Securities and Exchange Commission.
The Portfolio will limit its investments in the securities of other
investment companies to those which are consistent with the
Portfolio's investment policies. As a shareholder of another
investment company, the 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 the Portfolio bears directly
in connection with its own operations.
PORTFOLIO TURNOVER
Purchases and sales are made for the Portfolio whenever necessary, in
the Adviser's opinion, to meet the Portfolio's objective. The Adviser
expects that the turnover of the Portfolio should not exceed 100%.
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; 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.
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 Adviser of the Portfolio. The Adviser 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 Adviser 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 Adviser 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 Adviser 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.
Due to the services performed by the Adviser 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 Adviser, 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 Adviser'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 $12.4 billion, approximately $430
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; San
Francisco, California; London, England and Grand Cayman, Cayman
Islands B.W.I. In addition to the Portfolio, Bessemer is investment
adviser to the Old Westbury International Fund, the only other active
series of the Fund. The Adviser's address is 630 Fifth Avenue, New
York, New York 10111.
The Adviser 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
Adviser to allocate advisory recommendations and the placing of orders
in a manner which is deemed equitable by the Adviser to the accounts
involved, including the Portfolio. When two or more of the clients of
the Adviser, 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 Adviser 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 Adviser to be useful or desirable for its investment
management of the Portfolio and/or other advisory accounts of itself
and any investment adviser 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
Adviser, the Portfolio pays the Adviser 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 Adviser will also act as a
shareholder servicing agent for the Portfolio pursuant to which the
Portfolio is permitted to pay the Adviser a maximum of 0.25% per annum
of the Portfolio's average daily net assets to compensate it and to
permit the Adviser to compensate banks and other financial
institutions (the Adviser 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 Adviser 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 Adviser, 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 Adviser, 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 Adviser has agreed to a reduction in
the 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.
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:
<PAGE>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FUND
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 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
Adviser.
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 Adviser 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 Adviser
(and its affiliates) to compensate it for providing shareholder
services to such clients. In addition, the Shareholder Servicing
Agreement provides that the Adviser 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 Adviser 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
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 Adviser) 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 Adviser 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 Adviser 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 Adviser 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
Adviser, 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 Adviser 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 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.
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>
<S> <C> <C> <C>
SALES LOAD DEALER
AMOUNT OF SALES AS % OF AS % OF
PURCHASE LOAD NET AMOUNT INVESTED 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 Adviser 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.
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 accounts
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.
<PAGE>
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 Services, 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.
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 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 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 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, a sufficient number of escrowed shares will be
redeemed 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.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent
purchases of two or more portfolios in the Fund, the purchase price of
which includes a sales charge. For example, if a shareholder
concurrently invested $20,000 in the Portfolio and $30,000 in the Old
Westbury International Fund, the sales charge would be reduced.
To receive this sales charge reduction, the Shareholder Servicing
Agent or Broker-Dealer must be notified by the shareholder in writing
at the time the concurrent purchases are made. The Portfolio will
reduce the sales charge after it confirms the purchase.
DIRECTORS OF THE FUND, EMPLOYEES AND CLIENTS OF THE ADVISER. 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 Adviser 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.
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 cases where the amount redeemed exceeds
$50,000, 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.
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 tax 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.".
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 $4,000 annually to either or both IRAs 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 800-607-2200.
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 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 gains. 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.
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
January 23, 1997.
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 ten 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 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 is 90 Washington Street, New York, NY 10006, is the
Portfolio's transfer and dividend disbursing agent.
<PAGE>
Old Westbury Funds, Inc.
Old Westbury Growth Opportunity Fund
Prospectus
January 31, 1997
Adviser:
Bessemer Trust Company, N.A
630 Fifth Avenue
New York, New York 10111
(212) 708-9100
Administrator:
Federated Administrative Services
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
(412) 288-1900
Distributor:
Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania
(412) 288-1900
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
Adviser, 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
OLD WESTBURY GROWTH OPPORTUNITY FUND
(A Portfolio of Old Westbury Funds, Inc.)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1997
A. Please insert the following as the fourth paragraph after the chart under
the section entitled "Compensation Table" on page 11:
As of June 16, 1997, the following shareholder of record owned 5%
or more of the outstanding shares of the Fund: Naidot & Co., c/o
Bessemer Trust Co., Woodbridge, N.J., owned approximately 764,652
shares (91.28%)."
B. Please insert the following as the last sentence of the seventh paragraph
under the section entitled "Adviser" beginning on page 11:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the Growth Fund accrued $2,421 in
advisory fees, all of which were permanently and irrevocably waived."
C. Please insert the following as the last sentence of the third paragraph
under the section entitled "Administrator" on page 13:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the Growth Fund accrued $442 in
administrative services, of which $0, was permanently and irrevocably
waived."
D. Please insert the following as the last sentence of the first paragraph
under the section entitled "Distribution and Service Plan" on page 15:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the Growth Fund accrued $736 in
shareholder servicing fees."
E. Please insert the following as the last sentence of the second paragraph
under the section entitled "Distribution and Service Plan" beginning on page 15:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the Growth Fund paid $882 under the
Distribution Agreement."
F. Please insert the following as the last sentence of the third paragraph
under the section entitled "Distribution and Service Plan" beginning on
page 15:
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the Growth Fund paid $882 for such
expenses."
G. Please insert the following as the third paragraph under the section
entitled "Brokerage and Portfolio Turnover" beginning on page 17:
EDGEWOOD SERVICES, INC.
Distributor
Cusip 680414208
G01972-04 (6/97)
"For the period from January 31, 1997 (commencement of
operations) to April 30, 1997, the aggregate commissions paid from the
Growth Fund were $17,654."
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: (800) 607-2200
Statement of Additional Information
February 28, 1997
This Statement of Additional Information is not a prospectus
and is only authorized for distribution when preceded or accompanied
by the prospectuses (each a "Prospectus") for the Portfolios listed
above. The prospectus for Old Westbury International Fund is dated
February 28, 1997 and the prospectus for Old Westbury Growth
Opportunity Fund is dated January 31, 1997. 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
PAGE
INVESTMENT OBJECTIVE AND POLICIES ................ 1
DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT SECURITIES AND RISK FACTORS. 1
INVESTMENT RESTRICTIONS ................ 9
DIRECTORS AND OFFICERS ................ 10
ADVISER ......... ................
11
ADMINISTRATOR..... ................
13
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT........ 14
DISTRIBUTION AND SERVICE PLAN ................ 15
BROKERAGE AND PORTFOLIO TURNOVER ................ 17
COUNSEL AND INDEPENDENT AUDITORS ................ 18
PURCHASE AND REDEMPTION OF SHARES ................ 19
DESCRIPTION OF COMMON STOCK ................ 19
PERFORMANCE....... ................
19
NET ASSET VALUE... ................
20
TAX STATUS ....... ................
20
DESCRIPTION OF CORPORATE DEBT RATINGS............... 24
FINANCIAL STATEMENTS ................
25
<PAGE>
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 Adviser 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 executive
offices are located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779.
FOREIGN SECURITIES
Investments are made primarily in those regions where, in the
opinion of the International Fund's Adviser, 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 Adviser, 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 Portfolio'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.
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 investments 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.
<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 Adviser, 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. The commercial paper in
which the Portfolios may invest must be rated A-1 or A-2 by Standard &
Poor's Rating Group ("S&P"), Prime-1 or Prime-2 by Moody's Investors
Service, Inc. ("Moody's"), or F-1 or F-2 by Fitch Investors Service,
Inc. 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 Adviser or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are
credited to such accounts. The Adviser, 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 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 Adviser. 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 Adviser 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 from time to time enter 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 the U.S. dollar or in exchange for another foreign currency. A
Portfolio will only enter into forward contracts to sell a foreign
currency in exchange for another foreign currency if the Adviser
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 S&P
or "Baa" by Moody's or, if unrated, judged by the Adviser 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.
In selecting convertible securities for each Portfolio, the
Adviser 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 Adviser, 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 Adviser has no control, whether or not based
on fundamental analysis, may decrease the market price and liquidity
of such investments. Although the Adviser 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. The International
Fund will not purchase or hold more than 5% of its net assets in
securities rated below investment grade. The Growth Fund will not
invest 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
Adviser 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 S&P
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 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
Adviser, 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 Adviser 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 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 Adviser 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.
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, and except that with respect to Growth Fund,
a deposit or payment by such Fund of initial or variation margin in
connection with futures contracts or related options transactions is
not considered the purchase of a security on margin.
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. With respect to
Growth Fund, initial or variation margin for futures contracts will
not be deemed to be pledges of the Portfolio's 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, and Growth
Fund may enter into financial futures 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 (a)
with respect to International Fund, 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; and (b) with respect to Growth Fund,
(i) not more than 5% of the value of the 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 the Portfolio, unless the Portfolio is
permitted to exceed these limitations by the Securities and Exchange
Commission. Growth Fund will limit its investments in the securities
of other investment companies consistent with the Portfolio's
investment policies.
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 and officer is Old
Westbury Funds, Inc. c/o Edgewood Services, Inc., Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
ROBERT M. KAUFMAN (age 66) - Director.
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.
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.
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 67) - President, Treasurer and
Principal Financial Officer. Vice Chairman, Treasurer, and Trustee,
Federated Investors; Vice President, Federated Advisers, Federated
Management, Federated Research, Federated Research Corp., Federated
Global Research Corp. and Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of other funds
distributed by Federated Securities Corp.; President, Executive Vice
President and Treasurer of other funds distributed by Federated
Securities Corp.
RONALD M. PETNUCH (age 37) - Vice President.
Vice President and Assistant Treasurer of other funds distributed by
Federated Securities Corp. Senior Vice President, Federated Services
Company; and formerly, Associate Corporate Counsel, Federated
Investors.
C. CHRISTINE THOMSON (age 39) - Vice President and Assistant Treasurer.
Vice President and Assistant Treasurer of other funds distributed by Federated
Securities Corp.
JUDITH J. MACKIN (age 37) - Vice President.
Vice President and Assistant Treasurer of other funds distributed by
Federated Securities Corp.
C. GRANT ANDERSON (age 56) - Secretary.
Corporate Counsel, Federated Investors.
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
Pension or Total
Retirement
Compensation
Aggregate Benefits Estimated From
Compensation Accrued as Annual Fund and
Fund
Name of from part of Portfolio Benefits Upon Complex
Paid
DIRECTOR THE FUND EXPENSES RETIREMENT TO
DIRECTORS
Howard D. Graves none none none none
Robert M. Kaufman $5,500 none none $5,500
John Kevin Kenny $5,500 none none $5,500
</TABLE>
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 $5,000 to
be paid in quarterly installments of $1,250 and $500 per meeting, plus
reasonable expenses.
As of February 4, 1997, all Directors and officers as a group
owned less than 1% of each Portfolio's outstanding shares.
As of that date, the following shareholders of record owned
more than 5% of the International Fund's outstanding shares: Bessemer
Trust Company, 100 Woodbridge Center Drive, Woodbridge, New Jersey
07095-1191 held 94.59% of the outstanding shares of the International
Fund under the nominee name Naidot & Co. for its customers.
ADVISER
The Adviser to each Portfolio is Bessemer Trust Company,
N.A., a national banking association. Pursuant to the Advisory
Contract for each Portfolio, the Adviser 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 Adviser 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 Adviser, 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 January 31,
1997, 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 Fund or
the Adviser. 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 Adviser 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 Adviser, or of reckless disregard of its obligations
thereunder, the Adviser 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 Adviser, 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 Adviser, 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 Adviser 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 Adviser. The Adviser 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
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 Adviser
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 fiscal years ended October 31, 1994,
1995, and 1996, the International Fund accrued $570,189, $771,294, and
$990,632, respectively, in advisory fees, of which $134,868, $91,974,
and $29,346, respectively, were permanently and irrevocably waived.
Any portion of the total fees received by the Adviser may be
used by the Adviser to provide distribution, shareholder and
administrative services. Pursuant to the Fund's Distribution and
Service Plan, the Adviser will also act as a shareholder servicing
agent for each Portfolio pursuant to which the Portfolios are
permitted to pay the Adviser a maximum of 0.25% per annum of that
Portfolio's average daily net assets to compensate it and to permit
the Adviser to compensate banks, savings and loans and other financial
institutions (the Adviser with such other institutions, each a
"Shareholder Servicing Agent") whose clients are Fund shareholders for
providing shareholder services. The Adviser 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 Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. The Administrator serves as administrator of
other mutual funds. 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 Adviser, subject to the supervision of the
Fund's Board of Directors. Because of the services rendered each
Portfolio by the Administrator and the Portfolios' Adviser, 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 as described in the prospectus.
For the fiscal years ended October 31, 1994, 1995, and 1996, the
International Fund accrued $106,932, $143,716, and $175,182,
respectively, in administrative services with the former
Administrator, Signature Broker-Dealer Services, Inc. ("Signature"),
of which $5,989, $84, and $0, 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 Adviser; (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 after August 31, 1998, without the payment of any penalty, by a
vote of the majority of the Fund's shareholders, by the Fund on behalf
of the Portfolios or the Administrator on six month's written notice.
After August 31, 1998, 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 Adviser and
Administrator, the custodian maintains each Portfolio's accounting and
portfolio transaction records. Fundamental Shareholder Services, Inc.,
whose principal address is 90 Washington Street, New York, NY 10006,
is the Portfolios' transfer and dividend disbursing agent.
<PAGE>
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 Adviser. 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 Adviser 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 Adviser (and its affiliates) to
compensate it for providing shareholder services to such clients. In
addition, the Shareholder Servicing Agreement provides that the
Adviser 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 Adviser will not exceed
0.25% of the total net assets of that Portfolio. For the fiscal years
ended October 31, 1994, 1995, and 1996, the International Fund accrued
$176,227, $237,518, and $309,850, 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 Adviser) receives a fee, which may
be paid periodically, on an annual basis equal to 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 fiscal years ended October
31, 1994, 1995, and 1996, the International Fund paid $16,100, $7,002,
and $5,739, respectively, under the former Distribution Agreement with
Signature.
Under the Distribution Agreement 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 Adviser 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, 1995, and 1996, the International Fund paid $26,566,
$3,740, and $3,740, respectively, for such expenses with Signature.
The Plan, the Shareholder Servicing Agreements and the
Distribution Agreement each provide that the Adviser 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 Adviser 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 Adviser,
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 Adviser 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
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 Adviser, 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.
From time to time, the Adviser and the Distributor may
voluntarily assume certain expenses of a Portfolio. This would have
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 Adviser 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 Adviser or
portfolio transactions may be effected by the Adviser. Neither a
Portfolio nor the Adviser 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
Adviser for use in rendering investment advice to a Portfolio, such
information may be supplied at no cost to the Adviser and, therefore,
may have the effect of reducing the expenses of the Adviser in
rendering advice to that Portfolio. While it is impossible to place an
actual dollar value on such investment information, its receipt by the
Adviser probably does not reduce the overall expenses of the Adviser
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 Adviser 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 fiscal years ended October 31, 1994, 1995, and 1996,
the aggregate commissions paid from the International Fund were
$516,020, $325,787, and $462,315, respectively.
The investment information provided to the Adviser is of the
type described in Section 28(e) of the Securities Exchange Act of 1934
and is designed to augment the Adviser's own internal research and
investment strategy capabilities. Research services furnished by
brokers through which each Portfolio effects securities transactions
are used by the Adviser 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 Adviser
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 Adviser 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.
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 Adviser'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.
<PAGE>
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 January 23,
1997, 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.
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 10 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 Portfolios' performance in the
Prospectus is herein incorporated by reference. The Adviser may also
include performance information in such advertisements or information
furnished to current or prospective shareholders not only regarding
the Adviser's performance since John Trott, the International Fund's
portfolio manager, joined the Adviser in 1992, but also regarding Mr.
Trott's personal investment performance since 1988 when, as chief
investment officer for Klienwort Benson International Investment LTD.,
he managed investments for clients with similar objectives to those of
the International Fund. In addition, the Adviser may also include
performance information regarding the Adviser's performance since
Harry Rekas, the Growth Fund's portfolio manager, joined the Adviser
in 1996, but also regarding Mr. Rekas' personal investment performance
since 1993 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.
Readily marketable securities traded in the over-the-counter
market, including listed securities whose primary market is believed
by the Adviser 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.
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 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 (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.
<PAGE>
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 edged." 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.
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 Service, 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 RATINGS GROUP
AAA: Bonds rated AAA have the highest rating assigned by Standard
& Poor's Ratings Group("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.
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, 1996, 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.
Cusip 680414109
Cusip 680414208
G02009-04
OLD WESTBURY FUNDS, INC.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Financial Statements.
The Financial Statements for the Old Westbury International Fund for
the fiscal period ended October 31, 1996, are incorporated by
reference from the Portfolio's Annual Report dated October 31, 1996.
Financial Statements for the Old Westbury Growth Opportunity Fund are
included in Part A of this Registration Statement.
(B) Exhibits.
(1)Form of Articles of Incorporation of the Registrant; 3.
(2)By-laws of the Registrant; 3.
(3) Not applicable.
(4) Not applicable.
(5)(i) Advisory Contract between the Registrant, on behalf of the
International Fund, and Bessemer Trust Company, N.A.; 3
(ii) Form of Advisory Contract between the
Registrant, on behalf of the Growth Opportunity
Fund, and Bessemer Trust Company, N.A.; 4.
(6)See Distribution Agreement filed as Exhibit 15(iii) herein; 5.
(7) Not applicable.
(8)Custody Agreement between the Registrant and Bessemer Trust
Company (New Jersey); 1.
(9) Administrative Services Agreement between the
Registrant and Federated Administrative Services for
the Fund, on behalf of the Portfolios of the
Registrant.; 5.
(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; 1.
(11) Consent of Independent Auditors; 5.
(12) Not applicable.
(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; 1.
(14) Not applicable.
1. Incorporated herein by reference from Pre-Effective Amendment No. 1
to this Registration Statement as filed with the SEC on
October 5, 1993.
3 Incorporated herein by reference from Post-Effective Amendment No. 3
to this Registration Statement as filed with the SEC on
February 28, 1996.
4. Incorporated herein by reference from the Post-Effective
Amendment No. 5 to this Registration Statement as filed with the SEC
on November 26, 1996.
5. Incorporated herein by reference from the Post-Effective
Amendment No. 7 to this Registration Statement as filed with
the SEC on February 26, 1997.
<PAGE>
(15) (i) 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; 4.
(ii) 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; 4.
(iii) Distribution Agreement between the Registrant, on behalf of the
Portfolios, and Edgewood Services, Inc.; 5.
(iv) Exhibit B of the Distribution Agreement; 5.
(v) Shareholder Servicing Agreement between the Registrant, on behalf
of the International Fund, and Bessemer Trust Company, N.A.; 1.
(vi) Form of Shareholder Servicing Agreement between the Registrant,
on behalf of the Growth Fund, and Bessemer Trust Company, N.A.; 4.
(vii) Amended and Restated Shareholder Servicing Agreement between the
Registrant, on behalf of the International Fund, and Edgewood Services,
Inc.; 5.
(viii)Form of Shareholder Servicing Agreement between the Registrant,
on behalf of the Growth Fund, and Edgewood Services, Inc.; 4.
(16) Schedules of Computation of Performance Quotations; 2.
(i) Schedule of Computation of Fund Performance for Old Westbury
Growth Opportunity Fund; +
(17) Financial Data Schedules; 5.
(18) Not Applicable.
(19) Powers of Attorney; 5.
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 June 25, 1997
Common Stock
(par value $0.001)
Old Westbury International Fund.... 54
Old Westbury Growth Opportunity Fund........8........
1. Incorporated herein by reference from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on October 5, 1993.
2. Incorporated herein by reference from Post-Effective Amendment No. 1
to this Registration Statement as filed with the SEC on March 1, 1994.
3 Incorporated herein by reference from Post-Effective Amendment No. 3 to
this Registration Statement as filed with the SEC on February 28, 1996.
4. Incorporated herein by reference from the Post-Effective Amendment
No. 5 to this Registration Statement as filed with the SEC on
November 26, 1996.
5. Incorporated herein by reference from the Post-Effective Amendment
No. 7 to this Registration Statement as filed with the SEC on
February 26, 1997.
+. Incorporated herein.
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.
(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.
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 Managing Director & Head of
the Board 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 Pres. Senior Vice President, Fleet Investment Services, Rhode
Island
Brooks Carey Senior Vice Pres. Vice President, T. Rowe Price
John D. Chadwick Executive Vice Pres. Senior Vice President and President
Senior Portfolio Manager, Kidder Peabody & Co.
W. David Dary Senior Vice Pres. 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 Pres. 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 Exec. Vice Pres. CEO and Chief President Investment Officer, The Portfolio
Group
Jane Reilly Vice President Vice President, U.S. Trust
Frederick H. Sandstrom Senior Vice Pres. Executive Vice President and Managing Director, Fleet
Financial Group
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Edgewood Services, Inc. the Distributor for
shares of the Registrant, also acts as
principal underwriter for the following
open-end investment companies: BT Advisor
Funds, BT Pyramid Mutual Funds, BT Investment
Funds, BT Institutional Funds, Excelsior
Institutional Trust (formerly, UST Master
Funds, Inc.), Excelsior Tax-Exempt Funds,
Inc. (formerly, UST Master Tax-Exempt Funds,
Inc.), Excelsior Institutional Trust, FTI
Funds, FundManager Portfolios, Marketvest
Funds, and Marketvest Funds, Inc.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Lawrence Caracciolo Director, President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
<PAGE>
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 Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, the Registrant's
administrator; and Fundamental Shareholder Services,
Inc., 90 Washington Street, New York, NY 10006, 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.
(e) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant, OLD WESTBURY
FUNDS, INC., certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 26th day of June,
1997.
OLD WESTBURY FUNDS, INC.
By: /s/ C. Grant Anderson
C. Grant Anderson, Secretary
Attorney in Fact for Edward C. Gonzales
June 26, 1997
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.
NAME TITLE DATE
Edward C. Gonzales* President and Treasurer June 26, 1997
(Chief Executive Officer and
Principal Financial and
Accounting Officer)
Howard D. Graves* Director
Robert M. Kaufman* Director
John Kevin Kenny* Director
*By: /S/ C. GRANT ANDERSON
C. Grant Anderson
As Attorney-in-fact for Edward C. Gonzales by Power of Attorney.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
OLD WESTBURY GROWTH Price/
OPPORTUNITY FUND Share= $10.47
Return Since Inception
ending 4/30/97 NAV= $10.00
FYE: October 31
Begin Capital Reinvest Ending Total
DECLARED: ANNUAL Reinvest Period Dividend Gain Price Period Ending Invest
PAID: ANNUAL Dates Shares /Share /Share /Share Shares Price Value
4/30/97 95.511 0.000000000 0.00000 $9.52 95.511 $9.52 $909.26
$1,000 (1+T) = End Value
T = -9.07%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------
Old Westbury Growth Opportunity Fund Yield = 2{( N/A - N/A )+1)^6-1}=
---------------------------------------------
Computation of SEC Yield 0 *( $9.97 - N/A)
As of: April 30, 1997
SEC Yield = N/A
Dividend and/or Interest
Inc for the 30 days ended N/A
Net Expenses for N/A
the Period
Avg Daily Shares N/A
Outstanding and entitled
to receive dividends
Maxium offering price $9.97
per share as of 4-30-97
Undistributed net income N/A
Tax Equivalent Yield
(assumes individual
does not itemize
on Federal Return)
100 % minus the Federal
taxable % (100%-28%=72%)
30 SEC yield / by the tax
equiv % (0.00% / 72.0%)= N/A
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