<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 "New York Stock Exchange"). There can be no certainty that the Fund
will achieve its principal investment objective.
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 October 7, 1998, 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 19 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.
----------------
October 7, 1998
<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
FINANCIAL HIGHLIGHTS........................................................ 7
THE FUND.................................................................... 8
INVESTMENT OBJECTIVE, METHODS AND POLICIES.................................. 8
Investment Objective and Methods.......................................... 8
Other Investment Methods and Policies..................................... 9
Fundamental Investment Policies........................................... 10
MANAGEMENT.................................................................. 11
The Board of Directors.................................................... 11
The Investment Adviser.................................................... 11
The Custodian, Transfer Agent and Dividend Paying Agent................... 13
FEES AND EXPENSES........................................................... 14
FUND PERFORMANCE............................................................ 15
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................. 16
NET ASSET VALUE CALCULATION................................................. 16
PURCHASE OF SHARES.......................................................... 16
REDEMPTIONS AND DISTRIBUTIONS............................................... 17
Redemptions............................................................... 17
Dividends and Distributions............................................... 18
TAXATION.................................................................... 18
ADDITIONAL INFORMATION...................................................... 19
Accountants and Legal Counsel............................................. 19
Reports to Shareholders................................................... 19
Capital Stock............................................................. 19
Inquiries................................................................. 19
</TABLE>
3
<PAGE>
SUMMARY
The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere in 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, as amended
(the "Act"). The Fund commenced operations on
February 28, 1994. See "The Fund."
Investment Objective,
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. The Fund's investment adviser uses an
appraisal method to select investment
opportunities. See "Investment Objective, Methods
and Policies."
Investment Adviser.......... W.P. Stewart & Co., Inc. (the "Adviser"), based
in New York City, is a registered investment
adviser which, together with its affiliates, as
of August 31, 1998, provided investment advice
with respect to nearly $10 billion in assets. See
"Management--The Investment Adviser."
Risk Factors................ General. There can be no certainty that the Fund
will achieve its principal 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 "Investment
Objective, Methods and Policies."
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 Fund may suffer a loss. See "Investment
Objective, Methods and Policies--Other Investment
Methods and Policies--Borrowing."
Non-Diversified Status. As a non-diversified
investment company, as defined in the Act, the
Fund may invest more than 5% of the value of its
assets in the securities of any single issuer and
may acquire
4
<PAGE>
more than 10% of the voting securities of a
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 or by any change in an issuer's
financial condition than a diversified investment
company. See "Investment Objective, Methods and
Policies."
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." The minimum
initial investment in the Fund is $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 day on
which the New York Stock Exchange is open for
trading (a "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 paid to the Fund and 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 in advance at an annual rate equal to
1.5% of the net asset value of the Fund. The Fund
is obligated to pay 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. 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)............. 0.50%
Exchange Fee........................................................ None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET AS-
SETS)
Management Fees/1/.................................................. 1.50%
12b-1 Fees.......................................................... None
Other Expenses (After Expense Reimbursement)/2/..................... 0.63%
----
Total Fund Operating Expenses (After Expense Reimbursement)/2/...... 2.13%
====
</TABLE>
- --------
/1/ The management fee payable to the Adviser is significantly higher than the
advisory fees paid by most mutual funds.
/2/ The Adviser has voluntarily agreed to waive advisory fees and/or reimburse
expenses of the Fund so that Total Fund Operating Expenses do not exceed
2.5% of the average net assets of the Fund up to $30 million, 2% of the
next $70 million of average net assets of the Fund, and 1.5% of the average
net assets of the Fund in excess of $100 million. Other Expenses and Total
Fund Operating Expenses for the fiscal year ended December 31, 1997 without
such waiver and/or reimbursement would have been 0.65% and 2.15%,
respectively, of the Fund's average net assets. Such voluntary waiver
and/or expense reimbursement is not required by the Investment Advisory
Services Agreement between the Fund and the Adviser and may be discontinued
at any time. See "Management--The Investment Adviser."
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: $27 $73 $121 $255
You would pay the following expenses on
the same investment, assuming no
redemption: $22 $67 $115 $248
</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" includes operating expenses of the Fund, such as custodial,
shareholder servicing and administrative fees. For further information see
"Fees and Expenses."
The above example is based on data for the Fund's fiscal year ended December
31, 1997. 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.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below for the six-month period ended
June 30, 1998 is unaudited. The financial information for the periods ended
December 31, 1997, 1996, 1995 and for the period from February 28, 1994 through
December 31, 1994, have been audited in conjunction with the annual audits of
the financial statements of the Fund by Lopez Edwards Frank & Co., LLP,
independent auditors. Financial statements for the six months ended June 30,
1998 and financial statements for the fiscal year ended December 31, 1997, the
independent auditors' report thereon and additional information about the
performance of the Fund are included in the Fund's most recent semi-annual and
annual reports, which have been incorporated by reference into the Statement of
Additional Information. Additional copies of the semi-annual and annual reports
may be obtained without charge by calling or by writing to the Fund at the
telephone number or address appearing under "Additional Information--
Inquiries."
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTHS FOR THE FOR THE FOR THE FEBRUARY 28,
ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1994* THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998(A) 1997 1996 1995 1994
---------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Income From Investment
Operations:
Per Share Operating Per-
formance:
Net asset value, begin-
ning of period......... $168.71 $152.65 $125.94 $101.06 $100.00
------- ------- ------- ------- -------
Net investment loss.... (1.38) (1.87) (1.81) (1.15) (0.48)
Net realized and
unrealized gain on
investments........... 37.28 38.53 40.17 29.19 1.54
------- ------- ------- ------- -------
Net increase from in-
vestment operations.... 35.90 36.66 38.36 28.04 1.06
Distributions to
shareholders from net
realized gain on
investments............ (--) (20.60) (11.65) (3.16) 0.00
------- ------- ------- ------- -------
Net asset value, end of
period................. $204.61 $168.71 $152.65 $125.94 $101.06
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN
(b).................... 21.28 % 24.69 % 30.64 % 27.73 % 1.06 %
RATIOS AND SUPPLEMENTAL
DATA:
Ratio of expenses to av-
erage net assets....... 2.12 %(c) 2.13 % 2.50 % 2.50 % 2.50 %(c)
Ratio of fees and
expenses waived and
reimbursed by the
Adviser and
Administrator to
average net assets..... -- %(c) .02 % 0.28 % 1.32 % 10.20 %(c)(d)
Ratio of net investment
loss to average net as-
sets................... (1.46)%(c) (1.35)% (1.51)% (1.36)% (1.25)%(c)
Portfolio turnover...... 23 % 79 % 76 % 76 % 9 %
Net assets, end of pe-
riod (in thousands).... $43,670 $36,201 $19,829 $10,789 $ 3,109
</TABLE>
- --------
* Commencement of investment operations.
(a) Unaudited.
(b) Total investment return is calculated assuming a purchase of common stock
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 no redemption fee.
Total investment return would be reduced if the redemption fee of 0.5% were
taken into account. Total investment return for a period of less than one
year is not annualized. Past performance results shown in this report
should not be considered a representation of future performance. Investment
return will vary and net asset value of shares, when redeemed, may be worth
more or less than their original cost.
(c) Annualized.
(d) Includes organization expenses paid by Adviser.
7
<PAGE>
THE FUND
The Fund was organized as a corporation under Maryland law on September 23,
1993. Technically, the Fund is registered under the Act as an open-end, non-
diversified, management investment company (commonly known as a mutual fund).
The Fund's Adviser is W.P. Stewart & Co., Inc., a registered investment
adviser. Shares of the Fund, par value $0.001 per share, are available for
purchase by eligible investors. There are no sales charges.
INVESTMENT OBJECTIVE, METHODS AND POLICIES
INVESTMENT OBJECTIVE AND METHODS
The Fund's principal investment objective is to earn capital gains for
shareholders. The Fund's principal investment objective is a fundamental
policy of the Fund and may not be changed without the approval of shareholders
holding a majority of the total number of outstanding Shares. There can be no
assurance that the Fund will achieve its principal investment objective.
The Fund seeks to achieve its principal investment objective by investing
primarily in common stocks listed on the New York Stock Exchange. 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 securities of the companies in which the Fund
invests may experience price declines. Since such companies usually reinvest a
high portion of earnings in their own businesses, they may lack the dividend
yield associated with value stocks that can cushion total return in a
declining market. Also, since investors may buy growth stocks based on their
expected earnings growth, earnings disappointments often result in sharp price
declines.
The Fund invests in a relatively small number of individual stocks. To
enable it to do so, the Fund is classified as a non-diversified fund under the
Act and, therefore, is not subject to the diversification requirements of the
Act. This policy is fundamental and may not be changed without the approval of
shareholders holding a majority of the total number of outstanding Shares.
Accordingly, the Fund may invest more than 5% of the value of its assets in
the securities of a single issuer and may acquire more than 10% of the voting
securities of a single issuer. The Fund, however, remains subject to the
diversification requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), in order to qualify as a regulated investment
company for federal income tax purposes. To the extent that the Fund invests a
relatively high percentage of its assets in securities of a limited number of
companies, the Fund may be more susceptible than would a more widely
diversified fund to any single economic, political or regulatory occurrence or
to changes in a company's financial condition or in the market's assessment of
the company.
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 attractiveness 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.
8
<PAGE>
OTHER INVESTMENT METHODS AND POLICIES
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 up to 100% of 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 U.S. 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 U.S. 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 to agree to repurchase the securities from the Fund at a mutually
agreed time and price. The total amount received by the Fund on repurchase
would be calculated to exceed the price paid by the Fund, reflecting an agreed
upon yield for the period of time to the settlement (repurchase) date. 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. If the seller
defaults in its obligation to repurchase, the Fund may suffer a loss as a
result of the cost in liquidating the collateral or if the collateral declines
in value.
Foreign Investments: The Fund may also invest in stocks issued by non-U.S.
companies. Such investments will normally be made through the purchase of
American Depositary Receipts ("ADRs") which represent investments in shares of
non-U.S. companies but are denominated in U.S. dollars and usually are listed
on a U.S. stock exchange or traded on NASDAQ. Investments in non-U.S. stocks,
whether directly or through ADRs, involve more and different risks than
investments in U.S. 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 U.S. dollars will be affected favorably
or unfavorably by fluctuations in currency exchange rates. Dividends declared
on the underlying investment represented by ADRs generally will be subject to
withholding taxes at the source. See "Investment Objective, Policies and
Restrictions--Investment Objective and Methods--Foreign Investments" in the
Statement of Additional Information.
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 may pledge up to 33 1/3% of the Fund's total assets to
secure borrowings. If the Fund's asset coverage for borrowings falls below
300% as a result of market fluctuations or other reasons, the Fund may be
required to sell portfolio securities to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. The Fund will use borrowing only
when the Adviser believes it will benefit the Fund after taking related risks
into consideration. The Adviser presently does not intend to borrow on behalf
of the Fund more than 5% of the Fund's net assets.
Illiquid Securities: The Fund may hold up to 5% of the value of its total
assets in illiquid securities, including securities which cannot be readily
resold to the public because of legal or contractual restrictions, non-
negotiable deposits with banks, repurchase agreements which have a maturity of
longer than seven days and securities that are not readily marketable.
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.
9
<PAGE>
Fixed Income and Convertible Securities and Warrants: The Fund may invest in
investment grade debt or preferred equity securities, including securities
convertible into or exchangeable for equity securities, and warrants.
Convertible securities typically are corporate bonds or preferred stocks that
may be converted at a specified time and price into shares of common stock.
Convertible securities usually provide a fixed income stream and afford the
investor the opportunity to participate in the capital appreciation upon a
market price advance in the convertible security's underlying common stock.
Warrants are options to buy a stated number of shares of common stock at a
specified price during the life of the warrants.
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. 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. See
"Investment Objective, Policies and Restrictions--Fundamental Investment
Policies" in the Statement of Additional Information.
10
<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 Fund or the Adviser (the "Independent
Directors").
THE INVESTMENT ADVISER
The Fund's investments are managed by the Adviser, a Delaware corporation
incorporated in 1998, 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. The
Adviser and its predecessor have 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.
The Adviser is a wholly owned subsidiary of W.P. Stewart & Co., Ltd., a
Bermuda corporation ("W.P. Stewart-Bermuda"). William P. Stewart may be deemed
to be a controlling person of W.P. Stewart-Bermuda.
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 portfolio manager of the Fund is Marilyn G. Breslow, President of the
Fund and President and a Director of the Adviser. Ms. Breslow has served as a
portfolio manager of the Fund since July 1997 and of other accounts managed by
the Adviser since 1990. Ms. Breslow and the other portfolio managers of the
Adviser are members of an investment research group which selects the group of
securities in which each account, including the Fund, may invest. Ms. Breslow,
who is primarily responsible for the day-to-day management of the Fund's
portfolio, selects securities from this group for investment by the Fund.
Although each account managed by the Adviser has individual objectives and a
unique portfolio, the Fund's investments generally are similar to investments
made by the Adviser's managed accounts.
The Investment Advisory Services Agreement provides that the Adviser will
receive advisory fees, payable quarterly in advance, 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). The Adviser has agreed to waive fees
and/or reimburse expenses of the Fund so that total Fund operating expenses do
not exceed 2.5% of the average annual net assets of the Fund up to $30
million, 2% of the average annual net assets of the Fund of the next $70
million, and 1.5% of the average annual net assets of the Fund in excess of
$100 million. Fee waivers and reimbursement of expenses will increase the
Fund's total return. Such voluntary fee waivers and/or expense reimbursement
are not required by the Investment Advisory Services Agreement and may be
discontinued at any time. See "Fee Table" and "Fund Performance."
As required by the Act, the original Investment Advisory Services Agreement
(the "Original Advisory Agreement") between the Fund and the Adviser provides
that it will continue in effect after its initial two-year term (January 11,
1994 through January 11, 1996) only so long as its continuance has been
specifically approved at least annually in the manner required by the Act.
Each of the Directors of the Fund recalls having considered, and approved, the
continuation of the Original Advisory Agreement for an additional one-year
period at a
11
<PAGE>
meeting of the Board of Directors held in early 1996. Further, the minutes of
the Board of Directors' February 20, 1997 meeting reflect that the Board
considered and approved the further continuation of the Original Advisory
Agreement at that time. Thus, the Directors of the Fund believe that the
Original Advisory Agreement was continued on an annual basis. However, there
is some uncertainty concerning this matter, because the Fund's written records
of its Board's meetings from 1996 are missing or otherwise deficient. This is
significant because if the Original Advisory Agreement was not effectively
continued by the Board in 1996, then it would have lapsed as a technical
matter and could not have been revived by the 1997 Board action (because
approval of a new advisory agreement, as opposed to continuation of the
Original Advisory Agreement, would have required shareholder action, as well
as Board action). In addition, it appears that the 1997 approval may not have
complied in all respects with the Act's technical requirements, as one of the
Independent Directors attended the meeting by telephone conference.
Under the Act, if the Original Advisory Agreement lapsed, the Fund would not
now have a valid investment advisory contract with the Adviser and some part
of the fees paid to the Adviser since the occurrence of the lapse might be
recoverable by the Fund. In addition, in reviewing the issues relating to
approval of the Original Advisory Agreement, the Adviser found that from
February 28, 1994 (commencement of investment operations) through June 30,
1998, advisory fees were calculated quarterly in arrears rather than quarterly
in advance as provided for in the Original Advisory Agreement. As the Fund's
assets tended to rise over the period, this resulted in an overpayment of fees
to the Adviser. This overpayment did not actually commence until 1997 however,
because before that time the Adviser waived its fees and/or reimbursed
expenses under a voluntary expense cap. The amount of the overpayment has been
repaid in full to the Fund by the Adviser. Neither the overpayment nor the
repayment had a material effect on the Fund's net asset value per share. In
view of the foregoing and certain other deficiencies in the Fund's records and
operations, the Fund and the Adviser have reviewed all of the Fund's
procedures and taken steps designed to ensure that the Fund's operations
comply with the provisions of all governing agreements and applicable laws,
including the Act.
Because of the importance of removing any doubt about the status of the
advisory agreement between the Adviser and the Fund, the Fund's Directors have
approved a new investment advisory services agreement (the "New Advisory
Agreement"), having substantially identical terms as the Original Advisory
Agreement. The only material difference between the two agreements is that
under the New Advisory Agreement, the fee will be calculated based on the
Fund's average daily net assets and paid in arrears. As stated above, the
Original Advisory Agreement provides that the fee is paid quarterly, in
advance, based on the net asset value of the Fund as of the last day of the
preceding quarter (after giving effect to subscriptions and redemptions on
that date). This change will ensure that the Fund's fee payments more closely
track the Funds's actual size, and that the fee will be charged against those
shares actually receiving services during the period for which the fee is
paid. The Board has also ratified the payment of advisory fees by the Fund to
the Adviser for the period from January 12, 1996 through the date of approval
of the New Advisory Agreement by the Fund's shareholders. Approval of the New
Advisory Agreement and ratification of the interim fees will be considered by
Fund shareholders of record on August 31, 1998 at a meeting to be held on
October 28, 1998.
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.
12
<PAGE>
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's affiliate is permitted to act as broker for the Fund. See
"Brokerage Arrangements" below. By reason of the brokerage fees the Adviser's
affiliate would earn by acting as broker to the Fund, the Adviser will have an
incentive to select its affiliate as broker for the Fund.
Brokerage Arrangements: The Adviser is responsible for selecting the broker
or dealer to effect portfolio transactions of the Fund. Brokerage transactions
normally will be effected through the Adviser's affiliate, W.P. Stewart
Securities Limited. Portfolio securities transactions generally will be
effected through brokers on securities exchanges or directly with the issuer
or an underwriter or market maker for the securities. Brokerage transactions
not executed by the Adviser's affiliate will be executed by other brokers and
dealers selected by the Adviser. 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's affiliate will charge the Fund commissions not
exceeding the rates charged to institutional customers for similar trades at
the time of execution.
THE CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
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 1776 Heritage Drive, North Quincy,
Massachusetts 02171. 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.
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.
13
<PAGE>
FEES AND EXPENSES
The Fund bears all costs and expenses directly related to investment
transactions made and positions held for the Fund's account, including
advisory fees, brokerage commissions, custodial fees, interest on borrowings
and administrative fees. The Fund also is obligated to pay 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. From time
to time the Adviser may elect to pay fees and expenses on behalf of the Fund,
although it is not legally obligated to do so.
14
<PAGE>
FUND PERFORMANCE
The following line graph provides a comparison of the return of a
hypothetical investment in the Fund with the return of the S&P 500 for the
period indicated.
W.P. STEWART & CO. GROWTH FUND, INC.
COMPARISON OF A HYPOTHETICAL $50,000 INVESTMENT
W.P. STEWART & CO GROWTH FUND VS. S&P 500*
[Line Graph shows hypothetical $50,000 investment in each of the S&P 500 and the
Fund on February 28, 1994 grew to $113,625 if invested in the S&P 500 and
$105,135 and $104,610 if invested in the Fund, before and after redemption fee,
respectively, as of December 31, 1997.]
Total Investment Return*
February 28, 1994 - December 31, 1997
-----------------------------------
<TABLE>
<S> <C>
W.P. Stewart & Co. Growth
Fund, Before Payment of
Redemption Fee 110.27%
W.P. Stewart & Co. Growth
Fund, After Payment of
Redemption Fee 109.22%
S&P 500 127.25%
</TABLE>
* Total investment return is calculated
assuming reinvestment of all dividends and
distributions at net asset value during the
period. A redemption fee equal to 0.5% of
the gross redemption proceeds will be charged
by the Fund. See "Redemptions & Distributions".
S&P 500 return assumes no transaction costs.
15
<PAGE>
The following table provides the returns for the Fund as compared with the
returns of the S&P 500 for the periods indicated.
<TABLE>
<CAPTION>
FUND FUND
FUND CUMULATIVE RETURN CUMULATIVE RETURN
AVERAGE ANNUAL AFTER PAYMENT OF BEFORE PAYMENT S&P
TOTAL RETURN REDEMPTION FEE OF REDEMPTION FEE 500
-------------- ----------------- ----------------- ------
<S> <C> <C> <C> <C>
January 1, 1997 through
December 31, 1997...... 24.07% 24.07% 24.69% 33.36%
February 28, 1994
(commencement of
investment operations)
through December 31,
1997................... 21.19% 109.22% 110.27% 127.25%
</TABLE>
"Average annual total return" is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over a specified time period. Average annual
total return takes into account deduction of the 0.5% redemption fee.
"Cumulative Return After Payment of Redemption Fee" shows how much an
investment in the Fund has changed in value over a specified time period
assuming that all distributions and dividends were reinvested in additional
shares and takes into account deduction of the 0.5% redemption fee.
"Cumulative Return Before Payment of Redemption Fee" shows how much an
investment in the Fund has changed in value over a specified time period
assuming that all distributions and dividends were reinvested in additional
shares, but does not take into account deduction of the 0.5% redemption fee.
Past performance is not predictive of future performance.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Management's Discussion of the Fund's performance during the fiscal year
ended December 31, 1997 is incorporated into this Prospectus from the Fund's
Annual Report to Shareholders, for the period ended December 31, 1997.
Additional copies of 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.
NET ASSET VALUE CALCULATION
The net asset value per Share is determined by or at the direction of the
Board of Directors as of the close of business on the New York Stock Exchange
(generally 4:00 p.m. New York City time) of each Business Day. The net asset
value is computed by dividing the sum of the market value of the securities
held by the Fund plus any cash or other assets (including interest and
dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of Shares outstanding at such time,
rounded to the nearest cent.
In general, the Fund values its portfolio holdings 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. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith under
the direction of the Board of Directors of the Fund.
PURCHASE OF SHARES
You may purchase Shares each Business Day. The minimum initial investment in
the Fund is $50,000, although the Fund may in its discretion accept
subscriptions for a lesser amount. You may subscribe for Shares
16
<PAGE>
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 next computed
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 ensure that the purchase (or redemption) of Shares
reported has been recorded accurately in your account. Statements of account
will be mailed monthly, showing transactions during the month.
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 next computed
following receipt of the redemption request 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 Fund 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.
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 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.
17
<PAGE>
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. Uncashed
checks will not earn interest.
TAXATION
The Fund has elected to qualify and intends to remain qualified for the
special tax treatment relating to regulated investment companies under the
Code. If it qualifies, the Fund will pay no United States federal income tax
on net income and net capital gains distributed to shareholders of the Fund,
provided that the Fund timely distributes at least 90% of its taxable net
investment income each year. 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 capital gains from the sale of assets held by the Fund
for more than 12 months ("net 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 and regardless of how long you
have held shares of the Fund. The maximum long-term capital gains rate for
individuals is 20%. The maximum long-term capital gains rate for corporate
shareholders is the same as the maximum tax rate for ordinary income, which
currently is 35%. To the extent that the Fund's income is derived from certain
dividends received from domestic corporations, a portion of the dividends paid
to corporate shareholders of the Fund will be eligible for the 70% dividends
received deduction. 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 net capital gains generally will
not be subject to federal withholding tax.
Any gain or loss realized upon a sale or redemption of Shares by a
shareholder who is not a dealer in securities generally will be treated as
capital gain or loss and will be long-term capital gain or loss if such shares
have been held for more than 12 months. Any such long-term capital gain
derived by an individual will be subject to tax at the maximum rate of 20%.
Any such loss will be treated as a long-term capital loss if the Shares have
been held for more than one year and otherwise as a short-term capital loss.
Any such loss, however, with respect to Shares that are held for six months or
less will be treated as a long-term capital loss to the extent of any capital
gain distributions received by the shareholder.
The foregoing is a summary of some of the important federal income tax
considerations affecting the Fund and its shareholders and is not a complete
analysis of all relevant tax 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 regarding specific questions of federal,
state, local or foreign tax considerations.
18
<PAGE>
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.
Swidler Berlin Shereff Friedman, LLP of New York City is 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.
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 and semi-
annual reports containing financial statements examined by the Fund's
independent auditors. You may request additional copies of such reports by
calling or writing the Fund at the phone number or address listed below under
"Inquiries."
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.
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 Fund is obligated to bear the cost of any
such notice and meeting.
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.
19
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<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 Accounts) 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: 1776 Heritage Drive
North Quincy, Massachusetts 02171
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 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 October 7, 1998 and annual report
as of December 31, 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 the close of business at the
New York Stock Exchange (normally 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 objective, 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 October 7, 1998.
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 14.
--------------
October 7, 1998
<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 OBJECTIVE, POLICIES AND
RESTRICTIONS.................................. 3 8
Investment Objective and Methods............. 3 8
Portfolio Turnover........................... 4 --
Fundamental Investment Policies.............. 5 10
Non-Fundamental Investment Policies.......... 6 --
MANAGEMENT OF THE FUND......................... 6 11
INVESTMENT ADVISORY AND OTHER SERVICES......... 7 11
Potential Conflicts of Interest.............. 8 12
Duty of Care................................. 8 --
BROKERAGE ALLOCATION........................... 8 13
CUSTODIAN, ADMINISTRATOR AND SHAREHOLDER
SERVICING AGENT............................... 10 13
INDEPENDENT AUDITORS........................... 10 19
DISTRIBUTION OF THE FUND'S SHARES.............. 10 --
COMPUTATION OF NET ASSET VALUE................. 10 16
PURCHASE OF SHARES............................. 11 16
REDEMPTIONS.................................... 11 17
TAX STATUS..................................... 11 18
ERISA CONSIDERATIONS........................... 13 --
FINANCIAL STATEMENTS........................... 13 --
CONTACT INFORMATION............................ 14 19
</TABLE>
2
<PAGE>
ORGANIZATION OF THE FUND
W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is a corporation which was
organized under Maryland law on September 23, 1993. Technically 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 October 7, 1998 (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.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE AND METHODS
The Fund's principal investment objective is to earn capital gains for
shareholders. The Fund seeks to achieve its principal investment objective by
investing primarily in common stocks listed on the New York Stock Exchange,
Inc. (the "New York Stock Exchange"). There can be no assurance that the Fund
will achieve its principal investment objective. See "Investment Objective,
Methods and Policies" in the Prospectus.
The Fund may invest in the following:
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 to agree to repurchase the securities from the Fund at a mutually
agreed time and price. 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
(repurchase) date. 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. In the event of a default, the Fund might incur costs and
encounter delays in liquidating collateral.
Foreign Investments. The Fund may invest in stocks issued by non-U.S.
companies. Such investments may be made through the purchase of American
Depositary Receipts ("ADRs") or directly in such foreign securities.
3
<PAGE>
ADRs represent an investment in shares of non-U.S. companies but are
denominated in U.S. dollars and usually are listed on a U.S. stock exchange or
traded through NASDAQ. Investments in ADRs involve certain risks that
investments directly in U.S. stocks do not. Because the underlying security
represented by an ADR is normally denominated in a currency other than the
U.S. dollar, the value of the ADR as measured in U.S. 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 U.S.
dollars will be affected favorably or unfavorably by movements in currency
exchange rates because the dividend will normally be converted into U.S.
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 U.S. 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.
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 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.
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 principal objective of the Fund to provide capital gains.
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 for the
fiscal years ended December 31, 1997, 1996 and 1995 was 79.0%, 76.0% and
75.7%, respectively. The rate of portfolio turnover is not a limiting factor
when the Adviser deems portfolio changes appropriate to achieve the Fund's
stated objective.
4
<PAGE>
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.
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
5
<PAGE>
that such maximum percentage limitation be determined immediately after and as
a result of the acquisition of such security or property.
NON-FUNDAMENTAL INVESTMENT POLICIES
The Fund does not intend to invest in the securities of other investment
companies.
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, AGE AND ADDRESS+ THE FUND DURING PAST FIVE (5) YEARS
---------------------- ------------------ --------------------------
<C> <C> <S>
William P. Stewart, Jr. Director Director, Chief Executive
(60)*.................... Officer and Chairman of the
Board of the Adviser. Mr.
Stewart was the founder of
the Adviser and continues to
be a portfolio manager.
Marilyn G. Breslow (54)*. President Director and portfolio man-
ager with the Adviser since
1990. Ms. Breslow has served
as portfolio manager of the
Fund since mid-1997.
Robert L. Schwartz (64)*. Treasurer, Secretary Director and Vice Chairman of
and the Adviser. Mr. Schwartz has
Director been a portfolio manager with
the Adviser since 1981.
Antoine Bernheim (45).... Director Mr. Bernheim is President of
405 Park Avenue, Suite Dome Capital Management, Inc.
500 and President of The U.S.
New York, New York 10022 Offshore Funds Directory Inc.
June Eichbaum (48)....... Director Ms. Eichbaum has since 1992
570 Lexington Avenue been a principal of Major,
New York, New York 10022 Hagan & Africa (New York)
Inc. (an executive search
firm).
William Talcott May (36). Director Mr. May has since 1988 held
575 Madison Avenue various officerships and di-
New York, New York 10022 rectorships in May family
controlled companies engaged
in the real estate brokerage
and residential property man-
agement business.
John C. Russell (63)*.... Vice President Director of the Adviser since
1996; General Counsel of the
Adviser 1996-1997; Chief Op-
erating Officer of the Ad-
viser since 1997; Partner of
Kroll & Tract (a law firm)
from 1994 through 1996; prior
thereto engaged in practice
of law in New York.
Lisa D. Levey (42)*...... Assistant Secretary General Counsel and Assistant
Secretary of the Adviser
since 1997. From 1991 through
1996, Ms. Levey served as
General Counsel and Secretary
of Danielson Holding Corpora-
tion (a publicly traded fi-
nancial services holding com-
pany).
</TABLE>
- --------
* An "interested person" of the Fund as defined in the Act.
+ Unless otherwise indicated, the address of each of the members of the Board
of Directors and principal officers of the Fund is 527 Madison Avenue, New
York, New York 10022.
6
<PAGE>
The Fund makes no payments to any of its officers and employees for services
and the Fund does not pay any retirement benefits. However, each of the Fund's
Independent Directors is to be 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 or she may incur by reason of attending such meetings or in
connection with services he or she may perform for the Fund. During the fiscal
year ended December 31, 1997, the Fund held three in-person meetings of the
Board for which aggregate fees of $3,750 are payable to each Disinterested
Director.
As of August 31, 1998, the Directors and officers of the Fund owned in the
aggregate 2,412.05 Shares (approximately 1% of the Shares outstanding). As of
the same date, no person owned of record or beneficially 5% or more of the
Shares outstanding.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Fund's Prospectus, 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
1998. The Adviser is registered under the Investment Advisers Act of 1940 as
an investment adviser. Prior to July 1, 1998, and since inception, the Fund's
investment adviser was the predecessor of the Adviser's parent company. The
Adviser's business office is located at 527 Madison Avenue, New York, New York
10022-4212, its telephone number is (212) 750-8585 and its facsimile number is
(212) 980-8039. The Adviser is a wholly owned subsidiary of W.P. Stewart &
Co., Ltd., a Bermuda corporation ("W.P. Stewart-Bermuda"). William P. Stewart
may be deemed to be a controlling person of W.P. Stewart-Bermuda.
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 Director Director, Chief Executive Officer and
P. Chairman of the Board
Stewart,
Jr. .....
Marilyn
G.
Breslow.. President Director and President
John C.
Russell.. Vice President Director and Chief Operating Officer
Robert L.
Schwartz. Secretary, Treasurer and Director Director and Vice Chairman
Lisa D.
Levey.... Assistant Secretary General Counsel and Assistant Secretary
</TABLE>
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 reviewed by the directors of the Fund on
a regular basis.
For the fiscal years ended December 31, 1997, 1996 and 1995, fees payable to
the predecessor adviser in accordance with the terms of the Investment
Advisory Services Agreement totaled $406,906, $218,540, and $93,986,
respectively. After voluntary fee waiver and/or expense reimbursement, the
Fund paid the predecessor adviser $406,906, $210,050 and $25,773,
respectively.
7
<PAGE>
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 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's affiliate is permitted to act as broker for the Fund. By reason
of the brokerage fees the Adviser's affiliate earn by acting as broker to the
Fund, the Adviser has an incentive to select its affiliate as broker for the
Fund. See "Brokerage Allocation."
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.
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.
Portfolio securities transactions generally will be effected through brokers
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.
8
<PAGE>
As described in "Investment Objective, Methods and Policies--Investment
Objective and Methods" in the Prospectus, the Fund is non-diversified, and
tends to take larger positions in fewer different portfolio companies than
most other mutual funds. In addition, as described in "Management--The
Investment Adviser--Potential Conflicts of Interest" in the Prospectus, the
Adviser may select the same investments for the Fund as for its other managed
accounts, resulting in a large volume of trades on the same day in any
particular security. In an effort to obtain best execution for its clients in
the aggregate, including the Fund, the Adviser will take 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. In
light of these considerations, brokerage transactions normally will be
effected through the Adviser's affiliate, W.P. Stewart Securities Limited. The
Adviser believes that this practice results in a better overall price and
execution to its clients as a whole, although the Fund may pay commissions at
a rate higher than those charged by other brokers. The Adviser's affiliate
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's affiliate will charge the Fund commissions not
exceeding the rates charged to the Adviser's institutional customers for
similar trades at the time of execution. Prior to July 1997, the Fund effected
the majority of its trades through the Adviser's predecessor, which was then
registered as a broker-dealer, and thereafter effected the majority of its
trades through W.P. Stewart Securities Limited, the Adviser's affiliate, which
was formed and registered as a broker-dealer at that time. For the fiscal
years ended December 31, 1997, 1996 and 1995, the Fund paid the Adviser's
predecessor or its affiliate brokerage commissions of $82,116, $53,260 and
$29,207, respectively. The increase in commissions paid from fiscal year 1995
was due to the fact that the Fund's net assets increased significantly in each
of fiscal years 1996 and 1997 in large part due to new subscription payments
which needed to be invested. For the fiscal year ended December 31, 1997, the
Fund paid total brokerage commissions of $83,484, of which approximately 98.4%
was paid to the Adviser's predecessor or W.P. Stewart Securities Limited for
effecting 98.5% of the aggregate amount of transactions in which the Fund paid
brokerage commissions.
Any brokerage transactions not executed by the Adviser's affiliate (which
the Adviser believes will be on an exception only basis) 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 discussions, with
research personnel, along with hardware, software, data bases and other news,
technical and telecommunications services and equipment utilized in the
investment management process. The Adviser is authorized to pay higher
commissions to brokerage firms that provide it with such investment and
research information 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.
9
<PAGE>
CUSTODIAN, ADMINISTRATOR AND SHAREHOLDER SERVICING AGENT
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 1776 Heritage Drive, North Quincy, Massachusetts 02171 ("State
Street"). Under the Custodian Contract, 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 the average
assets of the Fund, subject to a minimum annual fee of $36,000.
State Street also provides certain administrative services to the Fund
pursuant to an Administration Agreement, including overseeing the
determination of the net asset value of the Fund, maintaining certain books
and records of the Fund, and preparing and/or filing periodic reports,
advertising materials, supplements, proxy materials and other filings. In
consideration for these services, State Street is paid a fee based on a
percentage of the average assets of the Fund, subject to a minimum annual fee
of $65,000.
State Street also provides certain shareholder services to the Fund pursuant
to a Transfer Agency and Service Agreement, including disbursing dividends and
distributions, disbursing redemption proceeds, processing subscription
applications and serving as transfer agent and registrar. In consideration for
these services, State Street is paid a monthly fee of $2,500 ($30,000
annually).
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 review certain
filings of the Fund with the Securities and Exchange Commission and prepare
the Fund's federal and state corporation tax returns.
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
specifically for doing so.
COMPUTATION OF NET ASSET VALUE
Shares of the Fund are sold at 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 is open for trading. The Exchange is closed on the
following days: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Using the Fund's net asset value at December 31, 1997, the
maximum offering price of the Fund's shares was as follows:
<TABLE>
<S> <C>
Net Assets...................................................... $36,201,406
Number of Shares Outstanding.................................... 214,581
Offering Price per Share........................................ $168.71
</TABLE>
10
<PAGE>
PURCHASE OF SHARES
The methods of buying Shares are described in the Prospectus. There are no
sales charges.
The Fund may accept securities in payment of Shares provided such
securities:
(a) meet the investment objective 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 your Shares in full (less a 0.5%
redemption fee) if (i) the net asset value of your Shares is reduced to less
than $10,000 due to redemptions made by you, or (ii) 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. 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 10 calendar days after delivery or
mailing of the notice of mandatory redemption).
TAX STATUS
The Prospectus of the Fund contains 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.
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
This relieves the Fund (but not its shareholders) from paying federal income
tax on income which is distributed to shareholders and permits net capital
gains of the Fund (i.e., the excess of net capital gains from the sale of
assets held for more than 12 months over net short-term capital losses) to be
treated as capital gains of the shareholders, regardless of how long
shareholders have held their Shares in the Fund.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of the Fund's annual gross income (without
reduction for losses from the sale or other disposition of securities) be
derived from interest, dividends, payments with respect to securities loans,
and gains from the sale or other disposition of securities or options thereon
or foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies; (b) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities and other securities limited in respect of any one
issuer to an amount not greater than 5% of the market value of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. government securities); and (c) the Fund
distribute to its shareholders at least 90% of its net taxable investment
income (including short-term capital gains) other than long-term capital gains
and 90% of its net tax exempt interest income in each year.
11
<PAGE>
Any gain realized by a shareholder on the redemption or other disposition of
Shares by a shareholder who is not a dealer in securities generally will be
treated as capital gain. Any such capital gain derived by an individual will
be subject to tax at the maximum rate of 20% with respect to Shares held for
more than 12 months. The maximum long-term capital gains rate for corporate
shareholders is the same as the maximum tax rate for ordinary income, which
currently is 35%.
Any capital loss realized by a shareholder on the redemption or other
disposition of Shares will be treated as long-term capital loss if such Shares
were held for more than one year. 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 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 capital loss on such shares 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.
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 4% 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.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Such taxes will reduce shareholders'
return.
Dividends and distributions generally are taxable to shareholders in the
year in which they are received or accrued. Dividends declared in October,
November and December payable to shareholders of record on a specified date in
October, November and December and paid in the following January will be
treated as having been paid by the Fund and received by shareholders in such
prior year. Under this rule, a shareholder may be taxed in one year on
dividends or distributions actually received in January of the following year.
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" 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 federal, state, local and foreign
tax consequences of ownership of Shares of the Fund.
12
<PAGE>
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.
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, copies of its latest Semi-Annual and Annual
Reports to Shareholders upon request.
The unaudited financial statements for the six months ended June 30, 1998
and audited financial statements and Report of the Fund's Independent
Accountants for the Fund's fiscal year ended December 31, 1997 are
incorporated by reference into this Statement of Additional Information from
the Fund's Semi-Annual Report to Shareholders for the six months ended June
30, 1998 and Annual Report to Shareholders for the year ended December 31,
1997, respectively. The Fund's Semi-Annual and Annual Reports to Shareholders
can be obtained free of charge upon request in writing or by telephoning the
Fund. See "Contact Information."
The financial statements of the Fund included in the Annual Report to
Shareholders for the year ended December 31, 1997 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.
13
<PAGE>
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.
14
