<PAGE>
PROSPECTUS
W.P. STEWART & CO. GROWTH FUND, INC.
----------------
Investment Adviser
W.P. STEWART & CO., INC.
527 MADISON AVENUE
NEW YORK, NEW YORK 10022
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W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is an open-end, non-
diversified management investment company. The Fund's principal investment
objective is capital appreciation. The Fund invests primarily in common stocks
listed on the New York Stock Exchange, Inc. THE FUND MAY UTILIZE LEVERAGING
TECHNIQUES THAT WILL CREATE AN OPPORTUNITY FOR INCREASED NET INCOME BUT, AT
THE SAME TIME, WILL INVOLVE SPECIAL RISKS. INVESTORS SHOULD CAREFULLY ASSESS
THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE "INVESTMENT
OBJECTIVES, METHODS AND POLICIES--LEVERAGE" AND "RISK CONSIDERATIONS." No
assurance can be given that the Fund will achieve its investment objectives.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. This Prospectus should be
retained for further reference.
Additional information about the Fund, including a Statement of Additional
Information dated May 21, 1996, has been filed with the Securities and
Exchange Commission. The Statement of Additional Information can be obtained
free of charge upon request in writing or by telephoning the Fund. Contact
information for the Fund is on page 18 of this Prospectus. The Statement of
Additional Information has been incorporated by reference into this
Prospectus.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OR THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
May 21, 1996
<PAGE>
NOTICE
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF SHARES OF W.P. STEWART & CO.
GROWTH FUND, INC. (THE "FUND") IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER, SOLICITATION OR SALE. NO PERSON HAS BEEN AUTHORIZED TO
MAKE ANY REPRESENTATIONS CONCERNING THE FUND WHICH ARE INCONSISTENT WITH THOSE
CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION.
PROSPECTIVE INVESTORS SHOULD NOT RELY ON ANY INFORMATION NOT CONTAINED IN THIS
PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS PROSPECTUS,
THE STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S REGISTRATION STATEMENT
AS LEGAL, TAX OR FINANCIAL ADVICE.
2
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TABLE OF CONTENTS
<TABLE>
<S> <C>
NOTICE...................................................................... 2
SUMMARY..................................................................... 4
FEE TABLE................................................................... 6
THE FUND.................................................................... 8
INVESTMENT OBJECTIVES, METHODS AND POLICIES................................. 8
Investment Objectives and Methods......................................... 8
Fundamental Investment Policies........................................... 9
Other Investment Policies................................................. 10
Brokerage and Custody..................................................... 10
RISK CONSIDERATIONS......................................................... 11
MANAGEMENT.................................................................. 12
The Board of Directors.................................................... 12
The Investment Adviser.................................................... 12
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................. 13
FEES AND EXPENSES........................................................... 14
NET ASSET VALUE CALCULATION................................................. 14
Net Asset Value........................................................... 14
PURCHASE OF SHARES.......................................................... 15
REDEMPTIONS AND DISTRIBUTIONS............................................... 15
Redemptions............................................................... 15
Dividends and Distributions............................................... 16
TAXATION.................................................................... 16
ADDITIONAL INFORMATION...................................................... 17
Accountants and Legal Counsel............................................. 17
Transfer Agent and Dividend Paying Agent.................................. 17
Reports to Shareholders................................................... 17
Capital Stock............................................................. 17
Available Documents....................................................... 18
Inquiries................................................................. 18
</TABLE>
3
<PAGE>
SUMMARY
The information set out below should be read in conjunction with the full
text of this Prospectus.
The Fund.................... W.P. Stewart & Co. Growth Fund, Inc. (the "Fund")
is an open-end, non-diversified, management
investment company registered under the
Investment Company Act of 1940, which was
incorporated under the laws of the State of
Maryland in September 1993. The Fund commenced
operations on February 28, 1994. See "The Fund."
Investment Objectives,
Methods and Policies....... The Fund's principal investment objective is
capital appreciation. The Fund invests primarily
in common stocks listed on the New York Stock
Exchange, Inc. The Fund's investment adviser uses
an appraisal method to select investment
opportunities. See "Investment Objectives,
Methods and Policies."
Investment Adviser.......... W.P. Stewart & Co., Inc. (the "Adviser"), based
in New York City, is a registered investment
adviser and broker-dealer which provides
investment advice with respect to more than $4
billion in assets. See "Management--The
Investment Adviser."
Risk Factors................ General. There can be no assurance that the Fund
will achieve its investment objective. The Fund
has a limited operating history, and the Adviser
has no experience advising a registered
investment company other than the Fund. To the
extent the Fund invests a relatively high
percentage of its assets in common stocks, the
Fund does not necessarily represent a complete
investment program and the Fund may be more
susceptible to volatility than a fund investing
in equity securities and non-equity securities
such as fixed income securities. See "Risk
Considerations" on page 9.
Leverage. The Fund may utilize financial leverage
with respect to 33 1/3% of the Fund's total
assets through borrowing money for investment
purposes. The Fund will use leverage only when
the Adviser believes leverage will benefit the
Fund after taking leverage risks into
consideration. As a result of the use of
leverage, the Fund's net asset value and yield
are expected to be more volatile than would be
the case if leverage were not used. The Fund
expects that its leverage will be only in the
form of bank borrowings. To the extent income
derived from leverage exceeds the interest and
other expenses the Fund pays in connection with
such leverage, the Fund's net income will be
greater than if leverage were not used.
Conversely, if the income obtained is not
sufficient to cover the cost
4
<PAGE>
of the leverage, the net income of the Fund will
be less than if leverage were not used, and
therefore the amount available for distribution
to stockholders will be reduced.
Non-Diversified Status. As a non-diversified
investment company, as defined in the Investment
Company Act of 1940, the Fund may invest more
than 5% of the value of its assets in the
obligations of any single issuer, subject to the
diversification requirements of subchapter M of
the Internal Revenue Code of 1986, as amended. To
the extent the Fund invests a relatively high
percentage of its assets in the securities of a
limited number of issuers, the Fund may be more
susceptible to any single economic, political or
regulatory occurrence than a diversified fund.
Purchase of Shares.......... Shares of the Fund, par value $0.001 per share
("Shares"), are generally available for purchase
every Business Day for a price equal to their net
asset value. See "Net Asset Value Calculation."
Each investor will be required to commit a
minimum of $50,000, although the Fund may in its
discretion accept investments of a lesser amount.
There are no sales charges. See "Purchase of
Shares."
Redemptions and
Distributions.............. The Fund's Shares may be redeemed on any Business
Day. See "Net Asset Value Calculation." A
redemption fee equal to 0.5% of the gross
redemption proceeds will be charged by the Fund,
representing an allowance for actual transaction
costs and other expenses of processing the
redemption. The Fund intends to distribute at
least annually substantially all of its net
ordinary income and net capital gains. Dividends
and/or capital gains distributions paid by the
Fund will be automatically reinvested in Shares,
unless otherwise requested. See "Redemptions and
Distributions--Dividends and Distributions."
Fees and Expenses........... The Adviser receives quarterly advisory fees
payable in arrears at an annual rate equal to
1.5% of the net asset value of the Fund. The Fund
pays all costs and expenses directly related to
the Fund's investment program including: (a)
expenses of portfolio transactions such as
brokerage commissions, custodial fees, interest
on borrowings and withholding and transfer taxes
and (b) professional fees of auditors and
attorneys and government fees. The Fund's Adviser
has borne the Fund's organizational expenses. See
"Fee Table" and "Fees and Expenses."
5
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FEE TABLE
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases...................................... None
Sales Load Imposed on Reinvested Dividends........................... None
Deferred Sales Load.................................................. None
Redemption Fee (as a percentage of the amount redeemed).............. 0.50%
Exchange Fee......................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)
Management Fees/1/................................................... 1.50%
12b-1 Fees........................................................... None
Other Expenses (total) (After Expense Reimbursements)................ 1.00%
----
Legal, Audit and Insurance.................................... 0.23%
Custodial, Shareholder Servicing,
Miscellaneous................................................ 0.77%
Total Fund Operating Expenses........................................ 2.50%
====
</TABLE>
- --------
/1/ The management fee payable to the Adviser is significantly greater than the
advisory fees paid by most mutual funds.
EXAMPLE
<TABLE>
<CAPTION>
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 (1) a 5%
annual return and (2) redemption at the
end of each time period: $32 $87 $144 $300
You would pay the following expenses on
the same investment, assuming no
redemption: $26 $81 $138 $294
</TABLE>
The information set forth above is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. "Other Expenses" are based on estimated amounts for the current
fiscal year. "Other Expenses" do not include the organizational expenses and
initial registration expenses of the Fund and its Shares which the Adviser has
paid. For further information see "Fees and Expenses."
This example should not be considered a representation of past or future
expenses, and actual expenses may be more or less than those shown. The annual
return assumed for the purpose of this example should not be considered a
representation of actual or expected returns.
Before giving effect to the expense reimbursement, other expenses would have
been 2.76% and total Fund operating expenses would have been 4.26% of 1994
average net assets. Due to the expiration of the minimum fee waiver for
custodial and shareholder servicing expenses, the expense information has been
restated to reflect current fees.
6
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CONDENSED FINANCIAL INFORMATION
Financial and performance information relating to the year ended December 31,
1995 as well as the Fund's first fiscal year (February 28, 1994 through
December 31, 1994) is incorporated into this Prospectus from the Fund's Annual
Report to Shareholders for the period ended December 31, 1995. The Fund's
Annual Report to Shareholders can be obtained free of charge upon request in
writing or by telephoning the Fund. Contact information for the Fund is on page
18 of this Prospectus.
When the Fund advertises its performance, the calculations are made in the
same manner as in the Fund's financial statements included in the Fund's Annual
Report to Shareholders.
The average commission rate paid by the Fund for securities brokerage, since
inception of the Fund's operations (February 28, 1994) through December 31,
1995, has been ten cents per share.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Management's Discussion of the Fund's performance during its fiscal year
ended December 31, 1995 is incorporated into this Prospectus from the Fund's
Annual Report to Shareholders, for the period ended December 31, 1995. The
Fund's Annual Report to Shareholders can be obtained free of charge upon
request in writing or by telephoning the Fund. Contact information for the Fund
is on page 18 of this Prospectus.
7
<PAGE>
THE FUND
W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is a corporation which was
formed under Maryland law on September 23, 1993. The Fund is registered under
the Investment Company Act of 1940, as amended (the "Act"), as an open-end,
non-diversified, management investment company, commonly known as a mutual
fund. W.P. Stewart & Co., Inc., a registered investment adviser and broker-
dealer (the "Adviser"), is the Fund's investment adviser. Shares of the Fund,
par value $0.001 per share ("Shares"), are available for purchase by eligible
investors. There are no sales charges.
INVESTMENT OBJECTIVES, METHODS AND POLICIES
INVESTMENT OBJECTIVES AND METHODS
The Fund's principal investment objective is capital appreciation. The Fund
invests primarily in common stocks listed on the New York Stock Exchange, Inc.
The Fund also expects to invest, from time to time, in securities listed on
other United States stock exchanges, including the American, Pacific and
Midwest Stock Exchanges, and in securities traded through the National
Association of Securities Dealers Automated Quotation system ("NASDAQ"),
National Market System. The Fund permits eligible investors to participate in
a professionally-managed portfolio consisting primarily of shares in a number
of issuers considered by the Adviser to be high-quality, growing, principally
United States-based companies.
The Adviser employs an appraisal method which attempts to measure each
prospective company's quality and growth rate by numerous criteria. These
results are compared to the general stock and bond markets to determine the
relative attraction of each company at a given moment. Weighing economic,
political and market factors in making investment decisions, this appraisal
technique attempts to measure each investment candidate not only against other
stocks of the same group, but also against a broad spectrum of investments.
No method of fundamental or technical analysis, including that employed by
the Adviser, has been proven to provide any risk adjusted excess rate of
return on an ongoing basis.
Money Market Instruments: For temporary defensive purposes or in order to
earn a return on available cash balances pending investment or reinvestment,
the Fund may invest its assets in customary, interest-bearing accounts
maintained with financial institutions, in short-term debt securities of
United States companies or in debt securities of the United States government
or its agencies or instrumentalities, as well as in other money market
instruments. Such money market instruments include, but are not limited to,
negotiable or non-negotiable or short-term deposits with United States banks,
high quality commercial paper and repurchase agreements maturing within seven
days with domestic dealers, banks and other financial institutions deemed to
be creditworthy by the Adviser. Short-term debt securities and commercial
paper generally are of high quality. Repurchase agreements will be fully
collateralized at all times. However, to the extent that the proceeds from any
sale upon default in the obligation to repurchase is less than the repurchase
price, the Fund would suffer a loss. Also, the Fund might incur costs and
encounter delays in liquidating collateral.
Foreign Investments: The Fund may also invest in stocks issued by non-US
companies. Such investments will normally be made through the purchase of
American Depositary Receipts ("ADRs") which represent investments in shares of
non-US companies but are denominated in US dollars and usually are listed on a
US
8
<PAGE>
stock exchange or traded on NASDAQ. Investments in non-US stocks, whether
directly or through ADRs, involve more and different risks than investments in
US stocks. To the extent that the underlying investments represented by ADRs
are denominated in foreign currencies or the Fund receives dividends which are
declared in foreign currencies, the value of the ADRs and the amount of
dividends received as measured in US dollars will be affected favorably or
unfavorably by movements in currency exchange rates. Dividends declared on the
underlying investment represented by ADRs generally will be subject to
withholding taxes at the source.
Leverage: The Fund is authorized to borrow money in an amount up to 33 1/3%
of the Fund's total assets (including the amount of the borrowing and any
other indebtedness representing "senior securities" under the Act but reduced
by any liabilities and indebtedness other than senior securities) for
investment purposes. The Fund also is authorized to borrow an additional 5% of
its total assets without regard to the foregoing limitation for temporary or
emergency purposes (such as clearance of portfolio transactions, the payment
of dividends and Share redemptions). The Fund will use leverage only when the
Adviser believes leverage will benefit the Fund after taking leverage risks
into consideration.
As a result of the use of leverage, the net asset value of the Fund and the
yield on the Fund's portfolio are expected to be more volatile than would be
the case if leverage were not used. Leverage also creates interest expenses
for the Fund, which will reduce the net income from the Fund's portfolio
securities. To the extent income derived from securities purchased with funds
obtained through leverage exceeds the interest and other expenses the Fund
pays in connection with such leverage, the Fund's net income will be greater
than if leverage were not used. Conversely, if the income from the securities
obtained through leverage is not
sufficient to cover the cost of the leverage, the net income of the Fund will
be less than if leverage were not used, and therefore the amount available for
distribution to stockholders will be reduced. The Fund expects that its
leverage will be only in the form of bank borrowings. The requirement that the
Fund segregate a specified amount of liquid high grade debt securities or cash
with its custodian in connection with the use of certain types of leverage
could have an adverse effect on the income earned and dividends paid by the
Fund.
The Fund's principal investment objective may be changed only with the
approval of shareholders holding a majority of the total number of outstanding
shares. As defined in the Act, this means the lesser of (a) 67% or more of the
Shares of the Fund at a meeting where more than 50% of the outstanding Shares
is present in person or by proxy or (b) more than 50% of the outstanding
Shares of the Fund.
FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental policies which cannot be changed
without approval by holders of a majority of its outstanding Shares.
The Fund's fundamental investment policies include the following. The Fund
will not underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under Federal securities laws, in
connection with the disposition of its portfolio securities. The Fund will not
invest more than 5% of the value of its total assets in securities which
cannot be readily resold to the public because of legal or contractual
restrictions or because there are no market quotations readily available or in
other "illiquid" securities (including non-negotiable deposits with banks and
repurchase agreements of a duration of more than seven days). The Fund will
not make loans, except that this restriction shall not prohibit (1) the
purchase of publicly distributed debt securities in accordance with the Fund's
investment objectives and policies, (2) the lending of portfolio securities
and (3) entering into repurchase agreements. A complete list of the Fund's
fundamental investment policies is contained in the Statement of Additional
Information, which is incorporated herein by reference.
9
<PAGE>
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in the percentage beyond the specified limit
resulting from a change in value or net assets will not be considered a
violation of the foregoing restrictions. Whenever any investment policy or
investment restriction states a maximum percentage of the Fund's assets which
may be invested in any security or other property, it is intended that such
maximum percentage limitation be determined after giving effect to the
acquisition of such security or property.
OTHER INVESTMENT POLICIES
The Fund expects to qualify for the special tax treatment afforded to
regulated investment companies under the Internal Revenue Code of 1986, as
amended. One of the requirements of such Code is that at least 50% of the
value of the Fund's total assets be represented by (a) cash, government
securities and securities of other regulated investment companies and (b)
other securities limited in respect of any issuer to not more than 5% of the
value of the Fund's total assets and not more than 10% of the outstanding
voting securities of such issuer. Also, not more than 25% of the value of the
Fund's total assets may be invested in the securities of any one issuer (other
than government securities or securities of other regulated investment
companies). Investment policies which are not fundamental may be changed
without a vote of the shareholders of the Fund.
BROKERAGE AND CUSTODY
Brokerage Arrangements: The Adviser is responsible for the placement of the
portfolio transactions of the Fund and the negotiation of any commissions paid
on such transactions when not effected by the Adviser acting as broker.
Portfolio securities transactions will normally be effected through brokers
(including the Adviser) on securities exchanges or directly with the issuer or
an underwriter or market maker for the securities. Brokerage transactions not
executed by the Adviser will be executed by other brokers and dealers selected
by the Adviser. Subject to seeking best execution, the Adviser also may
consider referrals of potential investors in the Fund as a factor in the
selection of brokers. Purchases and sales of portfolio securities through
brokers involve a commission to the broker. Purchases and sales of portfolio
securities with dealers serving as market makers include the spread between
the bid and the asked prices. In placing portfolio transactions, the Adviser
will seek to obtain the best execution for the Fund, taking into account such
factors as price (including the applicable dealer spread or commission, if
any), size of order, difficulty of execution, operational facilities of the
firm involved and the firm's risk in positioning a block of securities.
As broker, the Adviser will charge the Fund commissions not exceeding the
rates charged to its institutional customers for similar trades at the time of
execution. The Adviser will conduct any brokerage services it performs for the
Fund in accordance with all legal requirements. Brokerage commissions amounted
to 0.5% of the Fund's average net assets during the calendar year ended
December 31, 1995.
The Fund's rate of portfolio turnover for the calendar year ended December
31, 1995 was 75.69%.
Custody: The Fund's securities and other assets will normally be held in the
custody of State Street Bank and Trust Company ("State Street"), which has its
principal place of business at 225 Franklin Street, Boston, Massachusetts
02110. Some of the Fund's securities and other assets may also be held in the
custody of other qualified financial institutions. State Street will also act
as the Fund's shareholder servicing agent and provide certain administrative
services. These services include acting as transfer agent for the Fund's
Shares, communicating with the Fund's shareholders and maintaining certain of
the Fund's books and records.
10
<PAGE>
RISK CONSIDERATIONS
General: The Fund has a limited operating history, and there can be no
assurance that the Fund will achieve its investment objective. There can be no
assurance that the Adviser's assessment of the short-term or long-term
prospects of investments will prove accurate. The Adviser has limited
experience advising a registered investment company.
The Fund invests primarily in equities, and the Fund may invest in a
relatively small number of companies. Therefore, an investment in the Fund
does not represent a balanced investment strategy in and of itself.
Potential Conflicts of Interest: The Investment Advisory Services Agreement
requires that the Adviser act in a manner that it considers fair, reasonable
and equitable in allocating investment opportunities to the Fund, but does not
otherwise impose any specific obligations or requirements concerning the
allocation of time, effort or investment opportunities to the Fund or any
restrictions on the nature or timing of investments for the account of the
Fund and for the Adviser's own account or for other accounts which the Adviser
may manage. The Adviser is not obligated to devote any specific amount of time
to the affairs of the Fund and is not required to accord exclusivity or
priority to the Fund in the event of limited investment opportunities.
When the Adviser determines that it would be appropriate for the Fund and
one or more of its other investment accounts to participate in an investment
opportunity, the Adviser will seek to execute orders for all of the
participating investment accounts, including the Fund, on an equitable basis.
If the Adviser has determined to invest at the same time for more than one of
the investment accounts, the Adviser may place combined orders for all such
accounts simultaneously and if all such orders are not filled at the same
price, it may average the prices paid. Similarly, if an order on behalf of
more than one account cannot be fully executed under prevailing market
conditions, the Adviser may allocate the investments among the different
accounts on a basis that it considers equitable. Situations may occur where
the Fund could be disadvantaged because of the investment activities conducted
by the Adviser for other investment accounts.
The Adviser selects the brokers to be used for the Fund's transactions, and
the Adviser is permitted to act as broker for the Fund. See "Investment
Objectives, Methods and Policies -- Brokerage and Custody." By reason of the
brokerage fees the Adviser would earn by acting as broker to the Fund, the
Adviser will have an incentive to select itself as broker for the Fund.
The Adviser is expected to be the Fund's primary broker. Currently, two of
the Fund's five directors are affiliated persons of the Adviser. (See the
Statement of Additional Information under the caption "Management of the
Fund.") The Fund relies on the Adviser for many of its operations, and a
minority of the Fund's Board of Directors is employed by and has ownership
interests in the Adviser. Therefore, it may be unlikely that the Adviser would
be removed from its position with the Fund.
11
<PAGE>
MANAGEMENT
THE BOARD OF DIRECTORS
The ultimate responsibility for the management and operation of the Fund is
vested in the Board of Directors of the Fund, a majority of whom are not
"interested persons" (as defined in the Act) of the Adviser (the "Independent
Directors").
THE INVESTMENT ADVISER
Trading activities of the Fund are managed by its investment adviser, W.P.
Stewart & Co., Inc., a Delaware corporation incorporated in 1973, pursuant to
an agreement between the Adviser and the Fund (the "Investment Advisory
Services Agreement"). The Adviser is registered under the Investment Advisers
Act of 1940 as an investment adviser and is registered under the Securities
Exchange Act of 1934 as a broker-dealer. The Adviser has been providing
investment advisory services to individuals, trusts and pension funds since
1973. Its business office is located at 527 Madison Avenue, 21st Floor, New
York, New York 10022-4212, its telephone number is (212) 750-8585 and its
facsimile number is (212) 980-8039. Charles Graydon Rogers, Robert Lawrence
Schwartz and William Peirce Stewart may be deemed controlling persons of the
Adviser.
Pursuant to the Investment Advisory Services Agreement, the Adviser has
responsibility for the management of the Fund's business affairs, including
providing investment research and analysis of investment opportunities and the
management of the Fund's trading and investment transactions, subject to the
investment policies and restrictions described herein and the supervision of
the Board of Directors.
The organizational arrangements of the Adviser require that all investment
decisions be made by committee, and no person is primarily responsible for
making recommendations to such committee. The Fund's investments are similar
to the investments made by the Adviser for its managed accounts. Although each
account managed by the Adviser has individual objectives and a unique
portfolio, the Fund's investments generally approximate investments made by
the Adviser's managed accounts.
The Investment Advisory Services Agreement has a two-year term and
thereafter continues in effect from year to year so long as its continuance is
specifically approved at least annually by the Board of Directors or by a vote
by the holders of a majority of the outstanding Shares. In addition, the terms
of the Investment Advisory Services Agreement and the renewals thereof must be
approved annually by the vote of a majority of the Independent Directors. The
Investment Advisory Services Agreement will terminate automatically in the
event of its assignment (as defined in the Act) and may be terminated without
penalty on sixty days' written notice at the option of either the Fund or the
Adviser or by a vote of the holders of a majority of the outstanding Shares.
See "Fees and Expenses" for a description of the Adviser's compensation.
12
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Management's Discussion of the Fund's performance during the fiscal year
ended December 31, 1995 is incorporated into this Prospectus from the Fund's
Annual Report to Shareholders, for the period ended December 31, 1995. The
Fund's Annual Report to Shareholders can be obtained free of charge upon
request in writing or by telephoning the Fund. Contact information for the
Fund is on page 18 of this Prospectus.
[GRAPH]
TOTAL INVESTMENT RETURN*
FEBRUARY 28, 1994 - DECEMBER 31, 1995
<TABLE>
<S> <C>
W.P. Stewart & Co. Growth Fund 29.08%
W.P. Stewart & Co. Growth Fund, Net 28.44%
S&P 500 38.60%
</TABLE>
*Total investment return is calculated assuming reinvestment of all dividends
and distributions at net asset value during the period. The W.P. Stewart & Co.
Growth Fund, Net, reflects the effect of a redemption fee on the total return.
S&P 500 return assumes no transaction costs.
13
<PAGE>
FEES AND EXPENSES
The Adviser receives quarterly advisory fees payable in arrears as of the
first day in each quarter at an annual rate equal to 1.5% of the net asset
value of the Fund, as determined on the last day of the preceding quarter
(after giving effect to subscriptions and redemptions effective on such date).
In addition to the quarterly advisory fee, the Fund bears all costs and
expenses directly related to investment transactions effected and positions
held for the Fund's account, including brokerage commissions, which equaled
0.5% of the Fund's average net assets during the fiscal year ended December
31, 1995, custodial fees, interest on borrowings and administrative fees. Also
included are the fees and expenses of any accountants or attorneys engaged on
behalf of the Fund, the costs and expenses of holding any meetings of
shareholders of the Fund and such other types of expenses as may be approved
from time to time by the Board of Directors, other than those required to be
borne by the Adviser. If any such expenses are incurred jointly for the Fund's
account together with the Adviser's own account or the account of any other
persons in addition to the Fund, the Adviser will allocate the total expense
among the Fund and such other persons and will determine the portion
reimbursable by the Fund in a fair and reasonable manner. Except for the
foregoing, the Adviser pays all of its own operating and overhead costs and
those of the Fund, including costs incurred by the Adviser to provide office
space to the Fund or which it may incur in the course of providing bookkeeping
and other services to the Fund, and costs and expenses arising in connection
with the ongoing solicitation of subscriptions for Shares.
State Street will receive minimum annual fees of approximately $36,000,
$30,000 and $65,000 for acting as the Fund's custodian, shareholder servicing
agent and administrator, respectively.
The Adviser has borne all costs and expenses associated with the
organization and initial registration of the Fund and its Shares.
NET ASSET VALUE CALCULATION
NET ASSET VALUE
The net asset value per Share is determined by or at the direction of the
Board of Directors as of 4 p.m. New York City time of each Business Day on
which a purchase or redemption of Shares occurs. "Business Day" means any day
on which the New York Stock Exchange, Inc. is open for trading.
In general, the Fund values portfolio securities as of their last available
public sale price on the valuation date in the case of securities listed on
any established securities exchange or included in the NASDAQ National Market
System or any comparable foreign over-the-counter quotation system providing
last sale data, or if no sales of such securities are reported on such date,
and in the case of over-the-counter securities not described above in this
paragraph, at the last reported bid price. In special circumstances in which
the Adviser determines that market prices or quotations do not fairly
represent the value of particular assets, the Adviser is authorized to assign
a value to such assets which differs from the market prices or quotations. The
values of assets which are not publicly traded will be recorded at their fair
values as determined by the Adviser. In these circumstances, the Adviser will
attempt to use consistent and fair valuation criteria and may (but is not
required to) obtain independent appraisals at the expense of the Fund.
All accrued debts and liabilities, including any contingencies for which
reserves are determined to be required, are deducted from the total value of
the Fund's assets.
14
<PAGE>
Prospective investors should be aware that situations involving
uncertainties as to the valuation of portfolio positions could have an adverse
effect on the Fund's net assets if the Adviser's judgments regarding
appropriate valuations should prove incorrect. Absent bad faith or manifest
error, the Adviser's net asset value determinations are conclusive and binding
on all shareholders. The Board of Directors is responsible for the
determination of net asset value, whether performed directly by the Board or
delegated to the Adviser.
PURCHASE OF SHARES
Shares are available for purchase each Business Day on the terms set forth
herein. Each investor is required to commit a minimum of $50,000, although the
Fund may in its discretion accept subscriptions for a lesser amount. Investors
may subscribe for Shares by completing and returning the attached Subscription
Application in accordance with the instructions set forth in the Subscription
Application. The Fund reserves the right to reject any subscription. All
accepted subscriptions from new investors will be effected at the net asset
value of the Fund's Shares next computed after receipt of payment, the
Subscriber Information Form and the Subscription Agreement (the "Subscription
Documents"). Payment from new investors cannot be accepted until the
Subscription Documents have been received. Existing investors need not submit
Subscription Documents when purchasing additional Shares.
The Shares are offered directly by the Fund, and no selling commission or
other fees are payable by the Fund out of the proceeds derived from the sale
of Shares.
The Fund generally does not issue certificates for Shares purchased. The
Fund instead credits a subscriber's account with the number of Shares
purchased. Each shareholder should check promptly the confirmation advice that
is mailed after each purchase (or redemption) in order to insure that the
purchase (or redemption) of Shares reported has been recorded accurately in
his account. Statements of account will be mailed quarterly, showing
transactions during the quarter.
REDEMPTIONS AND DISTRIBUTIONS
REDEMPTIONS
Shares are redeemable each Business Day, upon request to the Fund. A
redemption fee equal to 0.5% of the gross redemption proceeds is charged by
the Fund, representing an allowance for actual transaction costs and other
expenses of processing the redemption. If certificates have been issued for
the Shares being redeemed, the request must be accompanied by such
certificates endorsed for transfer (or accompanied by an endorsed stock
power). The Fund reserves the right to refuse any requests for redemption by
telephone or facsimile if it is believed advisable to do so. The Fund will not
honor redemption requests that are not in proper form as determined by the
Adviser.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in proper order is received by the Fund, less a
0.5% redemption fee. The settlement of redemptions, including postponement
thereof, is described below.
The Fund reserves the right to require the redemption of any shareholder's
remaining Shares if the net asset value of such Shares is reduced to less than
$10,000 due to redemptions by the shareholder. Should the Directors elect to
exercise such right, the shareholder would receive prior written notice and
would be permitted at least 10 calendar days to purchase additional Shares to
increase his investment to at least the minimum to avoid automatic redemption
at the net asset value as of the close of business on the proposed redemption
date.
15
<PAGE>
Payment of the redemption price will be made within seven days after receipt
of the redemption request in good order, but the Fund may suspend the right of
redemption or postpone payment during any period when (a) trading on the New
York Stock Exchange, Inc. is restricted or such exchange is closed, other than
customary weekend and holiday closings; (b) the Securities and Exchange
Commission has by order permitted such suspension; or (c) an emergency, within
the meaning of the Act, exists, making disposal of portfolio securities or
determination of the value of the Fund's net assets not reasonably
practicable.
Notice of any suspension will be given to any shareholder who has submitted
a redemption request and to whom payment of the redemption proceeds has not
yet been remitted. If a redemption request is not rescinded by a shareholder
following notification of a suspension, the redemption will be effected as of
the day on which the suspension is lifted, on the basis of the net asset
valuation on that day.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to pay annually a dividend representing its entire net
investment income and to distribute all its realized net capital gains.
Dividends and/or any capital gain distributions paid by the Fund on its Shares
will be reinvested automatically in whole or fractional Shares of the Fund at
net asset value as of the payment date unless the shareholder makes a written
request to the Fund for payment in cash at least five days in advance of the
payment date. No certificates for Shares issued on payment of such dividends
and distributions generally will be delivered, but ownership of Shares will be
registered in each shareholder's account.
Checks issued pursuant to a shareholder's request for payment of dividends
and capital gain distributions in cash will be forwarded by first class mail
to the shareholder's registered address. The proceeds of any such checks which
are not accepted by the addressee and are returned to the Fund will not be
reinvested in the Fund.
TAXATION
The Fund expects to qualify for the special tax treatment afforded to
regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"). If it qualifies, the Fund will pay no United States
Federal income tax on net income and net capital gains timely distributed to
shareholders of the Fund. The Fund also intends to take all actions necessary
to avoid the imposition of any excise taxes on the Fund.
For Federal income tax purposes, distributions from net ordinary income or
net short-term capital gains will be treated as ordinary income to
shareholders and distributions from net long-term capital gains will be
treated as long-term capital gains to shareholders, regardless of whether such
distributions are paid in cash or reinvested in additional Shares of the Fund.
The Fund will inform shareholders each year of the amount and nature of any
income or gain distributed to them. The tax liabilities of shareholders with
respect to such distributions will depend on each shareholder's particular tax
situation.
Distributions of net ordinary income or net short-term capital gains
received by a non-resident alien individual or foreign corporation which is
not engaged in a trade or business in the United States generally will be
subject to Federal withholding tax at the rate of 30%, unless such rate is
reduced by an applicable income tax treaty to which the United States is a
party. However, gains from the sale by such shareholders of Shares of the Fund
and distributions to such shareholders from long-term capital gains generally
will not be subject to Federal withholding tax.
16
<PAGE>
In order to maintain its qualification for the special tax treatment
afforded to regulated investment companies under the Code, the Fund generally
will be required to request from shareholders within 30 days following the
close of each taxable year of the Fund a statement regarding the actual or
constructive ownership of Shares. Any shareholder required to supply such
statement to the Fund who fails to do so is required under the Code to supply
such information on the shareholder's income tax return, and regulations under
the Code require the failure to be noted in the Fund's permanent tax records.
Any shareholder considering a redemption of Shares which would not be a
complete redemption of such shareholder's interest in the Fund should consult
his own tax advisor.
The foregoing is a summary of some of the important Federal tax rules and
considerations affecting the Fund and its shareholders and does not purport to
be a complete analysis of all relevant tax rules and considerations, nor does
it purport to be a complete listing of all potential tax risks inherent in
purchasing or holding Shares. Prospective investors in the Fund are urged to
consult their own tax advisors.
ADDITIONAL INFORMATION
ACCOUNTANTS AND LEGAL COUNSEL
The Fund has designated Lopez Edwards Frank & Co., LLP of New York City as
the independent auditors of the Fund.
McDermott, Will & Emery of New York City has acted as legal counsel to the
Adviser and the Fund in connection with the operation of the Fund, including
the preparation of this Prospectus and the Statement of Additional Information
and amendments thereto. The Directors of the Fund are represented by separate
counsel at the expense of the Fund.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company, which has its principal place of
business at 225 Franklin Street, Boston, Massachusetts 02110, acts as the
Fund's shareholder servicing agent and is responsible for recording of Share
transactions and disbursing payments of dividends and distributions to
shareholders.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on December 31. The Fund will furnish to
its shareholders as soon as practicable after the end of each taxable year
such information as is necessary for such shareholders to complete Federal
income tax or information returns, along with any other tax information
required by law. The Fund will furnish to its shareholders annual reports
containing financial statements examined by the Fund's independent auditors as
soon as practicable (but no later than 60 days) after the end of the fiscal
year of the Fund.
CAPITAL STOCK
The authorized capital stock of the Fund consists of 100,000,000 Shares, all
of one class and of $0.001 par value per Share, and all having equal voting,
redemption, dividend and liquidation rights. Shares are fully paid and non-
assessable when issued and are redeemable and subject to redemption under
certain conditions described above. Shares have no preemptive, conversion or
cumulative voting rights.
17
<PAGE>
Pursuant to the By-Laws of the Fund adopted under the provisions of the laws
of Maryland, the Fund's jurisdiction of incorporation, the Fund will not
generally hold annual meetings of Fund shareholders. Shareholder meetings,
however, will be held when required by the Act or Maryland laws, or when
called by the Board of Directors, the President or shareholders owning at
least 10% of outstanding Shares. The cost of any such notice and meeting will
be borne by the Fund.
AVAILABLE DOCUMENTS
At the request of any shareholder or potential investor, the Fund will
provide to such person, at the Fund's expense, copies of the following
documents:
(1) the Fund's current Statement of Additional Information;
(2) the Fund's Registration Statement on Form N-1A and any amendments
thereto;
(3) the Articles of Incorporation of the Fund and any amendments thereto;
and
(4) the Fund's latest annual report and any subsequent semi-annual
report.
Certain other Fund documents and records, including a current list of
shareholders, their addresses and their respective Share holdings are
available for inspection and copying by shareholders at the office of the Fund
during normal business hours.
INQUIRIES
Inquiries concerning the Fund and its Shares (including information
concerning subscription and redemption procedures) should be directed to:
W.P. Stewart & Co., Inc.
527 Madison Avenue
New York, New York 10022
Telephone: 212-750-8585
Facsimile: 212-758-7347
* * * * *
This Prospectus does not purport to be and should not be construed as a
complete description of the Fund's Statement of Additional Information and
Registration Statement on Form N-1A, copies of which are available from the
Fund upon the request of any potential investor. Any potential investor in the
Fund is encouraged to consult appropriate legal and tax counsel.
18
<PAGE>
SUBSCRIPTION APPLICATION
W.P. STEWART & CO. GROWTH FUND, INC.
Subscription Instructions
BASIC SUBSCRIPTION DOCUMENTS
Subscriptions for shares of the common stock, par value $0.001 per share
("Shares"), of W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") may be made
only by means of the completion, execution and delivery of the following basic
subscription documents:
(a) Subscriber Information Form: Complete all requested information, date
and sign.
(b) Subscription Agreement: Date and sign two copies on page S-8. The
Subscription Agreement may be completed by a duly authorized officer or
agent on behalf of a Subscriber.
(c) Evidence of Authorization: Subscribers which are corporations should
submit certified corporate resolutions authorizing the subscription and
identifying the corporate officer(s) empowered to sign the basic
subscription documents. Partnerships should submit an extract of the
partnership agreement identifying the general partners. Trusts should
submit a copy of the trust agreement or relevant portions thereof showing
appointment and authority of trustee(s). Employee benefit plans (including
Individual Retirement Arrangements) should submit a certificate of the
trustee or an appropriate officer certifying that the subscription has been
authorized and identifying the individual empowered to sign the basic
subscription documents. (Entities may be requested to furnish other or
additional documentation evidencing the authority to invest in the Fund.)
DELIVERY INSTRUCTIONS
Basic subscription documents should be delivered or mailed to the Fund at
the following address:
W.P. Stewart & Co., Inc.
527 Madison Avenue
New York, New York 10022
All basic subscription documents will be returned to the Subscriber if this
subscription is not accepted.
S-1
<PAGE>
SUBSCRIPTION PAYMENTS
Payments for the amount subscribed (not less than $50,000 unless otherwise
agreed in advance by the Fund) must be made by wire transfer as follows:
Receiving Bank State Street Bank and Trust Company
Information: 225 Franklin Street
Boston, Massachusetts 02110
ABA No.: 011000028
For Account of: BNF=AC-65590622
Mutual Funds F/B/O W.P. Stewart
For Subaccount of: OBI=Growth Fund
Shareholder Name/Account Number
ACCEPTANCE OF SUBSCRIPTIONS
The acceptance of subscriptions is within the absolute discretion of the
Fund, which may require additional information prior to making a
determination. The Fund will seek to notify the Subscriber of its acceptance
or rejection of the subscription prior to the date of the proposed investment.
If the subscription is rejected, the Fund will promptly refund (without
interest) to the Subscriber any subscription payments received by the Fund.
ADDITIONAL INFORMATION
For additional information concerning subscriptions, prospective investors
should contact W.P. Stewart & Co., Inc. at 212-750-8585.
S-2
<PAGE>
W.P. STEWART & CO. GROWTH FUND, INC.
Subscriber Information Form
Each Subscriber for shares of the common stock, par value $0.001 per share
("Shares"), of W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is requested
to furnish the following information (please print or type):
1. IDENTITY OF SUBSCRIBER
Name: _______________________________________________________________________
*Mailing
Address: ____________________________________________________________________
Telephone: ( )
____________________________________________________________________
Telecopier: ( )
____________________________________________________________________
* Please indicate above the address to which Fund communications and notices
should be sent. If the Subscriber is a natural person, please also furnish
below the Subscriber's residential address if different from the address
indicated above:
Residential
Address: ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
2. AMOUNT OF SUBSCRIPTION
$_____________
3. REMITTING BANK OR FINANCIAL INSTITUTION
All subscriptions are payable in full by wire transfer to the account of
the Fund for value on or before the business day prior to the proposed date
of subscription. Please identify the bank or other financial institution
from which the Subscriber's funds will be wired.
Name of financial
institution: ________________________________________________________________
Address: ____________________________________________________________________
______________________________________________________________________
Account
Representative: _____________________________________________________________
Telephone: ( )
____________________________________________________________________
S-3
<PAGE>
4.SUPPLEMENTAL DATA FOR ENTITIES
If the Subscriber is not a natural person, furnish the following
supplemental data (natural persons may skip to Question 5):
(a) Legal form of entity: ___________________________________________________
(b) Jurisdiction of organization: ___________________________________________
5. TAX INFORMATION
- -------------------------------------------------------------------------------
PART 1-PLEASE PROVIDE YOUR TIN Social Security
IN THE BOX AT RIGHT AND CER- Number OR Employer
TIFY BY SIGNING AND DATING BE- Identification
LOW. Number
SUBSTITUTE
Form W-9
Department of the
Treasury Internal
Revenue Service
--------------------------------------------------------
PART 2-CERTIFICATES--Under penalties of perjury, I
certify that:
Payer's Request for (1) The number shown on this form is my correct Tax-
Taxpayer payer Identification Number (or I am waiting for a
Identification ("TIN") number to be issued for me) and
(2) I am not subject to backup withholding either be-
cause: (a) I am exempt from backup withholding, or
(b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup with-
holding as a result of a failure to report all inter-
est or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding be-
cause of underreporting interest or dividends on your
tax return. However, if after being notified by the
IRS that you are subject to backup withholding, you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out such item (2).
--------------------------------------------------------
SIGNATURE ...................... PART-3
DATE ........................... Awaiting
TIN [_]
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
S-4
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
Signature _________________________________________ Date __________________
Dated: ________________________, 199_ _____________________________________
Signature
_____________________________________
Name and title or
representative capacity,
if applicable
S-5
<PAGE>
W.P. STEWART & CO. GROWTH FUND, INC.
Subscription Agreement
W.P. Stewart & Co. Growth Fund, Inc.
c/o W.P. Stewart & Co., Inc.
527 Madison Avenue
New York, New York 10022-4212
Gentlemen:
The undersigned (the "Subscriber") hereby acknowledges having received the
current prospectus (the "Prospectus") dated May 21, 1996 of W.P. Stewart & Co.
Growth Fund, Inc., a corporation organized under the laws of the State of
Maryland (the "Fund").
Subscription Commitment
The Subscriber hereby subscribes for as many shares of the common stock of
the Fund, par value $0.001 (the "Shares"), as may be purchased including
fractional shares at the net asset value per Share (as set forth in the
Prospectus) next computed after receipt prior to 4:00 PM of this Subscription
Agreement and payment from the Subscriber for the amount set forth in the
accompanying Subscriber Information Form completed and signed by the
Subscriber (which shall be considered an integral part of this Subscription
Agreement). This Subscription Agreement and the Subscriber Information From
need be submitted only by new investors.
The Subscriber understands that this subscription is not binding on the Fund
until accepted by the Fund, and may be rejected by the Fund in its absolute
discretion. If so rejected, the Fund shall return to the Subscriber, without
interest or deduction, any payment tendered by the Subscriber, and the Fund
and the Subscriber shall have no further obligation to each other hereunder.
Unless and until rejected by the Fund this subscription shall be irrevocable
by the Subscriber.
Representations, Warranties and Covenants
To induce the Fund to accept this subscription, the Subscriber hereby makes
the following representations, warranties and covenants to the Fund:
(a) The information set forth in the accompanying Subscriber Information
Form is accurate and complete as of the date hereof, and the Subscriber
will promptly notify the Fund of any change in such information. The
Subscriber consents to the disclosure of any such information, and any
other information furnished to the Fund, to any governmental authority,
self-regulatory organization or, to the extent required by law, to any
other person.
(b) In formulating a decision to invest in the Fund, the Subscriber has
not relied or acted on the basis of any representations or other
information purported to be given on behalf of the Fund or investment
adviser of the Fund except as set forth in the Prospectus, the Fund's
Statement of Additional Information or the Fund's Registration Statement on
Form N-1A (it being understood that no person has been authorized by the
Fund or the Fund's investment adviser to furnish any such representations
or other information).
S-6
<PAGE>
(c) The Subscriber has the authority and legal capacity to execute,
deliver and perform this Subscription Agreement and to purchase and hold
Shares.
(d) If the Subscriber is, or is acting on behalf of, an employee benefit
plan (a "Plan") which is subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"): (i) the Plan, and any fiduciaries
responsible for the Plan's investments, are aware of and understand the
Fund's investment objectives, policies and methods and the decision to
invest the Plan's assets in the Fund was made with appropriate
consideration of relevant investment factors with regard to the Plan
including the diversification requirements of Section 404(a)(1)(c)(3) of
ERISA; (ii) the decision to invest the Plan's assets in the Fund is a
prudent one and is consistent with the responsibilities imposed upon the
Plan's fiduciaries with regard to their investment decisions under ERISA;
(iii) the fiduciary or other person signing this Subscription Agreement is
independent of the Fund and the investment adviser of the Fund; and (iv)
this subscription and the investment contemplated hereby is in accordance
with all requirements applicable to the Plan under its governing
instruments and under ERISA.
Indemnification
The Subscriber agrees that the subscription made hereby may be accepted in
reliance on the representations, warranties, agreements, covenants and
confirmations set out above. The Subscriber agrees to indemnify and hold
harmless the Fund and the Fund's investment adviser (including for this
purpose their respective shareholders, members, directors, managers, officers
and employees, and each person who controls any of them within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended) from and
against any and all loss, damage, liability or expense, including reasonable
costs and attorneys' fees and disbursements, which the Fund, such adviser or
such persons may incur by reason of, or in connection with, any representation
or warranty made herein (or in the accompanying Subscriber Information Form)
not having been true when made, any misrepresentation made by the Subscriber
or any failure by the Subscriber to fulfill any of the covenants or agreements
set forth herein, in the Subscriber Information Form or in any other document
provided by the Subscriber to the Fund.
Miscellaneous
(a) The Subscriber agrees that neither this Subscription Agreement, nor any
of the Subscriber's rights or interest herein or hereunder, is transferable or
assignable by the Subscriber, and further agrees that the transfer or
assignment of any Shares acquired pursuant hereto shall be made only in
accordance with the provisions hereof and all applicable laws.
(b) The Subscriber agrees that, except as permitted by applicable law, it
may not cancel, terminate or revoke this Subscription Agreement or any
agreement of the Subscriber made hereunder, and that this Subscription
Agreement shall survive the death or legal disability of the Subscriber and
shall be binding upon the Subscriber's heirs, executors, administrators,
successors and assigns.
(c) All of the representations, warranties, covenants, agreements and
confirmations set out above and in the Subscriber Information Form shall
survive the acceptance of the subscription made herein and the issuance of any
Shares.
(d) This Subscription Agreement together with the Subscriber Information
Form constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof and may be amended only by a writing executed by
both parties.
S-7
<PAGE>
(e) Within ten days after receipt of a written request therefor from the
Fund, the Subscriber agrees to provide such information and to execute and
deliver such documents as the Fund may deem reasonably necessary to comply
with any and all laws and ordinances to which the Fund is or may be subject.
Notices
Any notice required or permitted to be given to the Subscriber in relation
to the Fund shall be sent to the address specified in Item 1 of the Subscriber
Information Form accompanying this Subscription Agreement or to such other
address as the Subscriber designates by written notice received by the Fund.
Governing Law
This Subscription Agreement shall be governed by the laws of the State of
New York without regard to the conflicts of law provisions thereof.
Dated: ________________________, 199_ Very truly yours,
_____________________________________
Name of Subscriber
_____________________________________
Signature
_____________________________________
Name and title or representative
capacity,
if applicable
* * * * *
The foregoing is hereby accepted, subject to the conditions set forth
herein.
Dated: ________________________, 199_ W.P. Stewart & Co. Growth Fund, Inc.
By: _________________________________
S-8
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
--------------
W.P. STEWART & CO. GROWTH FUND, INC.
--------------
Investment Adviser
W.P. STEWART & CO., INC.
527 MADISON AVENUE
NEW YORK, NEW YORK 10022
--------------
This Statement of Additional Information provides information about W.P.
Stewart & Co. Growth Fund, Inc., a non-diversified, open-end management
investment company, in addition to the information contained in the Prospectus
of the Fund dated May 21, 1996. Please retain this document for future
reference.
This Statement of Additional Information is not a prospectus. It relates to
and should be read in conjunction with the Prospectus of the Fund, a copy of
which can be obtained by writing or calling the Fund. Contact information is
located on page 15.
--------------
May 21, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT OF CROSS-REFERENCED
ADDITIONAL TO CAPTIONS IN THE
INFORMATION PROSPECTUS
PAGE PAGE
------------ ------------------
<S> <C> <C>
ORGANIZATION OF THE FUND....................... 3 8
INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS.................................. 3
Investment Objectives and Methods............ 3 8
Fundamental Investment Policies.............. 4 9
Other Investment Policies.................... 5 9
Figures on Total Return...................... 6 --
Comparison of Portfolio Performance.......... 6 --
Portfolio Turnover........................... 6 9
MANAGEMENT OF THE FUND......................... 7 11
INVESTMENT ADVISORY AND OTHER SERVICES......... 8 11
Potential Conflicts of Interest.............. 9 10
Duty of Care................................. 10 --
CUSTODY OF PORTFOLIO........................... 10 9
SHAREHOLDER SERVICING AGENT.................... 11 9
INDEPENDENT AUDITORS........................... 11 15
DISTRIBUTION OF THE FUND'S SHARES.............. 11 12
COMPUTATION OF NET ASSET VALUE................. 11 13
PURCHASE OF SHARES............................. 11 13
REDEMPTIONS.................................... 12 14
TAX STATUS..................................... 12 15
ERISA CONSIDERATIONS........................... 13 --
BROKERAGE ALLOCATION........................... 14 9
FINANCIAL STATEMENTS........................... 15 15
CONTACT INFORMATION............................ 15 16
</TABLE>
2
<PAGE>
ORGANIZATION OF THE FUND
W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is a corporation which was
formed under Maryland law on September 23, 1993. The Fund is a registered
open-end, non-diversified, management investment company, commonly known as a
mutual fund. The Fund commenced operations on February 28, 1994. W.P. Stewart
& Co., Inc., a registered investment adviser (the "Adviser"), is the Fund's
investment adviser. Shares of the Fund, par value $0.001 per share ("Shares"),
are available for subscription as described in the Fund's prospectus dated May
21, 1996 (the "Prospectus").
Pursuant to the laws of Maryland, the Fund's jurisdiction of incorporation,
the Board of Directors of the Fund has adopted By-Laws of the Fund that do not
require annual meetings of Fund shareholders. The absence of a requirement
that the Fund hold annual meetings of the Fund's shareholders reduces Fund
expenses. Meetings of shareholders will be held when required by the
Investment Company Act of 1940, as amended (the "Act") or Maryland law or when
called by the Chairman of the Board of Directors, the President or
shareholders owning 10% of outstanding Fund shares. The cost of any such
notice and meeting will be borne by the Fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND METHODS
The Fund's principal investment objective is described in the Prospectus.
Money Market Instruments. For temporary defensive purposes or in order to
earn a return on available cash balances pending investment or reinvestment,
the Fund may invest its assets in customary, interest-bearing accounts
maintained with financial institutions, in short-term debt securities of
United States companies or in debt securities of the United States government
or its agencies or instrumentalities, as well as in other money market
instruments. Such money market instruments include, but are not limited to,
negotiable or non-negotiable or short-term deposits with United States banks,
high quality commercial paper and repurchase agreements maturing within seven
days with domestic dealers, banks and other financial institutions deemed to
be creditworthy by the Adviser. Short-term debt securities and commercial
paper generally are of high quality.
Repurchase Agreements. A repurchase agreement customarily obligates the
seller at the time it sells securities to the Fund to repurchase the
securities at a mutually agreed time and price, in the case of the Fund's
transactions within seven days. The total amount received by the Fund on
repurchase would be calculated to exceed the price paid by the Fund,
reflecting an agreed upon market rate of interest for the period of time to
the settlement date, and would not necessarily be related to the interest rate
on the underlying securities. The underlying securities are ordinarily United
States government securities, but may consist of other securities in which the
Fund is permitted to invest. Repurchase agreements will be fully
collateralized at all times. However, to the extent that the proceeds from any
sale upon default in the obligation to repurchase is less than the repurchase
price, the Fund would suffer a loss. Also, the Fund might incur costs and
encounter delays in liquidating collateral.
Lending Portfolio Securities. The Fund may lend its portfolio securities to
brokers, dealers and financial institutions when secured by collateral
maintained on a daily marked-to-market basis in an amount equal to
3
<PAGE>
at least 100% of the market value, determined daily, of the loaned securities.
The Fund may at any time call the loan and obtain the return of the securities
loaned. The Fund will continue to receive the income on loaned securities and
will, at the same time, earn interest on the loan collateral, a portion of
which generally will be rebated to the borrower. Any cash collateral received
under these loans will be invested in short-term money market instruments.
Where voting or consent rights with respect to the loaned securities pass to
the borrower, the Fund will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such voting or
consent rights if the matters involved will have a material effect on the
Fund's investment in the securities loaned. The Fund intends to limit its
securities lending activities so that no more than 5% of the value of the
Fund's total assets will be represented by securities loaned. The Fund does
not currently intend to lend securities.
Foreign Investments: The Fund may invest in stocks issued by non-US
companies. Such investments may be made through the purchase of American
Depositary Receipts ("ADRs") or directly in such foreign securities.
ADRs represent an investment in shares of non-US companies but are
denominated in US dollars and usually are listed on a US stock exchange or
traded through NASDAQ. Investments in ADRs involve certain risks that
investments directly in US stocks do not. Because the underlying security
represented by an ADR is normally denominated in a currency other than the US
dollar, the value of the ADR as measured in US dollars will be affected
favorably or unfavorably by movements in currency exchange rates. This may
occur even though the price of the underlying security in the foreign currency
in which the security trades directly does not vary. Dividends will normally
be declared in the currency in which the underlying security is denominated.
The amount of dividends received by the holder of an ADR as measured in US
dollars will be affected favorably or unfavorably by movements in currency
exchange rates because the dividend will normally be converted into US dollars
before payment. Also, dividends declared on the underlying investment
represented by an ADR generally will be subject to withholding taxes at the
source.
Investments directly in the securities of foreign companies present special
risks and considerations not typically associated with investing in the United
States in US securities and ADRs. In addition to the exchange rate risks and
withholding tax issues described above for ADRs, investments directly in
foreign securities may be subject to withholding taxes on capital gains. Other
risks and considerations can include political and economic instability,
different accounting and financial reporting standards, less available public
information regarding companies, exchange control and capital flow regulations
and different tax treatment. The securities markets on which such foreign
securities trade may be less liquid and settlement delays may be experienced,
resulting in losses to the Fund and periods when such assets are unavailable
to pay redemptions.
The Fund does not intend to enter into any type of transaction to hedge
currency fluctuations.
FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies which can be
changed only with the approval of shareholders holding a majority of the total
number of outstanding Shares. As defined in the Act, this means the lesser of
(a) 67% or more of the Shares of the Fund at a meeting where more than 50% of
the outstanding Shares is present in person or by proxy or (b) more than 50%
of the outstanding Shares of the Fund.
4
<PAGE>
The following is a complete list of the Fund's fundamental investment
policies:
(1) The Fund will not make short sales of securities, invest in warrants
or put or call options (or combinations thereof) or purchase any securities
on margin, except for short-term credits necessary for clearance of
portfolio transactions.
(2) The Fund will not issue senior securities;
(3) The Fund may borrow money for investment purposes in amounts not in
excess of 33 1/3% of its total assets (including the amount borrowed) and
the Fund may also borrow up to 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
(4) The Fund will not underwrite securities issued by others except to
the extent the Fund may be deemed to be an underwriter, under Federal
securities laws, in connection with the disposition of its portfolio
securities.
(5) The Fund will not invest more than 5% of the value of its total
assets in securities which cannot be readily resold to the public because
of legal or contractual restrictions or because there are no market
quotations readily available or in other "illiquid" securities (including
non-negotiable deposits with banks and repurchase agreements of a duration
of more than seven days). For purposes of this policy, illiquid securities
do not include securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 that have been determined to be liquid by the
Fund's Board of Directors based upon the trading markets for such
securities.
(6) The Fund will not invest more than 5% of the value of its total
assets in securities of companies which, including their predecessors, have
a record of less than three years' continuous operation.
(7) The Fund will not invest more than 25% of the value of its total
assets in any one industry or group of related industries.
(8) The Fund will not invest in real estate, real estate limited
partnerships or real estate mortgage loans, although the Fund may invest in
marketable securities which are secured by real estate and marketable
securities of companies which invest or deal in real estate or real estate
mortgage loans.
(9) The Fund will not engage in the purchase or sale of commodities or
commodity futures contracts or invest in oil, gas or other mineral
exploration or development programs, although the Fund may invest in
securities issued by companies that engage in such activities.
(10) The Fund will not make loans, except that this restriction shall not
prohibit (1) the purchase of publicly distributed debt securities in
accordance with the Fund's investment objectives and policies, (2) the
lending of portfolio securities and (3) entering into repurchase
agreements.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in the percentage beyond the specified limit
resulting from a change in value or net assets will not be considered a
violation of the foregoing restrictions. Whenever any investment policy or
investment restriction states a maximum percentage of the Fund's assets which
may be invested in any security or other property, it is intended that such
maximum percentage limitation be determined immediately after and as a result
of the acquisition of such security or property.
OTHER INVESTMENT POLICIES
The Fund does not intend to invest in the securities of other investment
companies.
5
<PAGE>
FIGURES ON TOTAL RETURN
From time to time the Fund may advertise its total return. These
calculations will assume reinvestment of all income dividends and capital
gains distributions during the period.
COMPARISON OF PORTFOLIO PERFORMANCE
From time to time the Fund may utilize various financial publications'
rankings in certain advertisements for the purpose of assisting investors in
the evaluation of an investment in the Fund.
PORTFOLIO TURNOVER
Although the Fund will not make a practice of short-term trading, purchases
and sales of securities will be made whenever appropriate, in the Adviser's
view, to achieve the objective of the Fund to provide long-term growth of
capital. The rate of portfolio turnover is calculated by dividing the lesser
of the cost of purchases or the proceeds from sales of portfolio securities
(excluding short-term United States government obligations and other short-
term investments) for the particular fiscal year by the monthly average of the
value of the portfolio securities (excluding short-term United States
government obligations and short-term investments) owned by the Fund during
the particular fiscal year. The Fund's rate of portfolio turnover during the
Fund's first fiscal year (February 28, 1994 to December 31, 1994) was 9%. The
Fund's rate of portfolio turnover during the fiscal year ended December 31,
1995 was 75.69%. The increase in the rate of portfolio turnover in fiscal 1995
over the rate for the 10 months ended December 31, 1994 was due principally to
portfolio transactions resulting from an increase, in large measure due to
subscriptions, in net assets during fiscal 1995 of more than $7.5 million over
year end 1994. The Fund expects that its rate of portfolio turnover generally
will not exceed 50% in future years. The rate of portfolio turnover is not a
limiting factor when the Adviser deems portfolio changes appropriate to
achieve the Fund's stated objective.
6
<PAGE>
MANAGEMENT OF THE FUND
The following table sets forth the principal occupation or employment of the
members of the Board of Directors and principal officers of the Fund.
<TABLE>
<CAPTION>
POSITION HELD WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE FUND DURING PAST FIVE (5) YEARS
---------------- ------------------ --------------------------
<C> <C> <S>
William P. Stewart*..... President and Director and Chairman of the
Director Board of the Adviser. Mr.
Stewart was the founder of the
Adviser and continues to be a
portfolio manager. He is also
a director and controlling
person of the
Adviser.
Robert L. Schwartz*..... Treasurer, Secretary Director and Vice Chairman of
and the Adviser. Mr. Schwartz has
Director been a portfolio manager with
the Adviser since 1981. He is
also currently a shareholder,
director and controlling per-
son of the Adviser.
Antoine Bernheim........ Director Mr. Bernheim is President of
Dome Capital Management, Inc.
and President of The U.S. Off-
shore Funds Directory Inc.
June Eichbaum........... Director Ms. Eichbaum has since 1992
been a principal of Major, Ha-
gan & Africa (New York) Inc.
From 1987 until 1991, Ms.
Eichbaum was a managing direc-
tor of Smythe, Masterson &
Judd.
William Talcott May..... Director Mr. May has since 1988 held
various officerships and di-
rectorships in May family con-
trolled companies engaged in
the real estate brokerage and
residential property manage-
ment business.
Stephen E. Memishian*... Vice President Director and Chief Operating
Officer of the Adviser since
1989.
Kevin S. Aarons*........ Assistant Treasurer Compliance and Administrative
and Assistant Officer of the Adviser since
Secretary 1991 and Chief Financial Offi-
cer of the Adviser since Janu-
ary 1994. Mr. Aarons served as
Chief Financial Officer of Co-
lonial Consulting Corporation
from 1989 until 1991.
</TABLE>
- --------
* An "interested person" of the Fund as defined in the Act.
The Fund makes no payments to any of its officers and employees for services
and the Fund does not pay any retirement benefit to any person. However, each
of the Fund's directors who is not an officer or employee of the Adviser is
paid by the Fund a fee of $1,250 for each meeting of the Fund's Board of
Directors and for each meeting of any committee of the Board of Directors that
they attend (other than those attended by telephone conference call). Each
director is reimbursed by the Fund for any expenses he may incur by reason of
attending such meetings or in connection with services he may perform for the
Fund.
No director of the Fund who is not an officer or employee of the Adviser
attended (other than by telephone conference call) any meeting of the Fund's
Board of Directors in 1995; accordingly, no such person received any
compensation or reimbursement of expenses from the Fund for the year ended
December 31, 1995.
7
<PAGE>
As of March 13, 1996, the following persons owned 5% or more of the
outstanding Shares of the Fund: Andrews & Company, whose address is c/o Chase
Manhattan Bank, Mutual Funds Department, 1211 Sixth Avenue, New York, NY
10036, owned 10.49% of the outstanding Shares both beneficially and of record;
Jonathan Scheuer, whose address is 375 Park Avenue, New York, NY 10152, owned
17.57% of the outstanding Shares both beneficially and of record.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Fund's Prospectus, W.P. Stewart & Co., Inc. (the
"Adviser") is the Fund's investment adviser pursuant to an agreement between
the Adviser and the Fund (the "Investment Advisory Services Agreement") and,
as such, manages the Fund's portfolio. The Adviser is a Delaware corporation
which was incorporated in 1973. The Adviser is registered under the Investment
Advisers Act of 1940 as an investment adviser and is registered under the
Securities Exchange Act of 1934 as a broker-dealer. Its business office is
located at 527 Madison Avenue, 21st Floor, New York, New York 10022-4212, its
telephone number is (212) 750-8585 and its facsimile number is (212) 980-8039.
The persons named below are affiliated with the Fund and are also affiliated
persons of the Adviser. The capacity in which such persons are affiliated with
the Fund and the Adviser is also indicated.
<TABLE>
<CAPTION>
NAME OFFICE HELD WITH THE FUND OFFICE HELD WITH THE ADVISER
---- ------------------------- ----------------------------
<S> <C> <C>
William P. Stewart.... President and Director Director and Chairman of the Board
Robert L. Schwartz.... Secretary, Treasurer and Director Director and Vice Chairman
Stephen E. Memishian.. Vice President Director and Chief Operating Officer
Kevin S. Aarons....... Assistant Treasurer and Chief Financial Officer and
Assistant Secretary Compliance and Administrative Officer
</TABLE>
The Adviser receives quarterly advisory fees payable in arrears as of the
first day of each calendar quarter at an annual rate equal to 1.5% of the net
asset value of the Fund, as determined on the last day of the preceding
calendar quarter (after giving effect to subscriptions and redemptions
effective on such date). During the Fund's first fiscal year (February 28,
1994 through December 31, 1994), the Adviser earned total advisory fees of
$26,067.51; for the fiscal year ended December 31, 1995, the Adviser earned
total advisory fees of $121,866. No fee was paid to the Adviser for the 10
month period ended December 31, 1994 due to the expense reimbursement; for the
fiscal year ended December 31, 1995, the fees paid to the Adviser were reduced
to $36,141 due to the expense reimbursement.
In addition to the quarterly advisory fee, the Fund bears all costs and
expenses directly related to investment transactions effected and positions
held for the Fund's account, including brokerage commissions, custodial fees
and administrative fees. Also included are the fees and expenses of any
accountants or attorneys engaged on behalf of the Fund, the costs and expenses
of holding any meetings of shareholders of the Fund and such other types of
expenses as may be approved from time to time by the Board of Directors, other
than those required to be borne by the Adviser. If any such expenses are
incurred jointly for the Fund's account together with the Adviser's own
account or the account of any other persons in addition to the Fund, the
Adviser will allocate the total expense among the Fund and such other persons
and will determine the portion reimbursable by the Fund in a fair and
reasonable manner. Except for the foregoing, the Adviser pays all of its own
operating and overhead costs and those of the Fund, including costs incurred
by the Adviser to provide office space to the Fund or which it may incur in
the course of providing bookkeeping and other services to the Fund, and costs
and expenses arising in connection with the ongoing solicitation of
subscriptions for Shares.
8
<PAGE>
The Adviser has borne all costs and expenses associated with the
organization and initial registration of the Fund and its Shares.
To the extent that the Fund's total expenses, excluding taxes, brokerage
expenses, interest and certain extraordinary expenses, in any fiscal year
exceed the permissible limits applicable to the Fund in any state in which its
shares are then qualified for sale, the Adviser will, quarterly, waive its
fees and, if necessary to meet the limit, reimburse the Fund. The current most
stringent limit imposed by a state is equal to the sum of (a) 2.5% of the
first $30,000,000 of the Fund's average net asset value, (b) 2.0% of the next
$70,000,000 of the Fund's average net asset value and (c) 1.5% of the excess
Fund's average net asset value in excess of $100,000,000. However, expenses
attributable to certain payments may be excluded from the calculation of
expenses for purposes of the limitation pursuant to waivers or orders granted
to the Fund by relevant state securities authorities.
Under the Investment Advisory Services Agreement, the Adviser is responsible
for the management of the Fund's portfolio and constantly reviews its holdings
in the light of its own research analyses and those of other relevant sources.
Reports of portfolio transactions are given regularly to the directors of the
Fund, who review the Fund's portfolio at meetings held at least four times a
year.
The Investment Advisory Services Agreement has a two-year term and
thereafter continues in effect from year to year so long as its continuance is
specifically approved at least annually by the Directors or by a vote by the
holders of a majority of the outstanding Shares. In addition, the terms of the
Investment Advisory Services Agreement and the renewals thereof must be
approved annually by the vote of a majority of the Independent Directors. The
Investment Advisory Services Agreement will terminate automatically in the
event of its assignment (as defined in the Act) and may be terminated without
penalty on sixty days' written notice at the option of either the Fund or the
Adviser or by a vote of the holders of a majority of the outstanding Shares.
POTENTIAL CONFLICTS OF INTEREST
The Adviser manages and expects to continue to manage other investment and
trading accounts with objectives similar in whole or in part to those of the
Fund, including other collective investment vehicles which may be managed or
sponsored by the Adviser and in which the Adviser may have an equity interest.
The Investment Advisory Services Agreement requires that the Adviser act in
a manner that it considers fair, reasonable and equitable in allocating
investment opportunities to the Fund, but does not otherwise impose any
specific obligations or requirements concerning the allocation of time, effort
or investment opportunities to the Fund or any restrictions on the nature or
timing of investments for the account of the Fund and for the Adviser's own
account or for other accounts which the Adviser may manage. The Adviser is not
obligated to devote any specific amount of time to the affairs of the Fund and
is not required to accord exclusivity or priority to the Fund in the event of
limited investment opportunities.
When the Adviser determines that it would be appropriate for the Fund and
one or more of its other investment accounts to participate in an investment
opportunity, the Adviser will seek to execute orders for all of the
participating investment accounts, including the Fund, on an equitable basis.
If the Adviser has determined to invest at the same time for more than one of
the investment accounts, the Adviser may place combined orders for all such
accounts simultaneously and if all such orders are not filled at the same
price, it may average the prices paid. Similarly, if an order on behalf of
more than one account cannot be fully executed under prevailing market
conditions, the Adviser may allocate the investments among the different
accounts on a basis that it
9
<PAGE>
considers equitable. Situations may occur where the Fund could be
disadvantaged because of the investment activities conducted by the Adviser
for other investment accounts.
The Adviser selects the brokers to be used for the Fund's transactions, and
the Adviser is permitted to act as broker for the Fund. See "Investment
Objectives, Methods and Policies--Brokerage and Custody." By reason of the
brokerage fees the Adviser would earn by acting as broker to the Fund, the
Adviser will have an incentive to select itself as broker for the Fund.
DUTY OF CARE
The Articles of Incorporation of the Fund provide that no director or
officer of the Fund shall have any liability to the Fund or its shareholders
for damages in the absence of malfeasance, bad faith, gross negligence or
recklessness or as otherwise required by the Maryland General Corporation Law.
The Articles of Incorporation and By-Laws of the Fund contain provisions for
the indemnification by the Fund of its directors and officers to the fullest
extent permitted by law.
The Investment Advisory Services Agreement provides that the Adviser shall
not be liable to the Fund or its shareholders for any loss or damage
occasioned by any acts or omissions in the performance of its services as
Adviser in the absence of misconduct, recklessness or gross negligence or as
otherwise required by law.
CUSTODY OF PORTFOLIO
The Fund's securities and other assets will normally be held in the custody
of State Street Bank and Trust Company, which has its principal place of
business at 225 Franklin Street, Boston, Massachusetts 02110 ("State Street").
State Street also maintains certain records for the Fund required by the Act
and applicable federal and state tax laws, keeps books of account, renders
reports and statements, including financial statements, and disburses funds in
payment of the Fund's bills and obligations.
State Street is reimbursed by the Fund for its disbursements, expenses and
charges incurred in connection with the foregoing services and receives a fee
from the Fund based on a fee schedule in effect from time to time (which is
based on the net asset value of the Fund). The Fund's agreement with State
Street provides for termination by either party on 30 days' written notice.
SHAREHOLDER SERVICING AGENT
In addition to acting as custodian, State Street provides certain
shareholder services to the Fund including disbursing dividends and
distributions, disbursing redemption proceeds, processing subscription
applications and serving as transfer agent and registrar.
INDEPENDENT AUDITORS
The Fund has designated Lopez Edwards Frank & Co., LLP, 1 Penn Plaza, New
York, New York 10119-0141, as the initial independent auditors of the Fund.
They audit the Fund's annual financial statements and render reports thereon,
which are included in the Annual Report to Shareholders. In addition, the
Fund's auditors will review certain filings of the Fund with the Securities
and Exchange Commission and will prepare the Fund's federal and state
corporation tax returns.
10
<PAGE>
DISTRIBUTION OF THE FUND'S SHARES
The Fund is offering its Shares directly and has no underwriter, except that
the Adviser will act as placement agent where required by local law. The
Adviser may recommend an investment in the Fund but receives no fee for doing
so.
COMPUTATION OF NET ASSET VALUE
For a discussion of how net asset value is determined see "Computation of
Net Asset Value" in the Prospectus. The Fund computes its net asset value once
daily on days the New York Stock Exchange, Inc. is open for trading. The
Exchange is closed on the following days: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. For a discussion of the determination of net asset value, see
the Fund's Prospectus.
PURCHASE OF SHARES
The methods of buying and selling Shares are described in the Fund's
Prospectus. There are no sales charges.
The Fund may accept securities in payment of Shares provided such
securities:
(a) meet the investment objectives and policies of the Fund;
(b) are acquired by the Fund for investment and not for resale;
(c) are liquid securities which are not restricted as to transfer either by
law or liquidity of market; and
(d) have a value which is readily ascertainable (and not established only by
valuation procedures) as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ.
REDEMPTIONS
The Fund may require the redemption of a shareholder's Shares in full at net
asset value (less a 0.5% redemption fee) if the Fund determines or has reason
to believe that ownership of such Shares by such shareholder will cause the
Fund to be in violation of, or require registration of any such Shares or
subject the Fund to additional registration or regulation under, the
securities laws of any of the United States or any other relevant jurisdiction
or the rules of any self-regulatory organization applicable to the Adviser.
Any such mandatory redemption shall be effective as of the date designated by
the Fund in a notice to the shareholder (which shall be not less than ten
calendar days after delivery or mailing of the notice of mandatory
redemption).
TAX STATUS
The Prospectus of the Fund contains detailed information about the Federal
income tax status of the Fund and the Federal income tax consequences of
ownership of Shares. Certain supplementary information is presented below.
11
<PAGE>
In order to qualify as a regulated investment company for a taxable year
under the laws in effect as of the date of this Statement of Additional
Information, the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to loans of stock
or securities, gains from the sale or other disposition of stock or
securities, foreign currency gains related to investments in stock or
securities and other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to the business of
investing in stock, securities or currency; (b) derive less than 30% of its
gross income from the sale or other disposition of stock or securities and
options, futures, forward contracts and foreign currencies held for less than
three months (excluding gains from certain hedging transactions and from
foreign currencies (and options, futures and forward contracts on foreign
currencies) that are directly related to the Fund's principal business of
investing in stocks or securities or options or futures thereon); and (c)
diversify its holdings as described in the Prospectus under the caption
"Investment Objectives, Methods and Policies--Other Investment Policies."
Distributions of net investment income and net realized capital gains will
be taxed in the manner as described in the Prospectus. Different tax
treatment, including a penalty on pre-retirement distributions, is accorded
accounts maintained as IRAs. Shareholders should consult their tax advisors
for more information.
Any loss realized by a shareholder on the redemption or other disposition of
Shares which he has held for six months or less will be treated for United
States Federal income tax purposes as a long-term capital loss to the extent
of any capital gains distributions received by the shareholder with respect to
such Shares; any loss in excess of such distribution will be treated as short-
term capital loss. Any loss realized on a sale or exchange of Shares will be
disallowed to the extent that the Shares disposed of are replaced (including,
for example, by receipt of dividends paid in Shares) within a 61-day period
beginning 30 days before and ending 30 days after the date the Shares are
disposed of. In such a case, a shareholder will adjust the basis of the Shares
acquired to reflect the disallowed loss. Any corporate shareholder should
consult its tax advisor regarding the possibility that its basis in its Shares
may be reduced, by reason of "extraordinary dividends" received with respect
to the Shares, for the purpose of computing its gain or loss on the Shares.
Corporate shareholders which borrow to acquire or retain Shares may be denied
a portion of the dividends-received deduction.
Since, at the time of an investor's purchase of Shares, a portion of the per
share net asset value by which the purchase price is determined may be
represented by realized or unrealized appreciation in the Fund's portfolio or
undistributed income of the Fund, subsequent distributions (or a portion
thereof) on such Shares may in reality represent a return of his capital.
However, such a subsequent distribution would be taxable to such investor even
if the net asset value of his Shares is, as a result of the distributions,
reduced below his cost for such Shares. Prior to purchasing Shares of the
Fund, an investor should carefully consider such tax liability which he might
incur by reason of any subsequent distributions of net investment income and
capital gains.
The Fund would be subject to a four percent non-deductible excise tax on
certain amounts if they are not distributed (or not treated as having been
distributed) on a timely basis in accordance with a calendar year distribution
requirement. The Fund intends to distribute to shareholders each year an
amount sufficient to avoid the imposition of such excise tax.
In addition to Federal income taxes, shareholders of the Fund may be subject
to state, local or foreign taxes on distributions from the Fund and on
repurchases or redemptions of Shares. Shareholders should consult their tax
advisors as to the application of such taxes and as to the tax status of
distributions from the Fund and repurchases or redemptions of Shares in their
own states and localities. Non-United States shareholders, present in the
United States for substantial periods of time during a taxable year,
maintaining an office or "tax home"
12
<PAGE>
in the United States, or conducting business in the United States with which
their Shares may be "effectively connected," should consult their tax advisors
as to whether such presence or such activities may subject them to United
States tax as a United States shareholder or otherwise. Each shareholder who
is not a United States person should also consult his tax advisor regarding
the United States and foreign tax consequences of ownership of Shares of the
Fund.
ERISA CONSIDERATIONS
Persons who are fiduciaries with respect to an employee benefit plan subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including a qualified retirement plan, Keogh plan or other arrangement ("ERISA
Plan") should consider, among other things, the matters described below before
determining whether to invest in the Fund.
ERISA imposes certain general and specific responsibilities on persons who
are fiduciaries with respect to an ERISA Plan, including prudence,
diversification, prohibited transaction and other standards. In determining
whether a particular investment is appropriate for an ERISA Plan, Department
of Labor regulations provide that a fiduciary of an ERISA Plan must give
appropriate consideration to, among other things, the role that the investment
plays in the ERISA Plan's portfolio, taking into consideration whether the
investment is designed reasonably to further the ERISA Plan's purposes, the
diversification of the portfolio, an examination of the risk and return
factors, the portfolio relative to the anticipated cash flow needs of the
ERISA Plan and the projected return of the total portfolio relative to the
ERISA Plan's funding objectives. Before investing the assets of an ERISA Plan
in the Fund, a fiduciary should determine whether such an investment is
consistent with its fiduciary responsibilities and the foregoing regulations.
As described in Department of Labor regulations, a fiduciary may need to take
other factors into consideration if the ERISA Plan permits participants to
direct the investment of their accounts and the Fund is offered as an
investment alternative under the ERISA Plan. If a fiduciary with respect to
any such ERISA Plan breaches his responsibilities with regard to selecting an
investment or an investment course of action for such ERISA Plan, the
fiduciary may be held personally liable for losses incurred by the ERISA Plan
as a result of such breach.
The provisions of ERISA are subject to extensive and continuing
administrative and judicial interpretation and review. The discussion of ERISA
contained in this Statement of Additional Information is, of necessity,
general and may be affected by future publication of regulations and rulings.
Potential investors should consult with their legal advisors regarding the
consequences under ERISA of the acquisition and ownership of Shares.
BROKERAGE ALLOCATION
The Adviser is responsible for the placement of the portfolio transactions
of the Fund and the negotiation of any commissions paid on such transactions
when not effected by the Adviser acting as broker. Portfolio securities
transactions will normally be effected through brokers (including the Adviser)
on securities exchanges or directly with the issuer or an underwriter or
market maker for the securities. Purchases and sales of portfolio securities
through brokers involve a commission to the broker. Purchases and sales of
portfolio securities with dealers serving as market makers include the spread
between the bid and the asked prices. In placing portfolio transactions, the
Adviser will seek to obtain the best execution for the Fund, taking into
account such factors as price (including the applicable dealer spread or
commission, if any), size of order, difficulty of execution, operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. The Adviser
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will conduct any brokerage services it performs for the Fund in compliance
with the requirements of Section 17(e)(2) of the Act, and the Board of
Directors of the Fund has adopted procedures designed to ensure such
compliance.
As broker, the Adviser will charge the Fund commissions not exceeding the
rates charged to the Adviser's institutional customers for similar trades at
the time of execution. During the Fund's first fiscal year (February 28, 1994
through December 31, 1994), the Fund paid to the Adviser $6,018 in commissions
as broker on trades of portfolio securities. During the fiscal year ended
December 31, 1995, the Fund paid the Adviser $29,207.40 in commissions. The
increase in commissions in fiscal year 1995 over the commissions paid during
the 10 month period ended December 31, 1994 was due to the fact that the Fund
was in operation for all 12 months in fiscal year 1995 and the Fund's net
assets increased significantly in fiscal year 1995 in large part due to new
subscription payments which needed to be invested. The brokerage commissions
paid to the Adviser during the Fund's first fiscal year and during fiscal year
1995 constituted 100% of the brokerage commissions paid by the Fund during
those periods; the Fund effected all of its trades during the periods through
the Adviser as broker. The Adviser will conduct any brokerage services it
performs for the Fund in accordance with all legal requirements.
Any brokerage transactions not executed by the Adviser (which the Adviser
believes will be on an exceptionable basis only) will be executed by other
brokers and dealers selected by the Adviser on the basis of a variety of
factors, including the following: the ability to effect prompt and reliable
executions at favorable prices; the operational efficiency with which
transactions are effected; the financial strength, integrity and stability of
the broker; the quality, comprehensiveness and frequency of available research
and related services considered to be of value; and the competitiveness of
commission rates in comparison with other brokers satisfying the Adviser's
other selection criteria. Research and related services furnished by brokers
may include written information and analyses concerning specific securities,
companies or sectors; market, financial and economic studies and forecasts;
statistics and pricing or appraisal services, as well as discussion with
research personnel, along with hardware, software, data bases and other news,
technical and telecommunications services and equipment utilized in the
investment management process. Subject to seeking best execution, the Adviser
also may consider referrals of potential investors in the Fund as a factor in
the selection of brokers. The Adviser is authorized to pay higher prices for
the purchase of securities from or accept lower prices for the sale of
securities to brokerage firms that provide it with such investment and
research information or to pay higher commissions to such firms if the Adviser
determines such prices or commissions are reasonable in relation to the
overall services provided. Research and related services provided by broker-
dealers used by the Fund may be utilized by the Adviser or its affiliates in
connection with its investment services for other accounts and, likewise,
research and related services provided by broker-dealers used for transactions
of other accounts may be utilized by the Adviser in performing its services
for the Fund. The Adviser will make appropriate allocations so that it bears
the cost of any such services used for purposes other than for investment
management, for example, for administration.
FINANCIAL STATEMENTS
The Fund will furnish to its shareholders annual reports containing
financial statements examined by the Fund's independent auditors as soon as
practicable after the end of the fiscal year of the Fund. The Fund will also
furnish quarterly reports reviewing the Fund's results for such quarter. The
Fund will furnish, without charge, a copy of its latest Annual Report to
Shareholders upon request.
The financial statements and the Report of the Fund's Independent
Accountants for the Fund's first fiscal year (February 28, 1994 through
December 31, 1994) are incorporated into this Statement of Additional
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Information from the Fund's Annual Report to Shareholders for the period ended
December 31, 1994. The Fund's Annual Report to Shareholders can be obtained
free of charge upon request in writing or by telephoning the Fund. Contact
information for the Fund is on page 15 of this Statement of Additional
Information (immediately below).
When the Fund advertises its performance, the calculations are made in the
same manner as in the Fund's financial statements included in the Fund's
Annual Report to Shareholders.
The financial statements and average annual total return calculation for the
Fund's first fiscal year and for the fiscal year ended December 31, 1995 are
included in the Annual Report to Shareholders for the year ended December 31,
1995 and have been incorporated herein by reference in reliance with respect
to the Financial Statements, on the report of Lopez Edwards Frank & Co., LLP,
independent auditors, given on the authority of that firm as experts in
auditing and accounting.
CONTACT INFORMATION
For further information regarding the Fund or to request copies of the
Fund's Prospectus or Registration Statement free of charge, telephone or write
to W.P. Stewart & Co., Inc., 527 Madison Avenue, New York, New York 10022,
Telephone: 212-750-8585, Facsimile: 212-758-7347.
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