<PAGE>
PROSPECTUS
W.P. STEWART & CO. GROWTH FUND, INC.
----------------
Investment Adviser
W.P. STEWART & CO., INC.
527 MADISON AVENUE
NEW YORK, NEW YORK 10022
----------------
W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is a non-diversified
mutual fund. The Fund's principal investment objective is capital gains. The
Fund invests primarily in common stocks listed on the New York Stock Exchange,
Inc. THE FUND MAY BORROW MONEY; THIS WILL CREATE AN OPPORTUNITY FOR INCREASED
NET INCOME BUT ALSO WILL INVOLVE SPECIAL RISKS. INVESTORS SHOULD THINK
CAREFULLY ABOUT THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE
"INVESTMENT OBJECTIVES, METHODS AND POLICIES--BORROWING" AND "RISK
CONSIDERATIONS." There can be no certainty that the Fund will achieve its
investment objectives.
This Prospectus sets forth concisely the information about the Fund that you
ought to know before investing. This Prospectus should be kept for further
reference.
Additional information about the Fund, including a Statement of Additional
Information dated May 29, 1997, 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 NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
May 29, 1997
<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. YOU
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.
YOU SHOULD NOT CONSIDER THE CONTENTS OF THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE FUND'S REGISTRATION STATEMENT AS LEGAL, TAX OR
FINANCIAL ADVICE.
2
<PAGE>
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 a non-diversified mutual fund 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 gains. 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 $6.5
billion in assets. See "Management--The
Investment Adviser."
Risk Factors................ General. There can be no certainty that the Fund
will achieve its investment objective. Because
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 price of the Fund's shares may be
more volatile than a fund investing in equity
securities and non-equity securities such as
fixed income securities. See "Risk
Considerations" on page 11.
Borrowing. The Fund may borrow money for
investment purposes up to 33 1/3% of the Fund's
total assets. The Fund will borrow only when the
Adviser believes borrowing will benefit the Fund
after taking account of the risks relating to
borrowing. As a result of the use of borrowing,
the Fund's net asset value and yield are expected
to be more volatile than would be the case if
borrowing were not used. The Fund expects it will
borrow only from banks. If the income derived
from borrowing is more than the interest and
other expenses the Fund pays in connection with
such borrowing, the Fund's net income will be
greater than if borrowing were not used. On the
other hand, if the income obtained is not
sufficient to cover the cost of the borrowing,
the net income of the Fund will be less than if
borrowing were not used, and therefore the amount
of money distributed 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
4
<PAGE>
invest more than 5% of the value of its assets in
the securities of any single issuer, subject to
the diversification requirements of subchapter M
of the Internal Revenue Code of 1986, as amended.
Because the Fund invests a relatively high
percentage of its assets in the securities of a
limited number of issuers, the Fund may be more
affected by 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 sold on every Business
Day for a price equal to their net asset value.
See "Net Asset Value Calculation." You 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;
this charge is an allowance for actual
transaction costs and other expenses of
processing the redemption. The Fund intends to
pay out to shareholders 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 you
tell us otherwise. See "Redemptions and
Distributions--Dividends and Distributions."
Fees and Expenses........... The Adviser receives quarterly advisory fees
payable after the end of each quarter 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
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................... None
Maximum Deferred Sales Load........................................... None
Maximum Sales Load Imposed on Reinvested Dividends.................... None
Redemption Fee (as a percentage of the amount redeemed, if applica-
ble)................................................................. 0.50%
Exchange Fee.......................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)
Management Fees/1/ (After Waiver)..................................... 1.34%
12b-1 Fees............................................................ None
Other Expenses (total)................................................ 1.16%
----
Legal, Audit and Insurance..................................... 0.00%
Custodial, Shareholder Servicing,
Miscellaneous................................................. 1.16%
Total Fund Operating Expenses......................................... 2.50%
====
</TABLE>
- --------
/1The/management fee payable to the Adviser is significantly higher 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 included in the Fee Table is to assist you in understanding
the various costs and expenses that you 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 management fee waiver, total Fund operating
expenses would have been 3.03% of 1996 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
<PAGE>
CONDENSED FINANCIAL INFORMATION
Financial and performance information relating to the year ended December 31,
1996 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, 1996. 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
the beginning of the Fund's operations (February 28, 1994) through December 31,
1996, 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, 1996 is incorporated into this Prospectus from the Fund's
Annual Report to Shareholders, for the year ended December 31, 1996. 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 to earn capital gains for
shareholders. 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 NASDAQ Stock Market Inc. ("NASDAQ"). The Fund permits investors to
participate in a professionally-managed portfolio consisting primarily of
shares in a number of companies 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. The Adviser weighs
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 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, among others, negotiable or non-
negotiable 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.
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. When 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.
Borrowing: The Fund is authorized to borrow money in an amount up to 33 1/3%
of the Fund's total assets 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 borrowing only when the Adviser believes it
will benefit the Fund after taking related risks into consideration.
As a result of the use of borrowing, the net asset value of the Fund and the
yield on the Fund's portfolio likely will be more volatile than would be the
case if borrowing were not used. Borrowing also creates interest expenses for
the Fund, which will reduce the net income from the Fund's portfolio
securities. If income from securities purchased with borrowed funds exceeds
the interest and other expenses the Fund pays in connection with such
borrowing, the Fund's net income will be greater than if borrowing were not
used. On the other hand, if the income from the securities purchased with
borrowed funds is not sufficient to cover the cost of the borrowing, the net
income of the Fund will be less than if borrowing were not used, and therefore
the amount to be distributed to stockholders will be reduced. The Fund expects
that its borrowing 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 borrowing 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, 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 applicable 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 difference
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.
The Fund's rate of portfolio turnover for the calendar year ended December
31, 1996 was 76.0%.
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: 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 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 is 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 its Board of Directors, a majority of whom are not "interested
persons" (as defined in the Act) of the Adviser (the "Independent Directors").
THE INVESTMENT ADVISER
The Fund's investments 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 is
responsible 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 in this Prospectus and the
supervision of the Board of Directors.
The arrangements with the Adviser require that all investment decisions be
made by committee, and no one 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 will remain in effect from year
to year so long as its renewal is specifically approved at least 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'
notice at the option of either the Fund or the Adviser. 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, 1996 is incorporated into this Prospectus from the Fund's
Annual Report to Shareholders, for the year ended December 31, 1996. 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.
W.P. Stewart & Co. Growth Fund, Inc.
Comparison of a Hypothetical $100,000 Investment
W.P. Stewart & Co. Growth Fund vs. S&P 500*
[GRAPH]
Growth Fund Growth Fund, Net S&P 500
2/28/94 100,000 100,000 100,000
12/31/94 101,060 100,550 101,396
12/31/95 129,080 128,440 138,601
12/31/96 168,630 167,790 170,480
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURN* FEBRUARY AVERAGE ANNUAL TOTAL RETURNS**
28, 1994 - DECEMBER 31, 1996
<S> <C> <C> <C>
FOR THE YEAR ENDED FROM FEBRUARY 28, 1994
W.P. Stewart & Co. Growth Fund 68.63% DECEMBER 31, 1996 TO DECEMBER 31, 1996
W.P. Stewart & Co. Growth Fund, Net 67.79% ------------------ ----------------------
S&P 500 70.48% 30.14% 19.89%
</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.
**Annual total return is calculated assuming a purchase of Shares at net asset
value at the beginning of the period, a sale at net asset value at the end of
the period, reinvestment of all dividends and distributions at net asset
value during the period and payment of the redemption fee. Past performance
results shown in the table should not be considered a representation of
future performance.
13
<PAGE>
FEES AND EXPENSES
The Adviser receives quarterly advisory fees payable at the end of 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 such 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 made and positions held
for the Fund's account, including brokerage commissions, custodial fees,
interest on borrowings and administrative fees. The Fund also pays the fees
and expenses of any accountants or attorneys engaged on behalf of the Fund,
the costs 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 such expenses, 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 arising in connection with the solicitation of subscriptions for
Shares.
State Street will receive approximate minimum annual fees as follows:
--For custodian services: $36,000
--For shareholder servicing agent: $30,000 and
--For administrator: $65,000.
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 its securities as of their last available public
sale price on a Business Day in the case of securities listed on any
established securities exchange or included in NASDAQ 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 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>
You should be aware that situations involving uncertainties as to the value
of the Fund's assets could have a negative effect on the Fund's net assets if
the Adviser's judgments regarding appropriate valuations should prove to be
wrong. Unless there is bad faith or an obvious mistake, the Adviser's net
asset value determinations are 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
You may purchase Shares each Business Day. You are required to commit a
minimum of $50,000, although the Fund may in its discretion accept
subscriptions for a lesser amount. You may subscribe for Shares by completing
and returning the attached Subscription Application and by following the
instructions set forth in the Subscription Application. The Fund can reject
any subscription. All accepted subscriptions from new investors will be made
at the net asset value of the Fund's Shares computed immediately following
receipt of payment, the Subscriber Information Form and the Subscription
Agreement (the "Subscription Documents"). Your payment cannot be accepted
until the Subscription Documents have been received. If you are already a Fund
shareholder, you need not submit Subscription Documents when purchasing
additional Shares.
The Shares are offered directly by the Fund, and no selling commissions or
other fees are payable by the Fund out of the proceeds from the sale of
Shares.
The Fund generally does not issue certificates for Shares. The Fund instead
credits your account with the number of Shares purchased. You 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 your account. Statements of account
will be mailed quarterly, showing transactions during the quarter.
REDEMPTIONS AND DISTRIBUTIONS
REDEMPTIONS
You may redeem Shares on each Business Day. You will be charged a redemption
fee equal to 0.5% of the gross redemption proceeds, representing an allowance
for actual transaction costs and other expenses of processing the redemption.
If certificates have been issued for the Shares being redeemed, your
redemption request must be accompanied by such certificates endorsed for
transfer (or accompanied by an endorsed stock power). The Fund can refuse any
requests for redemption by telephone or facsimile if it thinks any such
request may not be properly authorized. The Fund will not honor redemption
requests that are not in proper form.
The redemption price will be the net asset value of the Shares computed
immediately following the redemption request received in proper form by the
Fund, less a 0.5% redemption fee. The settlement of redemptions, including any
possible delays, is described below.
The Fund reserves the right to require the redemption of your remaining
Shares if the net asset value of such Shares is reduced to less than $10,000
due to redemptions made by you. Should the Directors elect to exercise such
right, you will receive prior written notice and you will be permitted at
least 10 calendar days to purchase additional Shares to increase your
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>
You will receive payment of the redemption price 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 sale of portfolio
securities or determination of the value of the Fund's net assets not
reasonably practicable.
You will receive notice of any suspension if you have submitted a redemption
request and you have not received your redemption payment. If you do not
withdraw your redemption request after notification of a suspension, the
redemption will be made 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 you make a written request to
the Fund for payment in cash at least five days in advance of the payment
date.
Checks issued upon your request for payment of dividends and capital gain
distributions in cash will be forwarded to you by first class mail.
TAXATION
The Fund expects to qualify for the special tax treatment relating 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 by you as ordinary income and
distributions from net long-term capital gains will be treated by you as long-
term capital gains, regardless of whether such distributions are paid in cash
or reinvested in additional Shares of the Fund. The Fund will inform you each
year of the amount and nature of any income or gain distributed to you. Your
tax liabilities for such distributions will depend on your 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>
If you are considering a redemption of Shares which would not be a complete
redemption of your interest in the Fund, you should consult your 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 is not a complete
analysis of all relevant tax rules and considerations, nor is it a complete
listing of all potential tax risks involved in purchasing or holding Shares.
You are urged to consult your own tax advisor.
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 in this Prospectus. 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 your request, the Fund will provide you, 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: 212-308-0626
* * * * *
This Prospectus is not 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 your request. You are encouraged to
consult appropriate legal and tax counsel.
18
<PAGE>
SUBSCRIPTION APPLICATION
W.P. STEWART & CO. GROWTH FUND, INC.
Subscription Instructions
BASIC SUBSCRIPTION DOCUMENTS
You may subscribe for shares of the common stock, par value $0.001 per share
("Shares"), of W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") only by
completing, signing and delivering 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 29, 1997 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 deciding whether 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 the 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 are 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 mutual fund, in addition to
the information contained in the Prospectus of the Fund dated May 29, 1997.
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. You may
obtain a copy of the Prospectus by writing or calling the Fund. Contact
information is located on page 15.
--------------
May 29, 1997
<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. You may purchase shares of the Fund, par value $0.001 per
share ("Shares"), in the manner described in the Fund's prospectus dated May
29, 1997 (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 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 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 requires 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, if 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 demand 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 foreign withholding taxes.
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 up to 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 sale 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 satisfied 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 use various financial publications' rankings
in certain advertisements for the purpose of assisting investors in deciding
whether to invest 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
fiscal year ended December 31, 1995 was 75.69% and during the fiscal year
ended December 31, 1996 was 76.0%. 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.
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.
</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 1996; accordingly, no such person received any
compensation or reimbursement of expenses from the Fund for the year ended
December 31, 1996.
7
<PAGE>
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. Assistant Treasurer and Chief Financial Officer and
Aarons.... 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; and for the fiscal year ended December 31,
1996, the Adviser earned total advisory fees of $253,000. 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 and for
the fiscal year ended December 31, 1996, the fees paid to the Adviser were
reduced to $210,000 due to the expense reimbursement.
In addition to the quarterly advisory fee, the Fund bears all costs and
expenses directly related to investment transactions made 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.
If the Fund's total expenses, excluding taxes, brokerage expenses, interest
and certain extraordinary expenses, in any fiscal year exceed 2.5% of the
Fund's average net asset value, it currently is the policy of the Adviser to
reimburse the Fund for any such excess. Such reimbursement is not required by
the Investment Advisory Services Agreement.
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 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 continuation of the Investment Advisory
Services Agreement was most recently approved on February 20, 1997. 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 give 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. By reason of the
brokerage fees the Adviser earns by acting as broker to the Fund, the Adviser
has 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
Lopez Edwards Frank & Co., LLP, 1 Penn Plaza, New York, New York 10119-0141,
serve as the 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 "Net Asset Value
Calculation" 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.
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 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 person 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
13
<PAGE>
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 and
during the fiscal year ended December 31, 1996, the Fund paid the Adviser
$53,260.30 in commissions. The increase in commissions in fiscal year 1996
over the commissions paid during fiscal year 1995 was due to the fact that the
Fund's net assets increased significantly in fiscal year 1996 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 years 1995 and 1996 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 fiscal year
14
<PAGE>
ended December 31, 1996 is incorporated into this Statement of Additional
Information from the Fund's Annual Report to Stockholders for the year ended
December 31, 1996. 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 fiscal years ended December 31, 1995 and December 31, 1996 are included
in the Annual Report to Shareholders for the year ended December 31, 1996 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: 212-308-0626.
15
