<PAGE>
As filed with the Securities and Exchange Commission on February 26, 1999
Securities Act File No. 33-71142
Investment Company Act File No. 811-8128
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 7 [X]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 8 [X]
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W.P. STEWART & CO. GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
527 Madison Avenue
New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 750-8585
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Copy to:
W. P. Stewart & Co., Inc. Joel H. Goldberg, Esq.
527 Madison Avenue Swidler Berlin Shereff Friedman, LLP
New York, New York 10022 919 Third Avenue
Attn: Lisa D. Levey New York, New York 10022-9998
(Name and Address of Agent for
Service)
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Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective (check
appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[X] on April 30, 1999 pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates
a new effective date for a previously filed
post-effective amendment.
Title of Securities Being Registered.... Shares of Common Stock, $0.001
Par Value
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<PAGE>
PROSPECTUS
W.P. Stewart & Co. Growth Fund, Inc.
----------------------------
Investment Adviser
W.P. Stewart & Co., Inc.
527 Madison Avenue
New York, New York 10022
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W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") is a non-diversified
mutual fund, the investment objective of which is capital gains. There can be
no certainty that the Fund will achieve its investment objective.
----------------------------
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.
----------------------------
April 30, 1999
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TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................. 3
FUND PERFORMANCE................................................ 4
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE..................... 4
FEES AND EXPENSES............................................... 5
Expense Example......................................... 5
INVESTMENT OBJECTIVE, INVESTMENT STRATEGIES AND RELATED RISKS... 6
Investment Objective and Principal Investment Strategies. 6
Principal Investment Risks............................... 6
Other Investment Strategies and Risks.................... 6
MANAGEMENT...................................................... 7
The Investment Adviser.................................. 7
YEAR 2000 READINESS............................................. 8
PRICING OF SHARES............................................... 8
PURCHASE OF SHARES.............................................. 9
REDEMPTIONS AND DISTRIBUTIONS................................... 9
Redemptions............................................. 9
Dividends and Distributions............................. 9
TAXATION........................................................ 10
Taxability of Dividends and Distributions............... 10
Taxability of Transactions.............................. 10
FINANCIAL HIGHLIGHTS............................................ 11
SUBSCRIPTION APPLICATION........................................ S-1
Subscription Instructions............................... S-1
Subscriber Information Form............................. S-3
Subscription Agreement.................................. S-6
2
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RISK/RETURN SUMMARY
. Investment Objective Capital gains.
. Principal Investment Strategies The Fund seeks to achieve its investment
objective by investing primarily in common
stocks of companies listed on the New York
Stock Exchange. The Fund's investment
adviser, W.P. Stewart & Co., Inc. (the
"Adviser"), emphasizes stocks that it
believes have above average potential for
long-term growth.
. Principal Investment Risks Because the Fund invests a high percentage
of its assets in common stocks, the Fund
does not represent a complete investment
program. Your Fund shares can go up or
down in value, so that you can lose money
by investing in the Fund. The price of the
Fund's shares may be more volatile than
the price of shares of funds investing in
other types of equity securities or in
other fixed income securities. The price
of common stocks tends to rise and fall
more dramatically than other types of
investments. These price movements may
result from economic, political and
regulatory factors affecting individual
companies, industries or securities
markets as a whole. The price of growth
stocks may be particularly volatile. Since
the companies that issue these stocks
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 buy growth stocks based on their
expected earnings growth, earnings
disappointments often result in sharp
price declines. An investment in the Fund
is not insured or guaranteed by the
Federal Deposit Insurance Corporation or
any other government agency. The Fund is a
"non-diversified" investment company,
which means that the Fund may invest a
larger portion of its assets in fewer
companies than a diversified investment
company. This increases the risks of
investing in the Fund since the
performance of each stock has a greater
impact on the Fund's performance.
3
<PAGE>
FUND PERFORMANCE
The following bar chart and table show the Fund's performance and provides
some indication of the risks of investing in the Fund. The bar chart shows the
Fund's performance for each full calendar year of operations for the last four
years. The table shows how the Fund's average annual returns compare to those
of a broad-based securities market index. Of course, past performance cannot
predict or guarantee future results.
Annual Total Returns/*/
[BAR CHART]
1995 1996 1997 1998
27.3% 30.64% 24.69% 33.30%
/*/ Annual total returns do not include performance for the period from
2/28/94 (inception date) through 12/31/94 and do not reflect deduction
of the Fund's 0.50% redemption fee. If the redemption fee was deducted,
the annual total returns would be lower than those shown. During the 4-
year period shown in the bar chart, the highest return for a quarter was
18.68% (quarter ended 12/31/98) and the lowest return for a quarter was
(7.39)% (quarter ended 9/30/98).
Average Annual Total Returns (as of the fiscal year ended December 31, 1998)
Return Since
One Year Inception/*/
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W.P. Stewart & Co. Growth Fund, Inc./**/ 32.63% 23.60%
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S&P 500/(R)/ Index/***/ 28.58% 24.78%
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/*/ Inception Date of Fund: 2/28/94
/**/ The Fund's returns shown are after deduction of the Fund's 0.50%
redemption fee.
/***/ The S&P 500 (R) is the Standard & Poor's Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Management's Discussion of the Fund's performance during the fiscal
year ended December 31, 1998 is included in the Fund's 1998 Annual Report to
Shareholders, additional copies of which can be obtained free of charge upon
request in writing or by telephoning the Fund.
4
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FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
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 (expenses that are deducted from Fund assets)
Management Fees/1/.......................................................... 1.50%
12b-1 Fees.................................................................. None
Other Expenses.............................................................. 0.44%
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Total Fund Operating Expenses /2/........................................... 1.94%
====
</TABLE>
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/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. For the fiscal year ended December 31, 1998, the
Adviser did not waive advisory fees and/or reimburse expenses of the Fund
pursuant to such voluntary waiver and/or expense reimbursement agreement. 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.
Expense Example
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
This Example assumes that you invest $50,000 (minimum investment) in the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 year 3 years 5 years 10 years
$1,252 $3,347 $5,570 $11,740
You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years
$994 $3,073 $5,280 $11,404
5
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INVESTMENT OBJECTIVE, INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective and Principal Investment Strategies
The Fund's investment objective is to earn capital gains for shareholders.
The Fund invests primarily in common stocks listed on the New York Stock
Exchange, but also invests, from time to time, in securities listed on other
U.S. 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 stocks of growth
businesses based in the U.S.
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 industry 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 a guaranteed
rate of return adjusted for investment risk.
The Fund invests in a relatively small number of individual stocks. To
enable it to do so, the Fund technically is classified as "non-diversified,"
and, therefore, may invest more than 5% of the value of its assets in the
securities of a company and may acquire more than 10% of the voting securities
of a company.
Principal Investment Risks
The price of the Fund's shares may go up or down, and may be more volatile
than for a fund investing in fixed income or money market securities. The
prices of common stocks tend to rise and fall more dramatically than other types
of investments. These price movements may result from economic, political,
regulatory and other factors affecting the issuer, the issuer's geographic
region, the issuer's industry, stock markets in general or particular sectors of
stock markets. Large-cap stocks, for example, can react differently than small-
or mid-cap stocks.
The price of growth stocks may be particularly volatile. Since the issuers
of such stocks 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, growth stocks tend to be
more expensive relative to their earnings or assets, especially compared to
"value" stocks. Because investors buy growth stocks based on their expected
earnings growth, earnings disappointments often result in sharp price declines.
Because the Fund invests in a relatively small number of individual stocks,
the risks of investing in the Fund are greater than the risks of investing in a
more widely diversified fund. 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
particular company's financial condition or in the market's assessment of the
company.
Other Investment Strategies and Risks
In addition to the Fund's principal investment strategies described above,
the Fund may invest in the following other investments:
Temporary Positions: 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 debt securities of the U.S.
6
<PAGE>
government or its agencies or instrumentalities, interest-bearing accounts
maintained with financial institutions, including banks, investment grade short-
term debt securities and commercial paper of U.S. companies or
repurchase agreements, as well as in other money market instruments.
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 are investments in shares of non-
U.S. companies denominated in U.S. dollars. Investments in non-U.S. stocks,
whether directly or through ADRs, involve more and different risks than
investments in U.S. stocks. Foreign companies are not necessarily subject to the
same disclosure, accounting, and financial reporting standards as U.S.
companies. Furthermore, the political, economic and social structures of some
countries may be less stable and more volatile than those in the U.S. As a
result, foreign stock exchanges, custodial arrangements and currencies generally
are more volatile. When the underlying investments represented by ADRs are
denominated in foreign currencies or the Fund receives dividends that are
declared in foreign currencies, the value of the ADRs and the amount of
dividends received as measured in U.S. dollars may be adversely affected by
fluctuations in currency exchange rates. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and potentially
less liquid than investments in U.S. companies. In addition, dividends declared
on the underlying investment represented by ADRs generally will be subject to
withholding taxes.
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 other 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 generally provide a fixed income stream and afford the
investor the opportunity to participate in the appreciation of the underlying
common stock. Convertible securities generally perform like regular debt
securities, that is, if interest rates rise, the value of the securities usually
will fall. Furthermore, since they are convertible into common stock,
convertible securities also have the same types of risks as investing in the
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. Warrants involve more risk than
an investment in the underlying common stock. If the price of the underlying
common stock does not rise above the exercise price before the warrant expires,
the Fund generally will not exercise the warrant and the Fund will lose the
amount it paid for the warrant. Furthermore, the price of the warrant will not
necessarily rise if the price of the underlying common stock rises.
MANAGEMENT
The Investment Adviser
The Fund's investments are managed by the Adviser, a Delaware corporation
incorporated in 1998. The Adviser and its predecessor have been providing
investment advisory services to individuals, trusts and pension funds since
1974. The Advisor's 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 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 and a
Director 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 and its predecessor 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.
At the Annual Meeting of Shareholders of the Fund held on October 28, 1998,
shareholders approved a new Investment Advisory Agreement between the Fund and
the Adviser, effective immediately. The terms of the new
7
<PAGE>
Advisory Agreement are identical in all material respects to the preceding
Advisory Agreement except for a change in the method of calculating the fee
payable by the Fund. Under the new Advisory Agreement, the fee rate has not
changed (remaining at 1.5% of the Fund's net assets) but the fee now is
calculated based on the Fund's average daily net assets and paid quarterly, in
arrears. The prior investment advisory agreement provided that the fee was 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).
For the fiscal year ended December 31, 1998, the Fund paid the Adviser and
its predecessor an advisory fee of 1.5% of the average net assets of the Fund.
YEAR 2000 READINESS
The Fund's business operations depend on the proper functioning of its
service providers' computer systems. Many systems currently cannot distinguish
the year 2000 from the year 1900 because of the way dates are encoded and
calculated (commonly referred to as the year 2000 or Y2K problem). The Fund
could be adversely affected if the computer systems of its service providers,
including the Adviser and the Fund's administrator, transfer agent and
custodian, cannot make this distinction. In addition, the fact that the year
2000 is a leap year may create additional difficulties for some systems. The
Adviser, on behalf of the Fund, has made inquiries of the Fund's administrator,
transfer agent and custodian as to the readiness of their computer systems to
handle the year 2000 transition. The Adviser had been informed that all of
these service providers expect that their systems will be ready to handle the
year 2000 transition. Furthermore, the Adviser expects that its systems will be
ready to handle the year 2000 transition as well.
Of course, the Fund's ability to reduce the effects of the year 2000
problem is dependent on the efforts of third parties over which the Fund and the
Adviser generally will have no control. The computer systems of the companies
and other entities in which the Fund invests as well as the systems of the
exchanges on which the securities of such companies are traded may encounter
year 2000 problems. Such problems could hurt the Fund's investment return.
PRICING OF SHARES
The price of a Fund share is based on the Fund's net asset value per share.
The net asset value per share is determined each day the New York Stock Exchange
is open for trading (each, a "Business Day") by or at the direction of the Board
of Directors as of the close of business of the Exchange (generally 4:00 p.m.
New York City time). Shares will not be priced on days that the New York Stock
Exchange is closed for trading. To the extent that the Fund's securities are
traded elsewhere, such as on foreign exchanges, on days that the New York Stock
Exchange is closed, the value of the Fund's shares may be affected on days when
shareholders will not be able to purchase or redeem shares of the Fund.
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 a
particular time.
In general, the Fund values its portfolio holdings at their last available
public sale price on a Business Day in the case of securities listed on any
established securities exchange or included in NASDAQ or any comparable foreign
over-the-counter quotation system providing last sale data, or if no sales of
such securities are reported on such date, and in the case of "over-the-counter"
securities not described above in this paragraph, at the last reported bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange on which the securities are principally
traded. 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.
8
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PURCHASE OF SHARES
You may purchase shares on any Business Day. The purchase price will be
the net asset value of the shares next computed following receipt of payment and
the attached Subscriber Information Form and Subscription Agreement. Your
payment cannot be accepted until the Fund receives these subscription documents.
The minimum initial investment in the Fund is $50,000, although the Fund may in
its discretion accept purchases for a lesser amount. There is no minimum
subsequent investment. Payment may be made by check or by wire pursuant to
delivery instructions set forth in the Subscription Instructions. If you already
are a Fund shareholder, you need not submit the subscription documents when
purchasing additional shares. The Fund can reject any purchase.
The Fund generally does not issue certificates for shares. The Fund instead
credits your account with the number of shares purchased. You should promptly
check the confirmation 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 any day the New York Stock Exchange is open for
trading. 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 redemption fee equal to 0.5% of the gross redemption proceeds.
Redemption requests must be made in writing and sent by mail to W.P. Stewart &
Co. Growth Fund, Inc., 527 Madison Avenue, New York, New York 10022, or sent by
facsimile to 212-980-8039. If certificates have been issued for the shares
being redeemed, your redemption request must be accompanied by the certificates
endorsed for transfer (or accompanied by an endorsed stock power). The Fund can
refuse any requests for redemption if a Fund representative thinks any such
request may not be properly authorized. The Fund will not honor redemption
requests that are not in proper form.
The Fund reserves the right to require the redemption of your 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 this 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.
Dividends and Distributions
The Fund intends to pay you a dividend annually representing its entire net
investment income and to distribute to you all its realized net capital gains.
Your dividends and/or any capital gain distributions will be reinvested
automatically in 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.
9
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TAXATION
Taxability of Dividends and Distributions
Dividends from net ordinary income or net short-term capital gains will be
taxable to 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 taxable to 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 corporations is the same as the maximum tax rate for
ordinary income, which currently is 35%. Corporations may be entitled to take a
dividends received deduction for a portion of certain dividends they receive.
The Fund will inform you each year of the tax status of distributions you
received for the previous year. 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 U.S. 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 U.S. is a party. However, gains from the sale by
such shareholders of shares of the Fund and distributions received by such
shareholders from net capital gains generally will not be subject to federal
withholding tax.
Taxability of Transactions
Any time you redeem your shares, it is considered a taxable event for you.
Any gain or loss realized upon a redemption of shares generally will be treated
as capital gain or loss and will be long-term capital gain or loss if you held
your shares for more than 12 months. Any such long-term capital gain derived by
an individual shareholder will be taxed at the maximum rate of 20%. Any such
loss will be treated as a long-term capital loss if you held your shares for
more than one year and otherwise as a short-term capital loss. Any such loss,
however, with respect to shares that you held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain
distributions received.
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 should consult
your own tax advisor regarding specific questions of federal, state, local or
foreign tax considerations.
10
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Lopez Edwards Frank & Co.,
LLP, independent auditors, whose report, along with the Fund's financial
statements are included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
For the Period
For the For the For the For the February 28,
Year Ended Year Ended Year Ended Year Ended 1994* through
December 31, December 31, December 31, December 31, December 31,
1998 1997 1996 1995 1994
----------------- ---------------- ---------------- ---------------- --------------------
Income From Investment
Operations:
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of $168.71 $152.65 $125.94 $101.06 $100.00
period.......................... ------- ------- ------- ------- -------
Net investment loss............ (2.21) (1.87) (1.81) (1.15) (0.48)
Net realized and unrealized $ 57.80 38.53 40.17 29.19 1.54
gain on investments........... ------- ------- ------- ------- -------
Net increase from investment 55.59 36.66 38.36 28.04 1.06
operations......................
Distributions to shareholders
from net realized gain on (10.71) (20.60) (11.65) (3.16) 0.00
investments..................... ------- ------- ------- ------- -------
Net asset value, end of period... $213.59 $168.71 $152.65 $125.94 $101.06
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN (a)...... 33.30% 24.69 % 30.64 % 27.73 % 1.06 %
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net 1.94% 2.13 % 2.50 % 2.50 % 2.50 %(b)
assets..........................
Ratio of fees and expenses
waived and reimbursed by ---- .02 % 0.28 % 1.32 % 10.20 %(b)(c)
the Adviser and Administrator
to average net assets..........
Ratio of net investment loss to (1.26)% (1.35)% (1.51)% (1.36)% (1.25)%(b)
average net assets..............
Portfolio turnover............... 34% 79 % 76 % 76 % 9 %
Net assets, end of period (in $50,650 $36,201 $19,829 $10,789 $ 3,109
thousands)......................
</TABLE>
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* Commencement of investment operations.
(a) 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.
(b) Annualized.
(c) Includes organization expenses paid by Adviser.
11
<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 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) may be made by check, made payable to the W.P.
Stewart & Co. Growth Fund, Inc., or by wire transfer as follows:
Receiving Bank Information: State Street Bank and Trust Company
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 (P.O. boxes are not acceptable). 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:____________________________________________________________
(If different from ____________________________________________________________
Mailing Address)
Duplicate Statement Address:____________________________________________________
____________________________________________________
2. Amount of Subscription
$_____________________
S-3
<PAGE>
3. 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:__________________________________________
4. Tax Information
<TABLE>
<S> <C> <C>
Part 1-PLEASE PROVIDE YOUR TIN IN Social Security Number OR
THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number
SIGNING AND DATING BELOW.
</TABLE>
Part 2-CERTIFICATES-Under penalties of perjury, I
certify that: (1) The number shown on this form is
my correct Taxpayer
SUBSTITUTE Identification Number (or I am waiting for a number
to be issued for me) and
(2) I am not subject to backup withholding either
Form W-9 because: (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 withholding as a result of a failure to
report all interest 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 because of under reporting interest or
dividends on your tax return. However, if after
Department of the Treasury being notified by the IRS that you are subject to
Internal Revenue Service backup withholding, you received another
notification from the IRS that you are no longer
Payer's Request subject to backup withholding, do not cross out
for Taxpayer such item (2).
Identification ("TIN")
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:____________________
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
Ladies and Gentlemen:
The undersigned (the "Subscriber") hereby acknowledges having received the
current prospectus (the "Prospectus") dated April 30, 1999 and annual report as
of December 31, 1998 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) 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.
(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.
S-7
<PAGE>
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: _________________________ 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: _________________________ W.P. Stewart & Co. Growth Fund, Inc.
By: _________________________________________
S-8
<PAGE>
[BACK COVER PAGE]
The Fund's Statement of Additional Information includes additional
information about the Fund and is incorporated by reference herein (legally
forms a part of this Prospectus). Additional information about the Fund's
investments is also available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. You can obtain the Statement of
Additional Information, annual and semi-annual reports and additional copies of
this Prospectus by writing to W.P. Stewart & Co., Inc., 527 Madison Avenue, New
York, New York 10022, by telephoning the Fund collect at 212-750-8585 or by
sending a request by facsimile at 212-980-8039. You can also obtain these and
other related materials at the Securities and Exchange Commission's internet
site (http://www.sec.gov) or upon paying a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009. You can also review and copy such materials
at the Securities and Exchange Commission's Public Reference Section in
Washington, D.C. (please call 1-800-732-0330 in advance for available
hours).
Investment Company Act File No. 811-8128
<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., in addition to the information contained in the
Prospectus of the Fund dated April 30, 1999. 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. The audited
financial statements and Report of the Fund's Independent Accountants for the
Fund's fiscal year ended December 31, 1998 are incorporated by reference into
this Statement of Additional Information from the Fund's Annual Report to
Shareholders for the year ended December 31, 1998. You may obtain the Fund's
Prospectus and Annual Report to Shareholders free of charge upon request in
writing or by telephoning the Fund (collect) at 212-750-8585.
----------------------------
April 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ORGANIZATION OF THE FUND................................... 3
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS............ 3
Investment Objective and Methods................... 3
Portfolio Turnover................................. 4
Fundamental Investment Policies.................... 6
Non-Fundamental Investment Policies................ 7
MANAGEMENT OF THE FUND..................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES..................... 9
Potential Conflicts of Interest.................... 11
Duty of Care....................................... 11
BROKERAGE ALLOCATION....................................... 11
CUSTODIAN, ADMINISTRATOR AND SHAREHOLDER SERVICING AGENT... 13
INDEPENDENT AUDITOR........................................ 13
CAPITAL STOCK.............................................. 13
DISTRIBUTION OF THE FUND'S SHARES.......................... 13
COMPUTATION OF NET ASSET VALUE............................. 14
PURCHASE OF SHARES......................................... 15
REDEMPTIONS................................................ 15
TAX STATUS................................................. 15
ERISA CONSIDERATIONS....................................... 17
FINANCIAL STATEMENTS....................................... 17
CONTACT INFORMATION........................................ 18
</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 April 30, 1999 (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 at
least 10% of the outstanding Fund Shares.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective and Methods
The Fund's investment objective is to earn capital gains for shareholders.
The Fund seeks to achieve its 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 investment
objective.
The Fund may also invest in the following:
Temporary Positions: 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 debt securities of the U.S. government or
its agencies or instrumentalities, interest-bearing accounts maintained with
financial institutions, including banks, investment grade short-term debt
securities and commercial paper of U.S. companies or repurchase agreements, as
well as in other money market instruments.
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 U.S. 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 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.
Borrowing: The Fund is authorized to borrow money in an amount up to 33%
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 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.
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
4
<PAGE>
portfolio securities (excluding short-term U.S. 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 U.S. 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, 1998 and 1997 was 34.0% and 79.0%, respectively. The decrease in
the portfolio turnover rate in 1998 was due to the fact that the Fund
temporarily refused new and additional subscriptions for Shares for several
months during 1998. The Fund anticipates that the portfolio turnover rate will
increase in 1999. The rate of portfolio turnover is not a limiting factor when
the Adviser deems portfolio changes appropriate to achieve the Fund's investment
objective.
5
<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
6
<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 ultimate responsibility for the management and operations 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 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
- ---------------------- -------- --------------------------
<S> <C> <C>
Marilyn G. Breslow (54)* President and Director Director and portfolio manager with the Adviser
since 1990. Ms. Breslow has served as portfolio
manager of the Fund since mid-1997.
Robert L. Schwartz (64)* Treasurer, Secretary and Director and Vice Chairman of the Adviser.
Director Mr. Schwartz was a portfolio manager with
the Adviser from 1981 through 1998.
June Eichbaum (48) Director Ms. Eichbaum has been a principal of Major, Hagen
570 Lexington Avenue & Africa (New York) Inc. (an executive search
New York, New York 10022 firm) since 1992.
William Talcott May (36) Director Mr. May has held various officerships and
575 Madison Avenue directorships in May family controlled companies
New York, New York 10022 engaged in the real estate brokerage and residential
property management business since 1988.
Thomas R. LeViness (58) Director President of Pell & LeViness, P.C. (a law firm)
90 Park Avenue
New York, New York 10016
David J. Winkler (42) Director Senior Vice President of American Phoenix Corp. (a
1211 Sixth Avenue commercial insurance broker).
New York, New York 10036
John C. Russell (64)* Vice President Director and Managing Director of W.P. Stewart & Co.,
129 Front Street Ltd., the Adviser's parent, since mid-1998; Director
P.O. Box HM2905 of the Adviser or its predecessor from 1996 through
Hamilton HMLX Bermuda mid-1998; General Counsel of the Adviser 1996-1997;
Chief Operating Officer of the Adviser since 1997;
Partner of Kroll & Tract (a law firm) from 1994
through 1996; prior thereto engaged in practice of
law in New York.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Position Held with Principal Occupation
Name, Age and Address+ the Fund During Past Five (5) Years
- ---------------------- -------- --------------------------
<S> <C> <C>
Lisa D. Levey (42)* Assistant Secretary General Counsel and Assistant Secretary of W.P.
Stewart & Co., Ltd., the Adviser's parent, since
mid-1998; General Counsel and Assistant Secretary
of the Adviser or its predecessor since 1997. From
1991 through 1996, Ms. Levey served as General
Counsel and Secretary of Danielson Holding Corporation
(a publicly traded financial services holding company).
</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.
8
<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 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. The Fund paid
$16,250 and $11,250 to the Independent Directors for their services for the
years ended December 31, 1998 and 1997, respectively.
As of January 29, 1999, the Directors and officers of the Fund owned less
than 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"), which is also registered
as an investment adviser. 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>
Marilyn G. Breslow Director and President Director and President
John C. Russell Vice President None
Robert L. Schwartz Director, Secretary and Treasurer 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.
The Adviser has 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
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 daily net
assets of the Fund in excess of $100 million. Fee waivers and reimbursement are
not required by the Investment Advisory Services Agreement and
9
<PAGE>
may be discontinued at any time. For the fiscal year ended December 31, 1998,
the Adviser did not waive advisory fees and/or reimburse expenses of the Fund
pursuant to such waiver and/or reimbursement agreement. During the same period,
the Fund paid the Adviser an advisory fee of 1.5% of the average net assets of
the Fund.
For the fiscal years ended December 31, 1998, 1997 and 1996, fees payable
to the Adviser and the predecessor adviser in accordance with the terms of the
Investment Advisory Services Agreement totaled $629,727, $406,906 and $218,540,
respectively. After voluntary fee waiver and/or expense reimbursement, for the
fiscal years ended December 31, 1997 and 1996 the Fund paid the predecessor
adviser $402,270 and $210,050, respectively.
10
<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 earns 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.
11
<PAGE>
As described 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, 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, including the Fund, 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, 1998, 1997 and 1996, the Fund paid the Adviser's predecessor
or its affiliate brokerage commissions of $47,414, $82,116 and $53,260,
respectively. For the fiscal year ended December 31, 1998, the Fund paid total
brokerage commissions of $47,574, of which approximately 99.7% was paid to the
Adviser's predecessor or W.P. Stewart Securities Limited for effecting 99.4% 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.
12
<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 AUDITOR
Lopez Edwards Frank & Co., LLP, 1 Penn Plaza, New York, New York 10119-
0141, serves as the independent auditor of the Fund. It audits the Fund's
annual financial statements and renders reports thereon, which are included in
the Annual Report to Shareholders. In addition, the Fund's auditor reviews
certain filings of the Fund with the Securities and Exchange Commission and
prepares the Fund's federal and state corporation tax returns.
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 the 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.
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.
13
<PAGE>
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 "Pricing of Shares" 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 ordinarily 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, 1998, the maximum offering price of the
Fund's shares was as follows:
<TABLE>
<S> <C>
Net Assets $50,649,729
Number of Shares Outstanding 237,131
Offering Price per Share $ 213.59
</TABLE>
14
<PAGE>
PURCHASE OF SHARES
The methods of buying Shares are described in the Prospectus. There are no
sales charges.
(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.
15
<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. 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-U.S. shareholders, present in the U.S. for
substantial periods of time during a taxable year, maintaining an office or "tax
home" in the U.S., or conducting business in the U.S. 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 U.S. tax as a U.S. person
or otherwise. Each shareholder who is not a U.S. person should also consult his
tax advisor regarding the federal, state, local and foreign tax consequences of
ownership of Shares of the Fund.
16
<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 audited financial statements and Report of the Fund's Independent
Accountants for the Fund's fiscal year ended December 31, 1998 are incorporated
by reference into this Statement of Additional Information from the Fund's
Annual Report to Shareholders for the year ended December 31, 1998. The Fund's
Annual Report to Shareholders can be obtained free of charge upon request in
writing or by telephoning the Fund.
The financial statements of the Fund included in the Annual Report to
Shareholders for the year ended December 31, 1998 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.
17
<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: 212-980-8039.
18
<PAGE>
PART C
OTHER INFORMATION
Item 23.
(b) EXHIBITS
Exhibit
Number
-------
(a) Amended Articles of Incorporation of the Fund. Incorporated by
reference from Exhibit 1 to Post-Effective Amendment No. 5 to the
Registration Statement filed on Form N-1A on May 7, 1998 (File No. 33-
71142).
(b) Amended By-Laws of the Fund Incorporated by reference from Exhibit 2 to
Post-Effective Amendment No. 6 to the Registration Statement filed on
Form N-1A on September 25, 1998 (File No. 33-71142).
(c) Portions of Articles of Incorporation and By-Laws of the Fund defining
the rights of holders of shares in the Fund. Incorporated by reference
from Exhibit 4 to Post-Effective Amendment No. 5 to the Registration
Statement filed on Form N-1A on May 7, 1998 (File No. 33-71142).
(d) Investment Advisory Services Agreement between the Fund and the
Adviser. Incorporated by reference from Exhibit 5 to Post-Effective
Amendment No. 5 to the Registration Statement filed on Form N-1A on
May 7, 1998 (File No. 33-71142).
(e) Not Applicable
(f) Not Applicable
(g) (i) Custodian Contract between the Fund and State Street Bank and Trust
Company. Incorporated by reference from Exhibit 8 to Post-Effective
Amendment No. 5 to the Registration Statement filed on Form N-1A on
May 7, 1998 (File No. 33-71142).
(ii) Amendment to Custodian Contract*
(h) Administration Agreement and Transfer Agency and Service Agreement,
each between the Fund and State Street Bank and Trust Company.
Incorporated by reference from Exhibit 9 to Post-Effective Amendment
No. 5 to the Registration Statement filed on Form N-1A on May 7, 1998
(File No. 33-71142).
(i) Opinion of Sutherland, Asbill & Brennan, former counsel for the Fund.
Incorporated by reference from Exhibit 10 to Post-Effective Amendment
No. 5 to the Registration Statement filed on Form N-1A on May 7, 1998
(File No. 33-71142).
(j) Consent of Lopez Edwards Frank & Co., LLP, independent auditors for
the Fund.*
(k) Not applicable
(l) Subscription Agreement between the Fund and WPS&Co., N.V. Incorporated
by reference from Exhibit 13 to Post-Effective Amendment No. 5 to the
Registration Statement filed on Form N-1A on May 7, 1998 (File No. 33-
71142).
C-1
<PAGE>
Exhibit
Number
-------
(m) Not Applicable
(n) Financial Data Schedules*
(o) (i) Power of Attorney. Incorporated by reference from Exhibit 24 to
Post-Effective Amendment No. 5 to the Registration Statement filed on
Form N-1A on May 7, 1998 (File No. 33-71142).
(ii) Powers of Attorney*
- --------
* Filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant
As of the date hereof, the Fund is not controlled by any person other than
the directors of the Fund and the Adviser, as members of its Board of Directors
and investment adviser to the Fund, in their respective capacities as such.
Item 25. Indemnification
Every person who is or was a director, officer or employee of the Fund has
the right to be indemnified to the fullest extent permitted by law for any
liabilities incurred and reasonable expenses of defending against claims or
threatened claims in connection with his office, except in cases of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties in
the conduct of his office. See Article Ninth of the Articles of Incorporation
and Article 9 of the Amended By-Laws for a more complete description of matters
related to indemnification.
Item 26. Business and Other Connections of Investment Adviser
The Adviser, including the Fund's predecessor adviser, have been engaged
since 1973 in the business of providing discretionary and non-discretionary
investment advisory services and brokerage services to various clients.
John A. Allison is a Director and portfolio manager of the Adviser and,
since June 1998, has served as a Deputy Managing Director of W.P. Stewart & Co.,
Ltd., the Adviser's parent.
Daniel B. Strickberger is a Director and portfolio manager of the Adviser
and, since June 1998, has served as a Deputy Managing Director of W.P. Stewart &
Co., Ltd., the Adviser's parent.
Lisa D. Levey is Assistant Secretary of the Fund, General Counsel and
Assistant Secretary of the Adviser and, since June 1998, has served as General
Counsel and Assistant Secretary of W.P. Stewart & Co., Ltd., the Adviser's
parent.
Item 27. Principal Underwriters
(a) Not applicable
(b) Not applicable
C-2
<PAGE>
Item 28. Location of Accounts and Records
Name of
Account, Book or Other Document Person Maintaining
------------------------------- ------------------
(Numbers refer to Subparagraphs under Rule 31a-1(b)
of the Act)
(1) Journals (or other records or original entry) State Street Bank
containing an itemized daily record in detail and Trust Company
of all purchases and sales of securities, all
receipts and deliveries of securities, all
receipts and disbursements of cash and all
other debits and credits.
(2) General and auxiliary ledgers (or other State Street Bank
records) reflecting all asset, liability, and Trust Company
reserve, capital, income and expense accounts.
(3) Not applicable
(4) Corporate Charters, By-Laws and Minute Books The Adviser
(5) Record of each brokerage order given by or on State Street Bank
behalf of the Fund and Trust Company
(6) Record of all other portfolio purchases or State Street Bank
sales and Trust Company
(7) Record of Options (if any) and commitments State Street Bank
and Trust Company
(8) Trial balances State Street Bank
and Trust Company
(9) Brokerage Records The Adviser
and/or W.P.
Stewart
Securities
Limited
(10) Records of authorizations The Fund
(11) Advisory Material The Fund
All other records (if any) required to be The Fund
maintained by paragraph (a) of Rule 31a-1
All records maintained by the Adviser or the Fund will be maintained at
527 Madison Avenue, New York, New York 10022.
All records maintained by W.P. Stewart Securities Limited will be
maintained at 129 Front Street, Fifth Floor, P.O. Box HM2905, Hamilton HM LX,
Bermuda.
All records maintained by State Street Bank and Trust Company will be
maintained at 1776 Heritage Drive, North Quincy, Massachusetts 02171.
Item 29. Management Services
Not Applicable
Item 30. Undertakings
The Fund hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Fund's latest annual report to shareholders, upon
request and without charge.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York on the 26th day
of February, 1999.
W.P. Stewart & Co. Growth Fund, Inc.
*
By: _________________________________
Name: Marilyn G. Breslow
Title:President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Director and February 26,
_____________________________________ President 1999
Marilyn G. Breslow
* Director, Treasurer February 26,
_____________________________________ and Secretary 1999
Robert L. Schwartz
* Director February 26,
_____________________________________ 1999
June Eichbaum
* Director February 26,
_____________________________________ 1999
William Talcott May
* Director February 26,
_____________________________________ 1999
Thomas R. LeViness
* Director February 26,
_____________________________________ 1999
David J. Winkler
/s/ Lisa D. Levey February 26,
*By: ____________________________ 1999
Lisa D. Levey
Attorney-in-Fact
</TABLE>
C-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
(g)(ii) Amendment to Custodian Contract
(j) Consent of Lopez, Edwards, Frank & Co., LLP, independent auditors
for the Fund
(n) Financial Data Schedules
(o)(ii) Powers of Attorney
C-5
<PAGE>
EXHIBIT (g)(ii)
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of February 2, 1999
by and between W.P. Stewart & Co. Growth Fund, Inc. (the "Fund") and State
Street Bank and Trust Company (the "Custodian").
WHEREAS, the Fund and the Custodian entered into a Custodian Contract
dated as of January 11, 1994 (as amended and in effect from time to time, the
"Contract"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions
of the Contract pertaining to proper authorization for payment of Fund expenses.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth hereinafter and in the Contract, the parties
hereby agree to amend the Contract, pursuant to the terms thereof, as follows:
I. Paragraph (4) of Section 2.8 is hereby amended and restated in its
entirety as follows:
For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses, but only upon receipt of written Proper
Instructions signed by at least two persons as the Board of
Directors of the Fund shall have from time to time
authorized. Oral instructions will not be considered
"Proper Instructions" for purposes of this paragraph (4).
II. The first sentence of Section 2.17 is hereby amended and restated in its
entirety as follows:
Except as set forth in Section 2.8(4), Proper Instructions as
used throughout this Article 2 means a writing signed or
initialled by one or more person or persons as the Board of
Directors shall have from time to time authorized.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and
effect.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
/s/ Marc L. Parsons By /s/ Ronald E. Logue
- ------------------------------ ------------------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
WITNESSED BY: W.P. STEWART & CO. GROWTH FUND, INC.
/s/ Hanna Shen By /s/ Marilyn G. Breslow
- ------------------------------ ------------------------------
Name: Hanna Shen Name: Marilyn G. Breslow
Title: Title: President
<PAGE>
EXHIBIT (j)
[LOGO] LOPEZ
EDWARDS
FRANK
& CO., LLP
- --------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
MEMBER MACINTYRE STRATER INTERNATIONAL
FEBRUARY 22, 1999
Ms. Lisa D. Levey
W.P. Stewart & Co., Growth Fund Inc.
527 Madison Ave.
New York, NY 10022
Re: W.P. Stewart & Co. Growth Fund, Inc.
Dear Ms. Levey:
As independent public accountants of W.P. Stewart & Co. Growth Fund,
Inc., we hereby consent to the incorporation by reference of the annual report
to shareholders in the annual registration statement, as well as to all
references to our firm included or made part of this registration statement.
Very truly yours,
/s/ Rocco Macri, CPA
--------------------------------------
Rocco Macri
For LOPEZ EDWARDS FRANK & CO., LLP
:cm
cc: Gregory N. Bressler, Esq.
<TABLE>
<S> <C>
[ ] ONE PENN PLAZA, SUITE 4501, NEW YORK, NY 10119-4598 (212) 685-7000 FAX: (212) 967-6538
[ ] 70 EAST SUNRISE HIGHWAY, BOX 547, VALLEY STREAM, NY 11582-0547 (516) 872-3400 FAX: (516) 872-2357
</TABLE>
<PAGE>
EXHIBIT O (ii)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose name
appears below hereby nominates, constitutes and appoints John C. Russell, Robert
L. Schwartz and Lisa D. Levey (with full power to each of them to act alone) his
or her true and lawful attorney-in-fact and agent, for him or her and on his or
her behalf and in his or her place and stead in any and all capacities, to make,
execute and sign the Registration Statement filed on Form N-1A under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, and all amendments and supplements thereto of W.P. Stewart & Co. Growth
Fund, Inc. (the "Fund"), and to file the same with the Securities and Exchange
Commission, and any other regulatory authority having jurisdiction over the
offer and sale of shares of common stock of the fund, and any and all exhibits
and other documents requisite in connection therewith, granting unto said
attorneys and each of them full power and authority to perform each and every
act and thing requisite and necessary to be done in and about the premises as
fully to all intents and purposes as each of the undersigned officers or
Directors himself or herself might or could do.
IN WITNESS WHEREOF, the undersigned officers and Directors have hereunto
set their hands this 22nd day of February, 1999.
/s/ Thomas R. LeViness
---------------------------
Thomas R. LeViness
Director
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 22nd day of February, 1999, before me personally came Thomas R.
LeViness, to me known, who, being by me duly sworn, did depose and say that he
is the person named above and who executed the foregoing instrument; and he
acknowledged to me that he executed the same.
/s/ SIDNEY N. WEISS
-----------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose name
appears below hereby nominates, constitutes and appoints John C. Russell,
Robert L. Schwartz and Lisa D. Levey (with full power to each of them to act
alone) his or her true and lawful attorney-in-fact and agent, for him or her and
on his or her behalf and in his or her place and stead in any and all
capacities, to make, execute and sign the Registration Statement filed on
Form N-1A under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and all amendments and supplements thereto of
W.P. Stewart & Co. Growth Fund, Inc. (the "Fund"), and to file the same with the
Securities and Exchange Commission, and any other regulatory authority having
jurisdiction over the offer and sale of shares of common stock of the fund, and
any and all exhibits and other documents requisite in connection therewith,
granting unto said attorneys and each of them full power and authority to
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as each of the
undersigned officers or Directors himself or herself might or could do.
IN WITNESS WHEREOF, the undersigned officers and Directors have hereunto
set their hands this 22nd day of February, 1999.
/s/ David J. Winkler
--------------------------
David J. Winkler
Director
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 22nd day of February, 1999, before me personally came David J.
Winkler, to me known, who, being by me duly sworn, did depose and say that he is
the person named above and who executed the foregoing instrument; and he
acknowledged to me that he executed the same.
/s/ RUTH ALTMAN
--------------------
Notary Public
<PAGE>
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 32933075
[INVESTMENTS-AT-VALUE] 49490969
[RECEIVABLES] 224001
[ASSETS-OTHER] 1149268
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 50864238
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 214509
[TOTAL-LIABILITIES] 214509
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 33951493
[SHARES-COMMON-STOCK] 237131
[SHARES-COMMON-PRIOR] 214581
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 140342
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 16557894
[NET-ASSETS] 50649729
[DIVIDEND-INCOME] 266349
[INTEREST-INCOME] 19005
[OTHER-INCOME] 0
[EXPENSES-NET] 809526
[NET-INVESTMENT-INCOME] (524172)
[REALIZED-GAINS-CURRENT] 2427262
[APPREC-INCREASE-CURRENT] 10121250
[NET-CHANGE-FROM-OPS] 12024340
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (2348801)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 38725
[NUMBER-OF-SHARES-REDEEMED] (27270)
[SHARES-REINVESTED] 11095
[NET-CHANGE-IN-ASSETS] 14448323
[ACCUMULATED-NII-PRIOR] (401797)
[ACCUMULATED-GAINS-PRIOR] 4077134
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 585210
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 809526
[AVERAGE-NET-ASSETS] 41685138
[PER-SHARE-NAV-BEGIN] 168.71
[PER-SHARE-NII] (2.21)
[PER-SHARE-GAIN-APPREC] 57.80
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (10.71)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 213.59
[EXPENSE-RATIO] 1.94
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
