As filed with the Securities and Exchange Commission on February 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. 7 ............ X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 8 ............................. 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:
immediately upon filing pursuant to paragraph (b)
X on February 28, 1997, 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
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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.
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 International Fund, and is comprised
of the following:
Part A
ITEM NO. PROSPECTUS HEADING
1. Cover Page..................................... Cover Page
2. Synopsis.................................Prospectus Summary;
Table of Fees
and Expenses
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3 Condensed Financial Information.........Financial Highlights
4. General Description of Registrant.......Investment Objective
and Policies;
Investment Restrictions
5. Management of the Fund...............Management of the Fund;
The Administrator; Custodian,
Transfer Agent and Dividend Agent;
Distribution and Service Plan
5A. Management's Discussion of Fund Performance...Not Applicable
6. Capital Stock and Other Securities.......Purchase of Shares;
Redemption of Shares;
Exchange of Shares;
Retirement Plans; Dividends,
Distributions and Taxes;
Calculation of Investment
Performance; General
7. Purchase of Securities Being OfferedPurchase of Shares; Net Asset
Value;
Distribution and Service Plan
8. Redemption or Repurchase................Redemption of Shares
9. Legal Proceedings.............................Not Applicable
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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 HistoryDescription of Each Portfolio's
Investment Securities; Advisor;
Administrator; Directors and Officers
13. Investment Objectives and PoliciesInvestment 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
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............................Brokerage and Portfolio Turnover
18. Capital Stock and Other SecuritiesDescription of Common Stock;
Description of Corporate Debt
Ratings
19. Purchase, Redemption and Pricing of
Securities Being Offered..Purchase and Redemption of Shares;
Net Asset Value
20. ..................................................Tax Status
..................................................Tax Status
21. ................................................Underwriters
...............................Distribution and Service Plan
22. .............................Calculation of Fund Performance
.................................................Performance
23. Financial Statements........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 to be filed by amendment.
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OLD WESTBURY
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Prospectus
February 28, 1997
BESSEMER TRUST
----------------
INVESTMENT ADVISOR
OLD WESTBURY INTERNATIONAL FUND
(A PORTFOLIO OF OLD WESTBURY FUNDS, INC.)
FEDERATED TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE: (800) 607-2200
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- --------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 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 International Fund portfolio (the "Portfolio"), is discussed
herein. The Portfolio is a fund whose investment objective is to seek long-term
growth of capital primarily through investment in a diversified portfolio of
marketable equity securities of issuers domiciled outside of the United States.
There can be no assurance that the Portfolio will achieve its objective. See
"Investment Objectives, Policies and Risks."
------------------------
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Portfolio. A Statement of
Additional Information, dated February 28, 1997, containing additional and more
complete information about the Portfolio has been filed with the Securities and
Exchange Commission and is incorporated in its entirety by reference into this
Prospectus. For a free copy, call or write the Portfolio at the telephone number
or address set forth above. The SEC maintains a web site (http://www.sec.gov)
that contains the Statement of Additional Information and other reports and
information regarding the Portfolio which have been filed electronically with
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the SEC.
------------------------
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.
THE PORTFOLIO MAY INVEST IN SECURITIES OF ISSUERS BASED IN EMERGING
MARKETS WHICH MAY PRESENT INCREASED RISK. INVESTORS SHOULD CAREFULLY CONSIDER
THESE RISKS PRIOR TO INVESTING. SEE "INVESTMENT OBJECTIVES, POLICIES AND RISKS:
FOREIGN SECURITIES" ON PAGE 7.
------------------------
THIS PROSPECTUS SHOULD BE RETAINED
BY INVESTORS FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
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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.
- --------------------------------------------------------------------------------
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, the Old
Westbury International Fund portfolio (the "Portfolio") and the Old
Westbury Growth Opportunity Fund. The Portfolio is described herein.
INVESTMENT OBJECTIVE: The Portfolio's investment objective is to
seek longterm growth of capital. The Portfolio seeks to achieve its
investment objective primarily through investment in a diversified
portfolio of marketable equity securities of issuers domiciled outside of
the United States. The Portfolio's assets will usually consist of issues
listed on recognized foreign securities exchanges. The Portfolio is,
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however, free to hold securities that are not so listed, and may invest up
to 15% of its net assets in such securities. 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 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 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, savings and loans or 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
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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
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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, at least on an annual basis. See "Dividends, Distributions and
Taxes."
RISK FACTORS: Investors should consider the risks associated with
investing in foreign equity securities including securities of issuers
based in emerging market countries. In general, less information is
publicly available about foreign companies than is available about
companies in the United States. Most foreign companies are not subject to
uniform audit and financial reporting standards, practices and
requirements comparable to those in the United States. For a more detailed
description of the risks associated with these securities, see "Investment
Objectives, Policies and Risks." The Portfolio may also use forward
foreign currency exchange contracts and purchase and sell options on
foreign currencies. (See "Investment Objectives, Policies and
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Risks--Foreign Securities" herein.)
SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................... 4.50%
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Advisory Fee (after waiver) (1).......................................... 0.78%
12b-1 Fee................................................................ 0.25%
Total Other Expenses..................................................... 0.47%
Total Fund Operating Expenses (2)........................................ 1.50%
</TABLE>
(1) The advisory fee has been reduced to reflect the 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 would have been 1.52% absent the voluntary
waiver of a portion of the advisory fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Portfolio will bear, either
directly or indirectly. The sales load is a one-time charge paid at the time of
purchase of the shares. An investor may be entitled to a reduction in such sales
loads. For more complete descriptions of the various costs and expenses, and
information concerning the reduction in sales loads, see "Purchase of Shares."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees. Under the Plan, the Portfolio may bear up to .10% in "asset based sales
charges" and, therefore, long-term shareholders may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. (see
"Distribution and Service Plan"). The Adviser, the Administrator and the
Distributor may, at their discretion, waive all or a portion of their fees. See
the table above for any fee waivers. Investors purchasing or redeeming shares
through Shareholder Servicing Agents and Dealers may be charged a fee in
connection with such service and, therefore, the net return to such investors
may be less than the net return by investing in the Portfolio directly. For a
further discussion of these fees, see "Management of the Fund" and "Distribution
and Service Plan" herein. The expense amounts contained in the example below may
increase if the fee waivers are discontinued.
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<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming a 5% annual
return, redemption at the end of each time
period and payment of the maximum sales
charge. The Fund charges no contingent
deferred sales charge...................... $60 $90 $123 $216
--------- --------- --------- ---------
</TABLE>
- --------------------------------------------------------------------------------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
OLD WESTBURY INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated December 12, 1996, on the Fund's
financial statements for the year ended October 31, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995 1994 1993(A)
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 9.80 $ 10.81 $ 10.14 $ 10.00
Income from investment operations:
Net investment income....................... 0.13 0.14 0.10 0.00
Net realized and unrealized gain (loss) on
investments................................. 1.37 (1.07) 0.57 0.14
--------- --------- --------- ---------
Total from investment operations............ 1.50 (0.93) 0.67 0.14
--------- --------- --------- ---------
Less distributions:
Distributions from net investment income.... (0.14) (0.08) -- --
--------- --------- --------- ---------
Net asset value, end of period................ $ 11.16 $ 9.80 $ 10.81 $ 10.14
--------- --------- --------- ---------
--------- --------- --------- ---------
Total return*................................. 15.5% (8.6%) 6.6% 1.4%
Ratios/Supplemental data:
Net assets, end of period (in 000's)........ $135,794 $104,194 $104,529 $11,957
Ratio of expenses to average net assets
before waiver of expenses................. 1.52% 1.60% 1.70% 2.50%**+
Ratio of expenses to average to net assets.. 1.50% 1.50% 1.50% 1.50%**
Ratio of net investment income (loss) to
average net assets........................ 1.19% 1.40% 0.90% (0.91%)**
Portfolio turnover.......................... 55% 32% 23% 0%
Average Commission rate paid................ 0.0080 0.0100 -- --
</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.
+ The calculation takes state expense limitations into consideration.
(a) For the period October 22, 1993 (commencement of operations) to October 31,
1993.
Note: Per share values calculated using average shares outstanding.
FURTHER INFORMATION ABOUT THE PORTFOLIO'S PERFORMANCE IS CONTAINED IN THE
PORTFOLIO'S ANNUAL REPORT, DATED OCTOBER 31, 1996, WHICH CAN BE OBTAINED FREE OF
CHARGE.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund is an open-end, diversified, management investment company
organized as a Maryland corporation on August 26, 1993. The Portfolio is a fund
whose investment objective is to seek long-term growth of capital. The Portfolio
seeks to achieve its objective primarily through investment in a diversified
portfolio of marketable equity securities of issuers domiciled outside of the
United States. The Portfolio's assets will usually consist of issues listed on
recognized foreign securities exchanges. The Portfolio is, however, free to hold
securities that are not so listed, and may invest up to 15% of its assets in
such securities. There is no assurance that the Portfolio will achieve its
investment objective. The investment objective of the Portfolio and its
investment restrictions, which are described herein and in the Statement of
Additional Information, are fundamental and may not be changed without
shareholder approval. The Portfolio's other investment policies indicated below
may be changed by the Board of Directors without shareholder approval.
The Portfolio will normally invest its assets primarily in common stocks.
Common stocks represent the residual ownership interest in the issuer and are
entitled to the income and increase in the value of the assets and business of
the entity after all of its obligations and preferred stocks are satisfied.
Common stocks generally have voting rights. The Portfolio may, in seeking its
objective of long-term capital growth, increase its holdings in equity
securities other than common stocks (including preferred stocks, warrants and
securities convertible into common or preferred stock) or in debt securities if
the Adviser believes that the potential capital appreciation of other equity
securities or debt securities will equal or exceed the potential appreciation of
common stocks. Investments in debt securities are consistent with the
Portfolio's investment objective because they could result in capital
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appreciation due to an increase in the value of such securities caused by
changes in interest rates and currency values. For the risks associated with
these investments see "Investment Objectives, Policies and Risks" in the
Statement of Additional Information. Debt securities that the Portfolio may
invest in include obligations of foreign governments and their political
subdivisions, and bonds, notes and other debt securities issued by companies
domiciled outside of the United States which are rated in the top four
categories published by Moody's Investors Service, Inc. ("Moody's") or by
Standard & Poor's Ratings Group ("Standard & Poor's" or "S&P") (Aaa, Aa, A or
Baa by Moody's or AAA, AA, A or BBB by Standard & Poor's) or, if unrated, are of
comparable quality as determined by the Adviser. Investments in obligations of
foreign governments or their political subdivisions are limited to direct
government obligations and government-guaranteed securities.
The Portfolio diversifies investments by issuer and does not concentrate
in any one industry. In addition, the Portfolio allocates its investments among
geographic regions and individual countries and, normally, will have 65% of its
total assets invested in at least three different foreign countries. The
Portfolio may invest
25% or more of its assets in the securities of a single country. See "Investment
Restrictions." Particular securities are selected for investment based upon
criteria with which the Adviser evaluates including: (i) the relative economic
prospects for various geographic regions and countries; (ii) the relative
economic prospects of particular industrial sectors within those regions and
countries; and (iii) the characteristics of particular issuers within those
industrial sectors.
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Investments are made primarily in those regions and countries where, in
the opinion of the Adviser, there are opportunities to achieve superior
investment returns relative to other investment opportunities available outside
the United States. The Portfolio does not, however, generally invest in debt or
equity securities of U.S. issuers. The Portfolio emphasizes those industrial
sectors of the world's market which, in the opinion of the Adviser, offer the
most attractive risk/reward relationship. 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.
Due to the changing nature of national economies and of market and
political conditions, the Portfolio may, temporarily for defensive purposes,
without limitation as to the amount of Portfolio assets which may be so
invested, hold United States and foreign short-term money market instruments
including government obligations, time deposits, bankers acceptances,
certificates of deposit, commercial paper, and short-term corporate debt
securities, which are rated in the top two categories published by Moody's or by
Standard & Poor's or, if unrated, are of comparable quality as determined by the
Adviser.
FOREIGN SECURITIES
Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of the Portfolio's 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
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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 Portfolio's 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. In general, less
information is publicly available with respect to foreign issuers than is
available with respect to U.S. companies. Most foreign companies are also not
subject to the uniform accounting and financial reporting requirements
applicable to issuers in the United
States. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the amounts
and types of foreign investments.
The Portfolio may invest up to 50% of its net assets in securities of
issuers in emerging markets countries, including Eastern Europe. A company in an
emerging market is one that: (i) has its principal securities trading market in
an emerging market country; (ii) is organized under the laws of, and with a
principal office in, an emerging market; or (iii) (alone or on a consolidated
basis) the issuer and all of its subsidiaries derive 50% or more of its total
revenue from either goods produced, sales made or services performed in emerging
markets. "Emerging markets" include any country which is generally considered to
be an emerging or developing country by the World Bank, the International
Finance Corporation, the United Nations or its authorities. These countries
generally include every country in the world except Australia, Austria, Belgium,
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Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Mexico, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United
Kingdom and United States. Investments in securities of issuers in emerging
markets countries may involve a high degree of risk and many may be considered
speculative. These investments carry all of the risks of investing in securities
of foreign issuers outlined in this section to a heightened degree. These
heightened risks include: (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the small current size of the markets for securities of emerging markets
issuers and the currently low or non-existent volume of trading, resulting in
lack of liquidity and in price volatility; (iii) certain national policies which
may restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) in the case of Eastern Europe, the absence of developed
legal structures governing private or foreign investment and private property
and the possibility that recent favorable economic and political developments
could be slowed or reversed by unanticipated events.
So long as the Communist Party continues to exercise a significant or, in
some countries, dominant role in Eastern European countries, investments in such
countries will involve risk of nationalization, expropriation and confiscatory
taxation. The Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, and in many cases
without adequate compensation, and there is no assurance that such expropriation
will not occur in the future. In the event of such expropriation, the Portfolio
could lose a substantial portion of any investments it has made in the affected
countries. Finally, even though certain eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial in
relation to the actual market values and may be adverse to Portfolio
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shareholders.
Foreign stock markets are generally not as developed or efficient as those
in the United States. In most foreign markets volume and liquidity are less than
in the United States and, at times, volatility of price can be greater than in
the United States. Fixed commission on foreign stock exchanges are generally
higher than the negotiated commissions on United States exchanges. There is
generally less government supervision and regulation of foreign stock exchanges,
brokers and companies than in the United States. The settlement periods for
foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity.
The dividends and interest payable on certain of the Portfolio's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount available for distribution to the Portfolio shareholders.
Investors should understand that the expense ratios of the Portfolio can be
expected to be higher than those of investment companies investing in domestic
securities due to the additional cost of custody of foreign securities. A more
detailed description of the costs of operation of the Fund is contained under
"Management of the Fund" and in the Statement of Additional Information.
Portfolio securities which are listed on foreign exchanges may be traded
on days that the Portfolio does not value its securities, such as Saturdays and
the customary United States business holidays on which the New York Stock
Exchange ("NYSE") is closed. As a result, the net asset value of the shares of
the Portfolio may be significantly affected on days when shareholders do not
have access to the Fund.
A change in the value of a foreign currency relative to the U.S. dollar
414578.1
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will result in a corresponding change in the U.S. dollar value of the
Portfolio's assets denominated in that currency. Accordingly, the value of the
assets of the Portfolio as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. In addition, the Portfolio may incur costs in connection with
conversions between various currencies. In order to protect against uncertainty
in the level of future foreign exchange rates, the Portfolio is authorized to
and may occasionally use forward foreign currency exchange contracts and
purchase and write (sell) options on foreign currencies. A forward foreign
currency exchange contract is an obligation to purchase or sell a specific
currency at a future date at a price set at the time of the contract and such
contracts are traded directly between currency traders (usually large commercial
banks with assets and deposits of over $1 billion) and their customers. A
foreign currency call option gives the purchaser the right to buy, and the
writer (seller) the obligation to sell, the underlying foreign currency at the
exercise price during the option period. A foreign currency put option gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying foreign currency at the exercise price during the option period.
If the Portfolio is the covered call writer, during the option period it
gives up most of the potential for capital appreciation above the exercise price
should the foreign currency rise in value. If the Portfolio is the secured put
writer, during the option period it retains the risk of loss should the foreign
currency decline in value. For the covered call writer, substantial appreciation
in the value of the foreign currency would result in the foreign currency being
"called away." For the secured put writer, substantial depreciation in the value
of the foreign currency would result in the foreign currency being "put to" the
writer. If the Portfolio is the writer and a covered call option expires
unexercised, it realizes a gain in the amount of the premium. If the Portfolio
414578.1
-8-
is the buyer and a covered call option expires unexercised, it realizes a loss
in the same amount. If the Portfolio as the covered call option writer has to
sell the foreign currency because of the exercise of a call option, it realizes
a gain or loss from the sale of the foreign currency, with the proceeds being
increased by the amount of the premium.
If the Portfolio is the writer and a secured put option expires
unexercised, the Portfolio realizes a gain in the amount of the premium. If the
Portfolio is the buyer and a secured put option expires unexercised, the
Portfolio realizes a loss in the same amount. If the Portfolio as the secured
put writer has to buy the underlying foreign currency because of the exercise of
a put option, it incurs an unrealized loss to the extent that the current market
value of the foreign currency is less than the exercise price of the put option,
minus the premium received. Options purchased and sold other than on an exchange
in private transactions also impose on the Portfolio the credit risk that the
counterparty will fail to honor its obligations and with the assets of the
Portfolio used to cover its options positions are deemed illiquid securities for
purpose of "Investment Restriction (i)." The Portfolio will not purchase options
if, as a result, the aggregate cost of all outstanding options exceeds 5% of the
Portfolio's total assets and the Portfolio will not write (sell) options
exceeding 25% of the Portfolio's total assets.
The Portfolio may use such forward contracts and options only under two
circumstances. First, when the Portfolio enters into a contract for the purchase
or sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security (a "transaction hedge"). Second, when
the Adviser believes that the currency of a particular foreign country may
suffer or enjoy a substantial movement against the U.S. dollar, it may enter
into a forward contract to sell or buy the amount of the foreign currency or
414578.1
-9-
options approximating the value of some or all of the Portfolio's portfolio
securities denominated in such foreign currency or in currencies believed by the
Adviser to bear a substantial correlation to the value of such currency (a
"cross hedge"). (See "Foreign Currency Exchange Transactions and Options" in the
Statement of Additional Information.)
The extent to which the Portfolio may enter into transactions involving
options and forward contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Portfolio intention to qualify as such. See "Dividends, Distributions and
Taxes."
PORTFOLIO TURNOVER
Purchases and sales are made for the Portfolio whenever necessary, in the
Adviser's opinion, to meet the Portfolio's objective. 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 reinvestment 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%) may increase the likelihood of
additional capital gains for the Portfolio, the Portfolio expects to satisfy the
30% income test. For the fiscal year ended October 31, 1996, the turnover of the
Portfolio was 55%.
414578.1
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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 (iii) below. However, although
not a fundamental policy of the Portfolio, as a matter of operating policy
414578.1
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in order to comply with certain state statutes, the Portfolio will not
pledge its assets in excess of an amount equal to 10% of net assets;
(ii) 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; or
(iii) 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:
(i) 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
(ii) purchase securities while borrowings exceed 5% of its total
assets.
If a percentage restriction (except (iii) above) is adhered to at the time
an investment is made, a later change in percentage resulting from changes in
414578.1
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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. John Trott is primarily responsible for the day-to-day investment
management of the Portfolio. Mr. Trott joined the Adviser in 1992, and was a
414578.1
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chief
investment officer for Klienwort Benson International Investment LTD. since
1988, where he managed investments for clients with similar objectives to those
of the Portfolio. The Portfolio's Annual Report contains information regarding
the Portfolio's performance and, will be provided without charge, upon request.
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 the associated banks, 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 740 clients with total assets under management
of about $12.4 billion, approximately $1.5 billion of which is represented by
investments in foreign 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,
414578.1
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California; London, England and Grand Cayman, Cayman Islands B.W.I. Bessemer has
not advised any registered investment company other than the Fund and, formerly,
Flag Investors International Trust. The Adviser's address is 630 Fifth Avenue,
New York, New York. As of February 4, 1997, Bessemer Trust Company, Woodbridge,
New Jersey, held 94.59% of the voting securities of the Portfolio under the
nominee name Naidot & Co. for its customers, 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.
The Adviser, may from time to time, make such 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
414578.1
-15-
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. For the fiscal year ended October 31, 1996, the
Adviser received 0.77% of the Portfolio's average net assets in advisory fees.
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, 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. 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
414578.1
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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 stockholders' services,
including charges and expenses of persons providing confirmations of
transactions in the Portfolio's shares, periodic statements to stockholders and
recordkeeping services and costs of stockholders' 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
414578.1
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pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"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." See "Management of Fund" 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 Investors 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;
414578.1
-18-
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:
414578.1
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<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FUND
<S> <C>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$75,000 per portfolio. The Administrator may choose voluntarily to waive a
portion of its fee or minimums from time to time in its sole discretion.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 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
414578.1
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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.
414578.1
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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
414578.1
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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. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
PURCHASE OF SHARES
414578.1
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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
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:
414578.1
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<TABLE>
<CAPTION>
DEALER
SALES LOAD DISCOUNT
SALES AS % OF NET AS % OF
AMOUNT OF PURCHASE LOAD AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
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 Securities Act of 1933. 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.
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 15 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 International Fund"
to:
Old Westbury International 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
414578.1
-2-
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
414578.1
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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
414578.1
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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.
414578.1
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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 Growth Opportunity 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 purchases.
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 with no sales load. In addition, clients of the
Adviser and its affiliates may purchase shares of the Portfolio with 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
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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 15 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.
414578.1
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By Mail. Redemption requests may be made by letter to the Shareholder
Servicing Agents or Broker-Dealers, specifying the name of the Portfolio, the
dollar amount or number of shares to be redeemed, and the account number. The
request must be signed in exactly the same way the account is registered (if
there is more than one owner of the shares, all must sign). In all cases, 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 International Fund
P.O. Box 119
414578.1
-8-
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
414578.1
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An investor may, without cost, exchange shares of the Portfolio of the
Fund into Old Westbury Growth Opportunity 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. The Portfolio does
not currently act as sponsor to such 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
414578.1
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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.
414578.1
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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
at least 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.
414578.1
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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. If more than 50% of the value
of the Portfolio's total assets at the close of the taxable year consists of
414578.1
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stock or securities in foreign corporations, the Portfolio may elect to pass
through to shareholders the right to take a foreign tax credit or deduction for
foreign taxes paid by the Portfolio.
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 Adviser may also include performance
information in such advertisements or information furnished to current or
prospective shareholders regarding the Adviser's investment performance since
John Trott, the Portfolio's portfolio manager, joined the Adviser in 1992. 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
414578.1
-14-
having the same investment objectives. The performance of the Portfolio may also
be compared to the Europe, Australia and Far East Index, an unmanaged standard
foreign securities index monitored by Capital International, S.A. and to the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average, both of
which are recognized indices of domestic stocks' performance.
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's average annual total returns (including
sales load of 4.5%) for the period October 22, 1993 (commencement of
operations) to October 31, 1996 and the fiscal year ended October 31, 1996 were
414578.1
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2.9% and 10.3%, respectively.
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 it is registered with the Securities and Exchange Commission
as a diversified, open-end, management investment company.
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 Act, (b)
414578.1
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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 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 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
414578.1
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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. Any assets and liabilities initially expressed in foreign
currency values will be translated into U.S. dollar values at the prevailing
market rates of such currencies against U.S. dollars at the time of valuation.
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
414578.1
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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. Morgan
Guaranty Trust Company of New York has been retained to act as sub-custodian of
the Fund's assets held outside of the United States. Fundamental Shareholder
Services, Inc., whose principal address is 90 Washington Street, 19th Floor, New
York, New York 10006 is the Portfolio's transfer and dividend disbursing agent.
TABLE OF CONTENTS
414578.1
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................. 2
Summary of Fund Expenses............ 4
Financial Highlights................ 5
Investment Objectives, Policies and
Risks............................. 6
Investment Restrictions............. 11
Management of the Fund.............. 12
The Administrator................... 15
Distribution and Service Plan....... 16
Purchase of Shares.................. 19
Redemption of Shares................ 23
Exchange of Shares.................. 25
Retirement Plans.................... 25
Dividends, Distributions and
Taxes............................. 26
Calculation of Investment
Performance....................... 27
General Information................. 28
Net Asset Value..................... 29
Custodian, Transfer Agent and
Dividend Disbursing Agent......... 30
</TABLE>
OLD WESTBURY
FUNDS, INC.
OLD WESTBURY
INTERNATIONAL
FUND
PROSPECTUS
FEBRUARY 28, 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 15222-3779
(412) 288-1900
Distributor:
Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(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.
- -------------------------------------------------------------------------------
DISTRIBUTOR AND SHAREHOLDER
SERVICING AGENT:
Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
ADMINISTRATOR:
414578.1
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Federated Administrative Services
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 680414109
G02009-03 (2/97) (not part of Prospectus)
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
414578.1
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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
414578.1
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DESCRIPTION OF CORPORATE DEBT RATINGS
24
FINANCIAL STATEMENTS
25
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
414578.1
-5-
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
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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,
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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
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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.
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
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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
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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
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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
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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
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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
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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
414578.1
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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
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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
414578.1
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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
414578.1
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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
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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
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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
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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;
414578.1
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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
414578.1
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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);
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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.
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Vice President and Assistant Treasurer of other funds distributed by
Federated Securities Corp.
C. GRANT ANDERSON (age 56) - Secretary.
Corporate Counsel, Federated Investors.
COMPENSATION TABLE
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
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.
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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.
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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
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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
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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
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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. (``ignature''), 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
414578.1
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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
414578.1
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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.
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
414578.1
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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
414578.1
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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.
414578.1
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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
414578.1
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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
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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,
414578.1
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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
414578.1
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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
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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.
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
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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
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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
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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.
414578.1
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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
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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.
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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
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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
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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
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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."
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Prospective tax-exempt investors are urged to consult their own tax
advisers prior to investing in a Portfolio.
DESCRIPTION OF CORPORATE DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt 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
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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.
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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.
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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
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OLD WESTBURY FUNDS, INC.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) Financial Statements.
The Financial Statement 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 will be filed by amendment.
(B) Exhibits.
***(1) Form of Articles of Incorporation of the Registrant.
***(2) By-laws of the Registrant.
(3) Not applicable.
(4) Not applicable.
***(5) Advisory Contract between the Registrant, on behalf of the
International Fund, and Bessemer Trust Company, N.A.
****(5.1) Form of Advisory Contract between the Registrant, on behalf
of the Growth Opportunity Fund, and Bessemer Trust Company,
N.A.
+(6) See Distribution Agreement filed as Exhibit 15.2 herein.
(7) Not applicable.
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*(8) Custody Agreement between the Registrant and Bessemer Trust
Company (New Jersey)
+(9) Administrative Services Agreement between the Registrant
and Federated Administrative Services for the Fund, on
behalf of the Portfolios of the Registrant.
*(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.
+(11) Consent of Independent Auditors.
(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.
(14) Not applicable.
****(15.1) Amended and Restated Distribution and Service Plan
adopted by the Registrant, on behalf of the International Fund,
Pursuant to Rule 12b-1 under the Investment Company Act of
1940.
****(15.1.1)Distribution and Service Plan adopted by the Registrant,
on behalf of the Growth Opportunity Fund, Pursuant to Rule 12b-
1 under the Investment Company Act of 1940.
+(15.2) Distribution Agreement between the Registrant, on behalf
of the Portfolios, and Edgewood Services, Inc.
+(15.2.1) Exhibit B of the Distribution Agreement.
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*(15.3) Shareholder Servicing Agreement between the Registrant, on
behalf of the International Fund, and Bessemer Trust
Company, N.A.
****(15.3.1)Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Bessemer Trust
Company, N.A.
+(15.4) Amended and Restated Shareholder Servicing Agreement
between the Registrant, on behalf of the International Fund,
and Edgewood Services, Inc.
****(15.4.1)Form of Shareholder Servicing Agreement between the
Registrant, on behalf of the Growth Fund, and Edgewood
Services, Inc.
**(16) Schedules of Computation of Performance Quotations.
+ (18) Powers of Attorney.
+ (27) Financial Data Schedule.
* Incorporated herein by reference from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on October 5, 1993.
** Incorporated herein by reference from Post-Effective Amendment No. 1
to this Registration Statement as filed with the SEC on March 1, 1994.
*** Incorporated herein by reference from Post-Effective Amendment No. 3
to this Registration Statement as filed with the SEC on February 28,
1996.
**** Incorporated herein by reference from the Post-Effective Amendment No.
5 to this Registration Statement as filed with the SEC on November 26,
1996.
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+ Incorporated herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
TITLE OF CLASS AS OF FEBRUARY 4, 1997
Common Stock
(par value $0.001)
Old Westbury International Fund 56
Old Westbury Growth Opportunity Fund 0
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:
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"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
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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
414578.1
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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
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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.
POSITION WITH
NAME INVESTMENT ADVISOR OTHER BUSINESS CONNECTIONS
Stuart S. Janney, III Chairman of Managing Director & Head of
the Board Asset Management, Alex, Brown
& Sons, Inc.
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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
414578.1
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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
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: 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, Marketvest Funds, and Marketvest Funds, Inc.
414578.1
-64-
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Douglas L. Hein Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Newton Heston, III 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
414578.1
-65-
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.
414578.1
-66-
(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) The Registrant hereby undertakes to file a post-effective
amendment on behalf of Old Westbury Growth Opportunity Fund,
using financial statements for Old Westbury Growth
Opportunity Fund, which need not be certified, within four
to six months from the date of Post-Effective Amendment No.
6.
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
414578.1
-67-
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 February, 1997.
OLD WESTBURY FUNDS, INC.
By: /s/ C. Grant Anderson
C. Grant Anderson, Secretary
Attorney in Fact for Edward C. Gonzales
February 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 February 26, 1997
(Chief Executive Officer and
Principal Financial and
Accounting Officer)
414578.1
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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 a Power of Attorney
filed herewith.
414578.1
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 7 to Registration
Statement No. 33-66528 of Old Westbury Funds, Inc. of our report dated December
12, 1996, incorporated by reference in the Statement of Additional Information,
which is a part of such Registration Statement, and to the reference to us under
the headings `Financial Highlights'' in the Prospectus, which is a part of such
Registration Statement, and `Counsel and Independent Auditors'' in the
Statement of Additional Information.
By: DELOITTE & TOUCHE
Deloitte & Touche
New York, New York
February 24, 1997
Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
OLD WESTBURY FUNDS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 2nd
day of December, 1996, between Old Westbury Funds, Inc., a Maryland
Corporation (herein called the `Fund''), and Federated
Administrative Services, a Delaware business trust (herein called
`FAS'').
WHEREAS, the Fund is a Maryland Corporation consisting of one or
more portfolios, which operates as an open-end management
investment company and will so register under the Investment
Company Act of 1940, as amended (the `1940 Act''); and
WHEREAS, the Fund desires to retain FAS as its Administrator to
provide it with Administrative Services (as herein defined), and
FAS is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby appoints FAS as
Administrator of the Fund on the terms and conditions set forth in
this Agreement; and FAS hereby accepts such appointment and agrees
to perform the services and duties set forth in Section 2 of this
Agreement in consideration of the compensation provided for in
Section 5 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Fund's Board of Directors FAS, or
its delegatee, will provide facilities, equipment, and personnel
to carry out the following administrative services for operation
of the business and affairs of the Fund and each of its
portfolios:
(a) in conjunction with counsel for the Fund, prepare, file, and
maintain the Fund's governing documents and any amendments
thereto, including the Articles of Incorporation (which has
already been prepared and filed), the By-laws and minutes of
meetings of Directors and shareholders;
(b) in conjunction with counsel for the Fund, prepare and file
with the Securities and Exchange Commission and the
appropriate state securities authorities the registration
statements for the Fund and the Fund's shares and all
amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other
documents all as may be necessary to enable the Fund to make
a continuous offering of its shares;
(c) in conjunction with counsel for the Fund, prepare, negotiate,
and administer contracts on behalf of the Fund with, and
coordinate the activities of, among others, the Fund's
investment adviser, distributor, custodian, portfolio
accountant, transfer agent and independent accountants;
(d) supervise the Fund's portfolio accountant in the maintenance
of the Fund's general ledger and in the preparation of the
Fund's financial statements, including periodic (i) review
and evaluation of expense accruals; (ii) review, evaluation
and authorization of expense payments; (iii) projection of
future expenses; and (iv) periodic review of the
determination of the net asset value of the Fund and of the
declaration and payment of dividends and other distributions
to shareholders;
(e) calculate performance data of the Fund for dissemination to
information services covering the investment company
industry;
(f) prepare and file the Fund's tax returns;
(g) examine and review the operations of the Fund's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) perform internal audit examinations in accordance with a
charter to be adopted by FAS and the Fund;
(j) assist with the design, development, and operation of the
Fund;
(k) provide individuals reasonably acceptable to the Fund's Board
of Directors for nomination, appointment, or election as
officers of the Fund, who will be responsible for the
management of certain of the Fund's affairs as determined by
the Fund's Board of Directors;
(l) consult with the Fund and its Board of Directors on matters
concerning the Fund and its affairs; and
(m) make periodic reports to the Fund's Board of Directors in the
performance of its obligations under this Agreement.
The foregoing, along with any additional services that FAS shall
agree in writing to perform for the Fund hereunder, shall
hereafter be referred to as "Administrative Services."
Administrative Services shall not include any duties, functions,
or services to be performed for the Fund by the Fund's investment
adviser, distributor, custodian, portfolio accountant, transfer
agent or independent accountants pursuant to their respective
agreements with the Fund.
3. Records. FAS shall create and maintain all necessary books and
records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by the
1940 Act and the rules thereunder, as the same may be amended from
time to time, pertaining to the Administrative Services performed
by it and not otherwise created and maintained by another party
pursuant to contract with the Fund. Where applicable, such
records shall be maintained by FAS for the periods and in the
places required by Rule 31a-2 under the 1940 Act. The books and
records pertaining to the Fund which are in the possession of FAS
shall be the property of the Fund. The Fund, or the Fund's
authorized representatives, shall have access to such books and
records at all times during FAS's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and
records shall be provided promptly by FAS to the Fund or the
Fund's authorized representatives.
4. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be
necessary or convenient to provide the Administrative Services to
the Fund, including the compensation of FAS employees who serve as
Directors or officers of the Fund. The Fund shall be responsible
for all other expenses incurred by FAS on behalf of the Fund,
including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent accountants,
insurance premiums, fees payable to Directors who are not FAS
employees, and trade association dues.
5. Compensation. For the Administrative Services provided, the Fund
hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative
fee at an annual rate per portfolio of the Fund's shares, payable
daily, as specified below:
Max. Admin. Average Daily Net Assets
Fee of the Fund
.15% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
However, in no event shall the administrative fee received during
any year of this Agreement be less than, or be paid at a rate less
than would aggregate, $75,000, per portfolio.
6. Responsibility of Administrator.
(a) FAS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties
under this Agreement. FAS shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Any person, even though also an officer, trustee, partner,
employee or agent of FAS, who may be or become an officer,
Director, employee or agent of the Fund, shall be deemed,
when rendering services to the Fund or acting on any business
of the Fund (other than services or business in connection
with the duties of FAS hereunder) to be rendering such
services to or acting solely for the Fund and not as an
officer, trustee, partner, employee or agent or one under the
control or direction of FAS even though paid by FAS.
(b) FAS shall be kept indemnified by the Fund and be without
liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the
above standards. In order that the indemnification
provisions contained in this Section 6 shall apply, however,
it is understood that if in any case the Fund may be asked to
indemnify or save FAS harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that FAS
will use all reasonable care to identify and notify the Fund
promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the
option to defend FAS against any claim which may be the
subject of this indemnification. In the event that the Fund
so elects, it will so notify FAS and thereupon the Fund shall
take over complete defense of the claim, and FAS shall in
such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Section.
FAS shall in no case confess any claim or make any compromise
in any case in which the Fund will be asked to indemnify FAS
except with the Fund's written consent.
7. Duration and Termination.
(a) The term of this Agreement shall commence on the date hereof,
and extend until August 31, 1998 and thereafter for
successive twelve-month periods, provided that such
continuation is specifically approved at least annually by
the Board of Directors and by a majority of those Directors
who are neither parties to this Agreement nor, other than by
their service as directors of the Fund, interested persons,
as defined in the 1940 Act, if any such person is party to
this Agreement.
(b) During any term of this Agreement, each time the Fund adds a
New Portfolio, an additional term shall commence on the first
date upon which the New Portfolio has sufficient average
daily net assets such that FAS will begin to earn a sum not
less than its minimum ("annualized") administrative fee in
connection with the New Portfolio pursuant to Section 5 of
this Agreement ("Additional Term"). Such Additional Term
shall extend to the later to occur of (i) the second
anniversary of the commencement of the Additional Term, or
(ii) the expiration of the Initial Term.
(c) During any term of this Agreement, each time the Fund adds a
class of shares to any portfolio, an additional term shall
commence on the later to occur of (i) the first date upon
which the relevant portfolio has sufficient average daily net
assets such that FAS will begin to earn a sum not less than
its minimum ("annualized") administrative fee pursuant to
Section 5 of this Agreement, or (ii) the effective date of
the registration statement or post-effective amendment
registering the new class of shares ("Class Term"). Such
Class Term shall extend to the third anniversary of the
commencement of the Class Term.
(d) This Agreement may be terminated at any time after August 31,
1998, without penalty, by a vote of a majority of the
outstanding voting securities as defined in the 1940 Act, or
by a vote of a majority of the entire Board of Directors, on
six months' written notice to FAS, or by FAS upon six months'
written notice to the Fund.
8. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which an enforcement of the
change, waiver, discharge or termination is sought.
9. Limitations of Liability of Directors and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized
by the Directors of FAS and signed by an authorized officer of
FAS, acting as such, and neither such authorization by such
Directors nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, and the obligations of
this Agreement are not binding upon any of the Directors or
shareholders of FAS, but bind only the trust property of FAS as
provided in the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly
given if delivered to the Fund, to its investment adviser and to
FAS at the following addresses: Old Westbury Funds, Inc. (Fund)
630 Fifth Avenue, New York, NY 10111, Attention: Robert Elliot;
Bessemer Trust Company, N.A., (Adviser), 630 Fifth Avenue, New
York, NY 10111, Attention: Robert Elliot; and if delivered to FAS
at Federated Investors Tower, Pittsburgh, PA 15222-3779,
Attention: President.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby. Subject to the provisions of Section 6, hereof, this
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be
governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the 1940
Act or any rule or regulation promulgated by the Securities and
Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed
and delivered, shall be an original, and all such counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and
year first above written.
FEDERATED ADMINISTRATIVE SERVICES
Attest: /s/ Thomas J. Ward By: /s/ S. Elliott Cohan
Secretary Senior Vice President
OLD WESTBURY FUNDS, INC.
Attest: /s/ C. Grant Anderson By: /s/ EdwardC. Gonzales
Secretary President
Exhibit 15.2 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Old Westbury Funds, Inc.
DISTRIBUTION AGREEMENT
AGREEMENT made this 2nd day of December, 1996, by and between Old
Westbury Funds, Inc. (the "Fund "), a Maryland corporation, and EDGEWOOD
SERVICES, INC. (`Edgewood''), a New York corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints Edgewood as its agent to sell and distribute
shares of the Fund which may be offered in one or more series (the
"Portfolios") consisting of one or more classes (the "Classes") of
shares (the "Shares"), as described and set forth on one or more
exhibits to this Agreement, at the current offering price thereof as
described and set forth in the current Prospectuses of the Fund.
Edgewood hereby accepts such appointment and agrees to provide such
other services for the Fund, if any, and accept such compensation from
the Fund, if any, as set forth in the applicable exhibits to this
Agreement. This Agreement is entered into pursuant to the Distribution
and Service Plan (the ``Plan') adopted by the Fund on behalf of each of
its series in accordance with Rule 12b-1 under the Investment Company
Act of 1940, as amended (the ``1940 Act').
2. The sale of any Shares may be suspended whenever in the judgment of the
Board of Directors of the Fund it is in the Fund's best interest to do
so.
3. Neither Edgewood nor any other person is authorized by the Fund to give
any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses,
or Statements of Additional Information ("SAIs") filed with the
Securities and Exchange Commission, as the same may be amended from time
to time, or in any supplemental information to said Prospectuses or SAIs
approved in writing by the Fund. Edgewood agrees that any other
information or representations other than those specified above which it
or any dealer or other person who purchases Shares through Edgewood may
make in connection with the offer or sale of Shares, shall be made
entirely without liability on the part of the Fund. No person or dealer,
other than Edgewood, is authorized to act as agent for the Fund for any
purpose. Edgewood agrees that in offering or selling Shares as agent of
the Fund, it will, in all respects, duly conform to all applicable state
and federal laws and the rules and regulations of the National
Association of Securities Dealers, Inc., including its Rules of Fair
Practice. Edgewood will submit to the Fund copies of all sales
literature before using the same and will not use such sales literature
if disapproved by the Fund.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term
of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Directors of the Fund including a
majority of the members of the Board of Directors of the Fund who are
not interested persons of the Fund and have no direct or indirect
financial interest in the operation of any Distribution and Service Plan
relating to the Fund or in any related documents to such Plan
("Disinterested Directors ") cast in person at a meeting called for that
purpose. If a Class is added after the first annual approval by the
Directors as described above, this Agreement will be effective as to
that Class upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by the Directors
and thereafter for successive periods of one year, subject to approval
as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a particular
Fund or Class by Edgewood on sixty (60) days' written notice to the
Fund.
6. This Agreement may not be assigned by Edgewood and shall automatically
terminate in the event of an assignment by Edgewood as defined in the
1940 Act, provided, however, that Edgewood may employ such other person,
persons, corporation or corporations at its cost and expense as it shall
determine in order to assist it in carrying out its duties under this
Agreement.
7. Edgewood shall not be liable to the Fund for anything done or omitted by
it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed by this
Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by
the Directors of the Fund including a majority of the Disinterested
Directors of the Fund cast in person at a meeting called for that
purpose.
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Fund agrees to
indemnify and hold harmless Edgewood and each person, if any, who
controls Edgewood within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Act of
1934, as amended, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and
all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectuses or SAIs
(as from time to time amended and supplemented) or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Fund about
Edgewood by or on behalf of Edgewood expressly for use in the
Registration Statement, any Prospectuses and SAIs or any amendment
or supplement thereof.
If any action is brought against Edgewood or any controlling person
thereof with respect to which indemnity may be sought against the
Fund pursuant to the foregoing paragraph, Edgewood shall promptly
notify the Fund in writing of the institution of such action and
the Fund shall assume the defense of such action, including the
employment of counsel selected by the Fund and payment of expenses.
Edgewood or any such controlling person thereof shall have the
right to employ separate counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of Edgewood or
such controlling person unless the employment of such counsel shall
have been authorized in writing by the Fund in connection with the
defense of such action or the Fund shall not have employed counsel
to have charge of the defense of such action, in any of which
events such fees and expenses shall be borne by the Fund. Anything
in this paragraph to the contrary notwithstanding, the Fund shall
not be liable for any settlement of any such claim of action
effected without its written consent. The Fund agrees promptly to
notify Edgewood of the commencement of any litigation or
proceedings against the Fund or any of its officers or Directors or
controlling persons in connection with the issue and sale of Shares
or in connection with the Registration Statement, Prospectuses, or
SAIs.
(b) Edgewood agrees to indemnify and hold harmless the Fund, each of
its Directors, each of its officers who have signed the
Registration Statement and each other person, if any, who controls
the Fund within the meaning of Section 15 of the Securities Act of
1933, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or
any claim whatsoever) arising out of statements or omissions, if
any, made in the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Fund about Edgewood
by or on behalf of Edgewood expressly for use in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement
thereof. In case any action shall be brought against the Fund or
any other person so indemnified based on the Registration Statement
or any Prospectus, SAI, or any amendment or supplement thereof, and
with respect to which indemnity may be sought against Edgewood,
Edgewood shall have the rights and duties given to the Fund, and
the Fund and each other person so indemnified shall have the rights
and duties given to Edgewood by the provisions of subsection (a)
above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Fund or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the duties of
such person or by reason of the reckless disregard by such person
of the obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Directors, officers, Edgewood and controlling persons
of the Fund by the Directors pursuant to this Agreement, the Fund
is aware of the position of the Securities and Exchange Commission
as set forth in the Investment Company Act Release No. IC-11330.
Therefore, the Fund undertakes that in addition to complying with
the applicable provisions of this Agreement, in the absence of a
final decision on the merits by a court or other body before which
the proceeding was brought, that an indemnification payment will
not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party Disinterested Directors, or
(ii) by independent legal counsel in a written opinion that the
indemnitee was not liable for an act of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties. The Fund
further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it
is ultimately determined that indemnification is appropriate)
against an officer, Directors, Edgewood or controlling person of
the Fund will not be made absent the fulfillment of at least one of
the following conditions: (i) the indemnitee provides security for
his undertaking; (ii) the Fund is insured against losses arising by
reason of any lawful advances; or (iii) a majority of a quorum of
non-party Disinterested Directors or independent legal counsel in a
written opinion makes a factual determination that there is reason
to believe the indemnitee will be entitled to indemnification.
12. If at any time the Shares of any Fund are offered in two or more
Classes, Edgewood agrees to adopt compliance standards as to when a
class of shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
EXHIBIT A
DISTRIBUTION AGREEMENT
OLD WESTBURY FUNDS, INC.
OLD WESTBURY INTERNATIONAL FUND (THE ``PORTFOLIO'')
The following provisions are hereby incorporated and made part of the
Distribution Agreement dated the 2nd day of December, 1996, between Old Westbury
Funds, Inc., on behalf of the Portfolio, and Edgewood Services, Inc. (`ESI''):
1. The Portfolio hereby appoints ESI, as its agent, to offer, and to
solicit offers to subscribe to, the unsold balance of shares of the series of
common stock represented by the Portfolio as shall then be effectively
registered under the 1933 Act (`Shares''). All subscriptions for Shares
obtained by ESI shall be directed to for acceptance and shall not be binding on
the Portfolio until accepted by the Portfolio. ESI shall have no authority to
made binding subscriptions on the Portfolio's behalf. The Portfolio reserves
the right to sell Shares directly to investors through subscriptions received by
the Portfolio at its principal office. The right given to ESI under this
agreement shall not apply to any Shares issued in connection with (a) the merger
or consolidation of any other investment company with the Portfolio, (b) the
Portfolio's acquisition by purchase or otherwise of all or substantially all of
the assets or stock of any other investment company, or (c) the reinvestment in
Shares by Portfolio stockholders of dividends or other distributions or any
other offering by the Fund of securities to its stockholders.
2. The Fund will reimburse ESI in an amount not to exceed .10% per annum
of the Portfolio's average daily net assets for ESI's cost incurred:
(i) to compensate broker-dealers with whom ESI has contracts for
providing assistance in distribution Shares ; and
(ii) to pay the cost of the preparation and printing of brochures and
other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries
and/or commissions of ESI and other sales personnel, and of printing
and distribution the Portfolio's prospectus to prospective investors
in connection with the distribution of its shares.
3. ESI may sell Shares to or through qualified brokers, dealers and
financial institutions under selling and servicing agreements provided that no
dealer, financial institution or other person shall be appointed or authorized
to act as the Portfolio's agent without its written consent. The Portfolio
acknowledges that, pursuant to a Shareholder Servicing Agreement with the
Portfolio, ESI may arrange for broker-dealers (each a `Broker-Dealer'') whose
customers or clients are Portfolio shareholders to enter into agreements with
ESI as the Distributor pursuant to which the Broker-Dealers will be compensated
directly by the Distributor for the performance of shareholder servicing and
related administrative functions not performed by the Advisor or its Shareholder
Servicing Agents, the Distributor, the Administrator or the Transfer Agent.
Such payments will be made only pursuant to written agreements approved in form
and substance by the Board of Directors to be entered into by the Distributor
and the Broker-Dealers. It is recognized that the Portfolio shall have no
obligation or liability to ESI, or any Broker-Dealer for any such payments under
the agreements with Broker-Dealers. The Portfolio's obligation is solely to
make payments to the Advisor under the Advisory Agreement and the Shareholder
Servicing Agreement and to the Distributor under the Distribution Agreement and
Shareholder Servicing Agreement.
4. The Portfolio and ESI will cooperate with each other in taking such
action as may be necessary to qualify Shares for sale under the securities laws
of such states as the Portfolio may designate, provided, that ESI shall not be
required to register as a broker-dealer or file a consent to service of process
in any such state where it is not now so registered. Pursuant to an Advisory
Agreement dated October 12, 1993 between the Portfolio and the Advisor, the
Portfolio will pay all fees and expenses of registering shares of all series of
Common Stock under the 1933 Act and of qualification of shares of all series of
Common Stock, and to the extent necessary, qualification under applicable state
securities laws. ESI will pay all expenses relating to its broker-dealer
qualification.
5. ESI will prepare reports to the Board of Directors of the Portfolio on
a quarterly basis showing amounts expended hereunder, including amounts paid to
Broker-Dealers and the purpose of such payments.
In consideration of the mutual convenants set forth in the Distribution
Agreement dated December 2, 1996 between Old Westbury Funds, Inc. and Edgewood
Services, Inc., Old Westbury Funds, Inc. executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 2nd day of December, 1996.
ATTEST: OLD WESTBURY FUNDS, INC.
/s/ C. Grant Anderson By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
Secretary Senior Vice President
(SEAL)
Exhibit 15.2.1 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
EXHIBIT B
DISTRIBUTION AGREEMENT
OLD WESTBURY FUNDS, INC.
OLD WESTBURY GROWTH OPPORTUNITY FUND (THE ``PORTFOLIO'')
The following provisions are hereby incorporated and made part of the
Distribution Agreement dated the 2nd day of December, 1996, between Old
Westbury Funds, Inc., on behalf of the Portfolio, and Edgewood Services,
Inc. (`ESI''):
1. The Portfolio hereby appoints ESI, as its agent, to offer, and to
solicit offers to subscribe to, the unsold balance of shares of the series
of common stock represented by the Portfolio as shall then be effectively
registered under the 1933 Act (`Shares''). All subscriptions for Shares
obtained by ESI shall be directed to for acceptance and shall not be
binding on the Portfolio until accepted by the Portfolio. ESI shall have
no authority to made binding subscriptions on the Portfolio's behalf. The
Portfolio reserves the right to sell Shares directly to investors through
subscriptions received by the Portfolio at its principal office. The right
given to ESI under this agreement shall not apply to any Shares issued in
connection with (a) the merger or consolidation of any other investment
company with the Portfolio, (b) the Portfolio's acquisition by purchase or
otherwise of all or substantially all of the assets or stock of any other
investment company, or (c) the reinvestment in Shares by Portfolio
stockholders of dividends or other distributions or any other offering by
the Fund of securities to its stockholders.
2. The Fund will reimburse ESI in an amount not to exceed .10% per
annum of the Portfolio's average daily net assets for ESI's cost incurred:
(i) to compensate broker-dealers with whom ESI has contracts for
providing assistance in distribution Shares ; and
(ii) to pay the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of ESI and other sales
personnel, and of printing and distribution the Portfolio's
prospectus to prospective investors in connection with the
distribution of its shares.
3. ESI may sell Shares to or through qualified brokers, dealers and
financial institutions under selling and servicing agreements provided that
no dealer, financial institution or other person shall be appointed or
authorized to act as the Portfolio's agent without its written consent.
The Portfolio acknowledges that, pursuant to a Shareholder Servicing
Agreement with the Portfolio, ESI may arrange for broker-dealers (each a
`Broker-Dealer'') whose customers or clients are Portfolio shareholders to
enter into agreements with ESI as the Distributor pursuant to which the
Broker-Dealers will be compensated directly by the Distributor for the
performance of shareholder servicing and related administrative functions
not performed by the Advisor or its Shareholder Servicing Agents, the
Distributor, the Administrator or the Transfer Agent. Such payments will
be made only pursuant to written agreements approved in form and substance
by the Board of Directors to be entered into by the Distributor and the
Broker-Dealers. It is recognized that the Portfolio shall have no
obligation or liability to ESI, or any Broker-Dealer for any such payments
under the agreements with Broker-Dealers. The Portfolio's obligation is
solely to make payments to the Advisor under the Advisory Agreement and the
Shareholder Servicing Agreement and to the Distributor under the
Distribution Agreement and Shareholder Servicing Agreement.
4. The Portfolio and ESI will cooperate with each other in taking
such action as may be necessary to qualify Shares for sale under the
securities laws of such states as the Portfolio may designate, provided,
that ESI shall not be required to register as a broker-dealer or file a
consent to service of process in any such state where it is not now so
registered. Pursuant to an Advisory Agreement dated October 12, 1993
between the Portfolio and the Advisor, the Portfolio will pay all fees and
expenses of registering shares of all series of Common Stock under the 1933
Act and of qualification of shares of all series of Common Stock, and to
the extent necessary, qualification under applicable state securities laws.
ESI will pay all expenses relating to its broker-dealer qualification.
5. ESI will prepare reports to the Board of Directors of the
Portfolio on a quarterly basis showing amounts expended hereunder,
including amounts paid to Broker-Dealers and the purpose of such payments.
In consideration of the mutual convenants set forth in the
Distribution Agreement dated December 2, 1996 between Old Westbury Funds,
Inc. and Edgewood Services, Inc., Old Westbury Funds, Inc. executes and
delivers this Exhibit on behalf of the Funds, and with respect to the
separate Classes of Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 2nd day of December, 1996.
ATTEST: OLD WESTBURY FUNDS, INC.
/s/ C. Grant Anderson By:/s/ Edward C. Gonzales
Secretary President
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ Newton Heston
Secretary Vice President
Exhibit 15.4 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
AMENDED AND RESTATED
SHAREHOLDER SERVICING AGREEMENT
OLD WESTBURY FUNDS, INC. (the `Fund'')
Old Westbury International Fund (the `Portfolio'')
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Edgewood Services, Inc.
Federated Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and Service
Plan adopted by us in accordance with Rule 12b-1 (the `Plan'') under the
Investment Company Act of 1940, as amended (the `Act''), to provide the
services listed below:
(a) You will perform, or arrange for others including broker-dealers
with which you have written agreements and whose clients are Fund shareholders
(each a `Broker-Dealer'') to perform, all shareholder servicing functions not
performed by us, by the Advisor or its Shareholder Servicing Agents, or by our
Transfer Agent.
(b) In consideration of the foregoing we will pay you up to one
quarter of one percent (0.25%) per annum of the Portfolio's average daily net
assets attributable to the clients of the Broker-Dealers (the `Shareholder
Servicing Fee') to permit you to make payments to the Broker-Dealers for
providing shareholder services. Your payment will be accrued by us daily, and
will be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request us in
writing. You may waive your right to any payment to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
(c) You will make payments from time to time from your own resources
and past profits for the following purposes:
(i) to defray the costs of, and to compensate Broker-Dealers for
performing shareholder servicing and related administrative functions on behalf
of the Portfolio;
(ii) to compensate Broker-Dealers for providing assistance in
distributing Portfolio's shares;
(iii) to pay the costs of printing and distributing the
Portfolio's prospectus to prospective investors; and
(iv) to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including salaries and/or
commissions of sales personnel in connection with the distribution of its
Portfolio's shares.
You will in your sole discretion determine the amount of any payments made by
you pursuant to this Agreement, and you may from time to time in your sole
discretion increase or decrease the amount of such payments; provided, however,
that no such payment will increase the amount which we are required to pay to
you under either this Agreement or the distribution agreement between you and
us, or otherwise.
2. Except as otherwise provided herein, you will be responsible for
the payment of all expenses incurred by you in rendering the foregoing services,
except that we will pay (i) telecommunications expenses, including the cost of
dedicated lines and CRT terminals, incurred by you, the Advisor, the Shareholder
Servicing Agents and Broker-Dealers in rendering such services, and (ii) the
cost of typesetting, printing and delivering our prospectus to existing
shareholders of the Portfolio and of preparing and printing subscription
application forms for shareholder accounts. Our obligation to be responsible
for the expenses enumerated in this paragraph 2 is limited to an amount equal to
.05% per annum of the Portfolio's average daily net assets.
3. (a) The written agreements between you and Broker-Dealers will
provide that such Broker-Dealers receive a fee, which may be paid periodically,
on an annual basis, equal to up to 0.25% of the average daily net assets of the
Portfolio represented by shares owned during the period for which payment is
being made by investors with whom such Broker-Dealer maintains a servicing
relationship, and will, as agents for their customers, perform the following,
among other things: answer customer inquiries regarding account status and
history, the manner in which purchases and redemptions of shares of the Fund may
be effected and certain other matters pertaining to the Fund; assist
shareholders in designating and changing dividend options, account designations
and addressees; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the writing of funds; transmit and receive
funds in connection with customer orders to purchase or redeem shares; verify
and guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; furnish (either
separately or on an integrated basis with other reports sent to a shareholder by
the Fund) monthly and year-end statements and confirmation of purchases and
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updating prospectuses and other communications from the Fund to shareholders of
the Fund; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provide
such other related services as the Fund or shareholder may request. Broker-
Dealers may waive all or a portion of their Shareholder Servicing Fees.
(b) Payments to Broker-Dealers to compensate them for providing
shareholder servicing and related administrative functions are subject to
compliance by them with the terms of written agreements satisfactory to our
Board of Directors to be entered into between you and the Broker-Dealers.
4 We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5 This Agreement will become effective on the date hereof and
will remain in effect until October 12, 1994 and thereafter for successive
twelve-month periods (computed from each October 1), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this Agreement.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of our entire Board of Directors, and by a vote
of a majority of our Directors who are not interested persons (as defined in the
Act) and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan, or by vote of a majority of
our outstanding voting securities, as defined in the Act, on sixty days' written
notice to you, or by you on sixty days' written notice to us.
6 This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you, and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale,hypothecation
or pledge by you. The terms `transfer,'' ``assignment'' and `sale'' as used in
this paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
7 Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management of other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
OLD WESTBURY FUNDS, INC.
Old Westbury International Fund
By: /s/ EDWARD C. GONZALES
Name: Edward C. Gonzales
Title: President
ACCEPTED: DECEMBER 2, 1996
EDGEWOOD SERVICES, INC.
By: /s/ R. JEFFREY NISS
Name: R. Jeffrey Niss
Title: Senior Vice President
Exhibit 18 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC.
and the Deputy General Counsel of Federated Investors, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/EDWARD C. GONZALES President and Treasurer November 13, 1996
Edward C. Gonzales (Chief Executive
Officer and Principal
Financial and
Accounting Officer)
Howard D. Graves Director
Robert K. Kaufman Director
John Kevin Kenny Director
Sworn to and subscribed before me this 13th day of November, 1996
/s/MARIE M. HAMM
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
Exhibit 18 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC.
and the Deputy General Counsel of Federated Investors, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/EDWARD C. GONZALES President and Treasurer November 13, 1996
Edward C. Gonzales (Chief Executive
Officer and Principal
Financial and Accounting Officer)
/s/HOWARD D. GRAVES Director November 13, 1996
Howard D. Graves
Robert K. Kaufman Director
John Kevin Kenny Director
Sworn to and subscribed before me this 13th day of November, 1996
/s/MARIE M. HAMM
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
Exhibit 18 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC.
and the Deputy General Counsel of Federated Investors, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/EDWARD C. GONZALES President and Treasurer
Edward C. Gonzales (Chief Executive
Officer and Principal
Financial and Accounting Officer)
Howard D. Graves Director
/s/ROBERT M. KAUFMAN Director November 13, 1996
Robert M. Kaufman
John Kevin Kenny Director
Sworn to and subscribed before me this 13th day of November, 1996
/s/MARIE M. HAMM
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Assocation of Notaries
Exhibit 18 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of OLD WESTBURY FUNDS, INC.
and the Deputy General Counsel of Federated Investors, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/EDWARD C. GONZALES President and Treasurer
Edward C. Gonzales (Chief Executive
Officer and Principal
Financial and
Accounting Officer)
Howard D. Graves Director
Robert K. Kaufman Director
/s/JOHN KEVIN KENNY Director November 19, 1996
John Kevin Kenny
Sworn to and subscribed before me this 19th day of November, 1996
/s/CAROL ANN KAMINSKI
Carol Ann Kaminski
Official Notary Seal
Carol Ann Kaminski
Notary Public State of Florida
Commission No. CC441742
My Commission Exp. Feb. 26, 1999
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Old Westbury International Fund
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Oct-31-1996
<PERIOD-END> Oct-31-1996
<INVESTMENTS-AT-COST> 112,825,858
<INVESTMENTS-AT-VALUE> 129,875,839
<RECEIVABLES> 552,288
<ASSETS-OTHER> 7,250,285
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 137,678,412
<PAYABLE-FOR-SECURITIES> 1,272,566
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 611,394
<TOTAL-LIABILITIES> 1,883,960
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126,622,295
<SHARES-COMMON-STOCK> 12,165,931
<SHARES-COMMON-PRIOR> 10,635,019
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 83,507
<ACCUMULATED-NET-GAINS> (7,442,479)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,698,143
<NET-ASSETS> 135,794,452
<DIVIDEND-INCOME> 3,089,889
<INTEREST-INCOME> 292,895
<OTHER-INCOME> 0
<EXPENSES-NET> 1,892,958
<NET-INVESTMENT-INCOME> 1,489,826
<REALIZED-GAINS-CURRENT> (2,100,012)
<APPREC-INCREASE-CURRENT> 17,669,875
<NET-CHANGE-FROM-OPS> 17,059,689
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,459,800
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,294,507
<NUMBER-OF-SHARES-REDEEMED> 2,871,960
<SHARES-REINVESTED> 108,364
<NET-CHANGE-IN-ASSETS> 31,599,966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5,348,822)
<OVERDISTRIB-NII-PRIOR> (113,533)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 990,632
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,922,304
<AVERAGE-NET-ASSETS> 126,173,584
<PER-SHARE-NAV-BEGIN> 9.800
<PER-SHARE-NII> 0.140
<PER-SHARE-GAIN-APPREC> 1.360
<PER-SHARE-DIVIDEND> 0.140
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.160
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
