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Money Market Fund
PROSPECTUS
November 1, 1996
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PROSPECTUS
THE 59 WALL STREET MONEY MARKET FUND
6 St. James Avenue, Boston, Massachusetts 02116
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The 59 Wall Street Money Market Fund is an open-end investment company
which is a separate diversified portfolio of The 59 Wall Street Trust. Shares of
the Fund are offered by this Prospectus.
The Fund is a type of mutual fund commonly known as a money market fund. It
is designed to be a cost effective and convenient means of making substantial
investments in money market instruments. The Fund's investment objective is to
achieve as high a level of current income as is consistent with the preservation
of capital and the maintenance of liquidity. The net asset value of each of the
Fund's shares is expected to remain constant at $1.00. There can be no assurance
that the investment objective of the Fund will be achieved or that the net asset
value per share will not vary.
Investments in the Fund are neither insured nor guaranteed by the U.S.
Government. Shares of the fund are not deposits or obligations of, or guaranteed
by, Brown Brothers Harriman & Co., and the shares are not insured by the Federal
Deposit Insurance Corporation or any other federal, state or other governmental
agency.
The trust seeks to achieve the investment objective of the Fund by
investing all of the Fund's assets in the U.S. Money Market Portfolio, a
diversified open-end investment company having the same investment objective as
the fund. (See "Special Information Concerning the Two-Tier Fund Structure"
herein.)
Brown Brothers Harriman & Co. is the investment adviser to the Portfolio
and the administrator and shareholder servicing agent of the Fund. Shares of the
Fund are offered at net asset value without a sales charge.
This Prospectus, which investors are advised to read and retain for future
reference, sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated November 1, 1996. This information is
incorporated herein by reference and is available without charge upon request
from the Fund's distributor, 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, Massachusetts 02116.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is November 1, 1996.
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TABLE OF CONTENTS
Page
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Expense Table.................................. 3
Financial Highlights............................ 4
Special Information Concerning the
Two-Tier Fund Structure....................... 5
Investment Objective and Policies.............. 6
Investment Restrictions........................ 7
Purchase of Shares.............................. 8
Redemption of Shares........................... 8
Management of the Trust and the Portfolio ...... 10
Net Asset Value................................ 15
Dividends and Distributions.................... 15
Taxes.......................................... 16
Description of Shares.......................... 17
Additional Information ......................... 19
Appendix ....................................... 20
TERMS USED IN THIS PROSPECTUS
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<S> <C>
Trust ............................................... The 59 Wall Street Trust
Fund ................................................ The 59 Wall Street Money Market Fund
Portfolio............................................ U.S. Money Market Portfolio
Investment Adviser .................................. Brown Brothers Harriman & Co.
Administrator of the Trust........................... Brown Brothers Harriman & Co.
Administrator of the Portfolio....................... Brown Brothers Harriman Trust Company
(Cayman) Limited
Subadministrator of the Trust........................ 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Subadministrator of the Portfolio.................... Signature Financial Group
(Cayman) Limited
("SFG-Cayman")
Distributor.......................................... 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act............................................. The Investment Company Act of 1940,
as amended.
</TABLE>
2
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EXPENSE TABLE
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The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the aggregate annual operating
expenses of the Fund and the Portfolio, as a percentage of average net assets of
the Fund, and (ii) an example illustrating the dollar cost of such estimated
expenses on a $1,000 investment in the Fund. The Trustees of the Trust believe
that the aggregate per share expenses of the Fund and the Portfolio will be less
than or approximately equal to the expenses which the Fund would incur if the
Trust retained the services of an investment adviser on behalf of the Fund and
the assets of the Fund were invested directly in the type of securities being
held by the Portfolio.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases ................................. None
Sales Load Imposed on Reinvested Dividends ...................... None
Deferred Sales Load ............................................. None
Redemption Fee .................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ............................ 0.15%
12b-1 Fee........................................... None
Other Expenses
Administration Fee................................ 0.110%
Shareholder Servicing/Eligible Institution Fee ... 0.225
Other Expense Reimbursement Fee................... 0.065 0.40
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Total Fund Operating Expenses....................... 0.55%
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Example 1 year 3 years 5 years 10 years
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A shareholder of the Fund would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual return, and (2)
redemption at the end of each time period................... $ 6 $18 $31 $69
--- --- --- ---
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than the Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of the Fund
bear directly or indirectly.
Under an agreement dated July 1, 1993, 59 Wall Street Administrators pays the
Fund's expenses, other than fees paid to Brown Brothers Harriman & Co. under the
Trust's Administration Agreement. Had this expense reimbursement agreement not
been in place, the total Fund operating expenses would have been 0.56% of the
Fund's average annual net assets and the shareholder expenses reflected in the
example above would have been $6, $18, $31, and $70, respectively. After this
expense reimbusement agreement terminates on or before June 30, 1997, the
Trustees of the Trust estimate that, at the Fund's current asset level, the
total Fund operating expenses will increase to approximately 0.56% of the fund's
average annual net assets. (See "Expense Reimbursement Agreement".)
For more information with respect to the expenses of the Fund and the
Portfolio, see "Management of the Trust and the Portfolio" herein.
3
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FINANCIAL HIGHLIGHTS
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The following information for the five fiscal years ended June 30, 1996
has been audited by Deloitte & Touche LLP, independent auditors. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
ratios of expenses and net investment income to average net assets are not
indicative of future ratios.
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For the year ended June 30,
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1996 1995 1994 1993 1992
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Net asset value, beginning of year . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income ........... 0.05 0.05 0.03 0.03 0.05
Dividends to shareholders
from net investment income ...... (0.05) (0.05) (0.03) (0.03) (0.05)
-------- -------- ------- -------- --------
Net asset value, end of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======== ========
Total return ** .................... 5.33% 4.92% 2.94% 3.02% 4.79%
Ratios/supplemental data*:
Net assets, end of year
(000's omitted).................. $763,972 $624,847 $556,982 $684,055 $596,008
Ratio of expenses to average
net assets**..................... 0.55% 0.55% 0.55% 0.53% 0.53%
Ratio of net investment income
to average net assets ........... 5.14% 4.86% 2.88% 2.97% 4.70%
For the years ended June 30,
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1991 1990 1989 1988 1987
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Net asset value, beginning of year.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income ........... 0.07 0.08 0.08 0.07 0.06
Dividends to shareholders
from net investment income ...... (0.07) (0.08) (0.08) (0.07) (0.06)
-------- -------- --------- -------- --------
Net asset value, end of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= ======== ========
Total return**...................... 7.13% 8.29% 8.65% 6.75% 5.83%
Ratios/supplemental data*:
Net assets, end of year
(000's omitted)................. $648,501 $458,792 $457,407 $374,209 $329,423
Ratio of expenses to average
net assets** ................... 0.56% 0.58% 0.59% 0.60% 0.63%
Ratio of net investment income
to average net assets............ 6.83% 7.98% 8.33% 6.48% 5.68%
</TABLE>
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* Ratios include the Fund's share of Portfolio income and expenses, as
appropriate.
** Had the expense reimbursement agreement, which commenced July 1, 1993, not
been in place, the ratio of expenses to average net assets, for the years
ended June 30, 1996, 1995 and 1994, would have been 0.56%, 0.56% and 0.55%,
respectively. For the same periods, the total return of the Fund would have
been 5.32%, 4.90% and 2.94%, respectively. The expense reimbursement
agreement will terminate on or before July 1, 1997.
4
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SPECIAL INFORMATION CONCERNING THE TWO-TIER FUND STRUCTURE
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The Trust seeks to achieve the investment objective of the Fund, which is an
open-end investment company, by investing all of the Fund's assets in the
Portfolio, a separate open-end investment company with the same investment
objective as the Fund. The use of the two-tier structure was approved by the
shareholders of the Fund on September 23, 1993. The two-tier structure has been
developed relatively recently, so shareholders should carefully consider this
investment approach. Other mutual funds or institutional investors may invest in
the Portfolio on the same terms and conditions as the Fund. However, these other
investors may have different operating expenses which may generate different
aggregate performance results. Information concerning other investors in the
Portfolio is available from Brown Brothers Harriman & Co. (See the back cover
for the address and phone number.)
The investment objective of the Fund may not be changed without the approval
of the shareholders of the Fund and the investment objective of the Portfolio
may not be changed without the approval of the investors in the Portfolio.
Shareholders of the Fund shall receive 30 days prior written notice of any
change in the investment objective of the Fund or the Portfolio. For a
description of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies" below and "Investment
Restrictions" on pages 6 & 7, respectively.
Whenever the Trust is requested to vote on a matter pertaining to the
Portfolio, the Trust will vote its shares without a meeting of shareholders of
the Fund if the proposal is one, if which made with respect to the Fund, would
not require the vote of shareholders of the Fund as long as such action is
permissible under applicable statutory and regulatory requirements. For all
other matters requiring a vote, the Trust will hold a meeting of shareholders of
the Fund and, at the meeting of investors in the Portfolio, the Trust will cast
all of its votes in the same proportion as the votes of the Fund's shareholders
even if all Fund shareholders did not vote. Even if the Trust votes all its
shares at the Portfolio meeting, other investors with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio.
The Trust may withdraw the Fund's investment in the Portfolio as a result of
certain changes in the Portfolio's investment objective, policies or
restrictions or if the Board of Trustees of the Trust determines that it is
otherwise in the best interests of the Fund to do so. Upon any such withdrawal,
the Board of Trustees of the Trust would consider what action might be taken,
including the investment of all of the assets of the Fund in another pooled
investment entity or the retaining of an investment adviser to manage the Fund's
assets in accordance with the investment policies described below with respect
to the Portfolio. In the event the Trustees of the Trust were unable to
accomplish either, the Trustees will determine the best course of action.
As with traditionally structured funds which have large investors, the
actions of such large investors may have a material affect on smaller investors.
For example, if a large investor withdraws from the Portfolio, a small remaining
fund may experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk.
For descriptions of the management and expenses of the Portfolio, see
"Management of the Trust and the Portfolio" on page 10 and in the Statement of
Additional Information.
5
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INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund and the Portfolio is to achieve as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity.
The investment objective of the Fund and the Portfolio is a fundamental
policy and may be changed only with the approval of the holders of a "majority
of the outstanding voting securities as defined in the 1940 Act" of the Fund or
the Portfolio, as the case may be. (See "Additional Information" in this
Prospectus.) However, the investment policies as described below which are the
same for the Fund and the Portfolio are not fundamental and may be changed
without such approval.
Investments for the Portfolio mature or are deemed to mature within 397 days
from the date of purchase and the average maturity of the investments held by
the Portfolio (on a dollar-weighted basis) is 90 days or less. Currently, the
Portfolio's investment policy is to invest only in money market instruments,
including U.S. Government securities and bank obligations (such as certificates
of deposit, fixed time deposits and bankers' acceptances), commercial paper,
repurchase agreements, reverse repurchase agreements, when-issued and delayed
delivery securities, bonds issued by U.S. corporations and obligations of
certain supranational organizations. (See Appendix for more information.) The
Portfolio does not invest more than 5% of its total assets in securities of a
single issuer other than U.S. Government securities. All of the assets of the
Portfolio are invested in securities which are rated within the highest rating
category for short-term debt obligations by at least two (unless only rated by
one) nationally recognized statistical rating organizations (e.g., Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P"))
or, if unrated, are of comparable quality as determined by or under the
direction of the Portfolio's Board of Trustees.
Risk Factors
Although the assets of the Portfolio are invested in high quality short-term
securities, the Portfolio is subject to interest rate risk and credit risk which
causes fluctuations in the amount of income accrued on the Portfolio's
investments and therefore in the daily dividend paid by the Fund and, in extreme
cases, could cause the net asset value per share of the Fund to deviate from
$1.00 per share. Interest rate risk refers to the price fluctuation of a debt
security in response to changes in interest rates. In general, short-term
securities have relatively small fluctuations in price in response to general
changes in interest rates. Credit risk refers to the likelihood that an issuer
will default on interest and principal payments. High quality securities of
short maturities generally have relatively minimal credit risk.
Portfolio Brokerage
Although the Portfolio generally holds investments until maturity and does
not seek profits through short-term trading, it may dispose of any portfolio
security prior to its maturity if it believes such disposition advisable.
Money market securities are generally traded on a net basis and do not
normally involve either brokerage commissions or transfer taxes. Where possible
transactions on behalf of the Portfolio are entered directly with the issuer or
from an underwriter or market maker for the securities involved. Purchases from
underwriters of securities may include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
may include a spread between the bid and asked price. The policy of the
Portfolio regarding purchases and sales of securities is that primary
consideration will be given to obtaining the most favorable prices and efficient
executions of transactions. In seeking to implement the Portfolio's policies,
the Investment Adviser effects transactions with those brokers and dealers who
the Investment Adviser believes provide the most favorable prices and are
capable of providing efficient executions. If the Investment Adviser believes
such prices and executions are obtainable from more than one broker or dealer,
it may give consideration to placing portfolio transactions with those brokers
6
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and dealers who also furnish research and other services to the Portfolio and or
the Investment Adviser. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of securities
for purchase or sale; statistical or factual information or opinions pertaining
to investment; and appraisals or evaluations of portfolio securities. (See
"Portfolio Transactions" in the Statement of Additional Information.)
On those occasions when Brown Brothers Harriman & Co. deems the purchase or
sale of a security to be in the best interests of the Portfolio as well as other
customers, Brown Brothers Harriman & Co., to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Portfolio. In some instances, this procedure might adversely affect the
Portfolio.
Other Investment Techniques
LOANS OF PORTFOLIO SECURITIES. Loans of portfolio securities up to 30% of the
total value of the Portfolio are permitted and may be entered into for not more
than one year. These loans must be secured continuously by cash or equivalent
collateral or by an irrevocable letter of credit in favor of the Portfolio at
least equal at all times to 100% of the market value of the securities loaned
plus accrued income. By lending securities, the Portfolio's income can be
increased by its continuing to receive income on the loaned securities as well
as by the opportunity to receive interest on the collateral. Any appreciation or
depreciation in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its investors.
INVESTMENT RESTRICTIONS
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The Statement of Additional Information for the Fund includes a listing of
the specific investment restrictions which govern the investment policies of the
Fund and the Portfolio. Certain of these investment restrictions are deemed
fundamental policies and may be changed only with the approval of the holders of
a "majority of the outstanding voting securities as defined in the 1940 Act" of
the Fund or the Portfolio, as the case may be. (See "Additional Information" in
this Prospectus.)
Since the investment restrictions of the Fund correspond directly to those of
the Portfolio, the following is a discussion of the various investment
restrictions of the Portfolio.
As a fundamental policy, money is not borrowed by the Portfolio in an amount
in excess of 10% of its assets. It is intended that money will be borrowed only
from banks and only either to accommodate requests for the withdrawal of part or
all of an interest while effecting an orderly liquidation of portfolio
securities or to maintain liquidity in the event of an unanticipated failure to
complete a portfolio security transaction or other similar situations.
Securities are not purchased for the Portfolio at any time at which the amount
of its borrowings exceed 5% of its assets.
As a non-fundamental policy, the Portfolio does not purchase more than 10% of
all outstanding debt obligations of any one issuer (other than securities issued
by the U.S. Government, its agencies or instrumentalities). In addition, except
for the investment of all of the Fund's assets in an open-end investment company
with substantially the same investment objective, policies and restrictions as
the Fund, not more than 10% of the net assets of the Fund or the Portfolio, as
the case may be, may be invested in securities that are subject to legal or
contractual restrictions on resale.
7
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The Fund is classified as "diversified" under the 1940 Act, which means that
at least 75% of its total assets is represented by cash; securities issued by
the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one company to an amount no greater than 5% of the
Fund's total assets (other than securities issued by the U.S. Government, its
agencies or instrumentalities).
PURCHASE OF SHARES
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Shares of the Fund are offered on a continuous basis at their net asset value
without a sales charge. The Trust reserves the right to determine the purchase
orders for Fund shares that it will accept. Shares of the Fund may be purchased
on any day the New York Stock Exchange is open for regular trading and New York
banks are open for business if the Trust receives the purchase order and
acceptable payment for such order prior to 11:00 A.M., New York time. Purchases
of Fund shares are then executed at the net asset value per share next
determined on that same day. Dividends are earned on the day that the purchase
is executed.
An investor who has an account with an Eligible Institution (see page 13) or
a Financial Intermediary (see page 13) may place purchase orders for Fund shares
with the Trust through that Eligible Institution or Financial Intermediary,
which holds such shares in its name on behalf of that customer. Each Eligible
Institution and each Financial Intermediary may establish and amend from time to
time a minimum initial and a minimum subsequent purchase requirement for its
customers.
An investor who does not have an account with an Eligible Institution or a
Financial Intermediary must place purchase orders for Fund shares with the Trust
through the Fund's Shareholder Servicing Agent. Such an investor has such shares
held directly in the investor's name on the books of the Trust and is
responsible for arranging for the payment of the purchase price of Fund shares
to the Trust's account at State Street Bank and Trust Company, the Trust's
custodian bank. Such payment must be in the form of either (a) an inter-bank
wire transfer of "available funds" prior to 11:00 A.M., New York time, in which
case a purchase order placed prior to 11:00 A.M., New York time is executed that
day, or (b) a cashier's check drawn on a U.S. bank or a check certified by a
U.S. bank, in which case a purchase order is executed after such a check has
been converted into "available funds", generally the next business day after the
check is received for the Trust by State Street Bank and Trust Company. Brown
Brothers Harriman & Co., as the Fund's Shareholder Servicing Agent, has
established a minimum initial purchase requirement for the Fund of $10,000 and a
minimum subsequent purchase requirement for the Fund of $5,000. These minimum
purchase requirements may be amended from time to time.
Inquiries regarding the manner in which purchases of Fund shares may be
effected and other matters pertaining to the Fund should be directed to Brown
Brothers Harriman & Co., the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.)
REDEMPTION OF SHARES
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A redemption request must be received by the Trust prior to 11:00 A.M., New
York time on any day the New York Stock Exchange is open for regular trading and
New York banks are open for business. Such a redemption is executed at the net
asset value per share next determined on that same day. Proceeds of a redemption
are paid in "available funds" generally on the day the redemption request is
8
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executed, and in any event within seven days. A shareholder continues to receive
each daily dividend declared prior to the day on which a redemption request is
executed.
Shares held by an Eligible Institution or a Financial Intermediary on behalf
of a shareholder must be redeemed through that Eligible Institution or Financial
Intermediary. A transaction fee may be charged by an Eligible Institution or a
Financial Intermediary on the redemption of Fund shares.
Shares held directly in the name of a shareholder on the books of the Trust
may be redeemed by submitting a redemption request in good order to the Trust
through the Fund's Shareholder Servicing Agent. (See back cover for address and
phone number.) Proceeds resulting from such redemption are paid by the Trust
directly to the shareholder.
A shareholder redeeming shares should be aware that the net asset value of
the Fund's shares may, in unusual circumstances, decline below $1.00 per share.
Accordingly, a redemption request may result in payment of a dollar amount which
differs from the number of shares redeemed. See "Net Asset Value".
Redemptions By the Trust
The Fund's Shareholder Servicing Agent (see page 12), each Eligible
Institution and each Financial Intermediary (see page 13) may establish and
amend from time to time for their respective customers a minimum account size.
If the value of a shareholder's holdings in the Fund falls below that amount
because of a redemption of shares, the shareholder's remaining shares may be
redeemed. If such remaining shares are to be redeemed, the shareholder is so
notified and is allowed 60 days to make an additional investment to enable the
shareholder to meet the minimum requirement before the redemption is processed.
Brown Brothers Harriman & Co., as the Fund's Shareholder Servicing Agent, has
established a minimum account size of $10,000.
Further Redemption Information
In the event a shareholder redeems all shares held in the Fund at any time
during the month, all accrued but unpaid dividends are included in the proceeds
of the redemption and future purchases of shares of the Fund by such shareholder
would be subject to the Fund's minimum initial purchase requirements.
An investor should be aware that redemptions from the Fund may not be
processed if a completed account application with a certified taxpayer
identification number has not been received.
A shareholder's right to receive payment with respect to any redemption may
be suspended or the payment of the redemption proceeds postponed for up to seven
days and for such other periods as the 1940 Act may permit. (See "Additional
Information" in the Statement of Additional Information.)
9
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MANAGEMENT OF THE TRUST AND THE PORTFOLIO
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Trustees and Officers
The Trust's Trustees, in addition to supervising the actions of the Trust's
Administrator and Distributor, as set forth below, decide upon matters of
general policy with respect to the Trust. The Portfolio's Trustees, in addition
to supervising the actions of the Portfolio's Investment Adviser and
Administrator, as set forth below, decide upon matters of general policy with
respect to the Portfolio. The Trust's Trustees are not the same individuals as
the Portfolio's Trustees.
Because of the services rendered to the Portfolio by the Investment Adviser
and to the Trust and the Portfolio by their respective Administrators, the Trust
and the Portfolio require no employees, and their respective officers, other
than the Chairmen, receive no compensation from the Fund or the Portfolio. (See
"Trustees and Officers" in the Statement of Additional Information.)
The Trustees of the Trust are:
J.V. Shields, Jr.
Chairman and Chief Executive Officer of Shields & Company
Eugene P. Beard
Vice Chairman-Finance and Operations of The Interpublic Group
of Companies
David P. Feldman
Chairman and Chief Executive Officer-
AT&T Investment Management Corporation
Alan G. Lowy
Private Investor
Arthur D. Miltenberger
Vice President and Chief Financial Officer of Richard K. Mellon
and Sons
The Trustees of the Portfolio are:
H.B. Alvord
Retired, Former Treasurer and Tax Collector of Los Angeles County
Richard L. Carpenter
Retired, Director of Internal Investments of the Public School
Employees' Retirement System
Clifford A. Clark
Retired, Former Senior Manager of Brown Brothers Harriman & Co.
David M. Seitzman
Practicing Physician with Seitzman, Shuman, Kwart and Phillips
Investment Adviser
The Investment Adviser to the Portfolio is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Portfolio. Subject to the general supervision of the
Portfolio's Trustees, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions, places the purchase and sale orders for portfolio
transactions, and generally manages the Portfolio's investments. Brown Brothers
Harriman & Co. provides a broad range of investment management services for
customers in the United States and abroad. At June 30, 1996, it managed total
assets of approximately $25 billion.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreement, Brown Brothers Harriman & Co. receives from the
Portfolio an annual fee, computed daily and payable monthly, equal to 0.15% of
the average daily net assets of the Portfolio. Brown Brothers Harriman & Co. and
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its affiliates also receive annual administration fees from the Fund and the
Portfolio and an annual shareholder servicing/eligible institution fee from the
Fund equal to 0.11% and 0.225%, respectively, of the average daily net assets of
the Fund or the Portfolio, as the case may be.
The investment advisory services of Brown Brothers Harriman & Co. to the
Portfolio are not exclusive under the terms of the Investment Advisory
Agreement. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
Pursuant to a license agreement between the Trust and Brown Brothers Harriman
& Co. dated August 24, 1989, as amended as of December 15, 1993, the Trust may
continue to use in its name "59 Wall Street", the current and historic address
of Brown Brothers Harriman & Co. The agreement may be terminated by Brown
Brothers Harriman & Co. at any time upon written notice to the Trust upon the
expiration or earlier termination of any investment advisory agreement between
the Fund or any investment company in which a series of the Trust invests all of
its assets and Brown Brothers Harriman & Co. Termination of the agreement would
require the Trust to change its name and the name of the Fund to eliminate all
reference to "59 Wall Street".
Pursuant to license agreements between Brown Brothers Harriman & Co. and each
of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
"Licensee"), dated June 22, 1993 and June 8, 1990, respectively, each Licensee
may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co.
does not terminate the respective license agreement, which would require the
Licensee to change its name to eliminate all reference to "59 Wall Street".
Administrators
Brown Brothers Harriman & Co. acts as Administrator of the Trust and Brown
Brothers Harriman Trust Company (Cayman) Limited acts as Administrator of the
Portfolio. (See "Administrators" in the Statement of Additional Information.)
Brown Brothers Harriman Trust Company (Cayman) Limited is a wholly-owned
subsidiary of Brown Brothers Harriman Trust Company of New York, which is a
wholly-owned subsidiary of Brown Brothers Harriman & Co.
In its capacity as Administrator of the Trust, Brown Brothers Harriman & Co.
administers all aspects of the Trust's operations subject to the supervision of
the Trust's Trustees except as set forth below under "Distributor". In
connection with its responsibilities as Administrator and at its own expense,
Brown Brothers Harriman & Co. (i) provides the Trust with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary in order to provide effective administration of the
Trust; (ii) oversees the performance of administrative and professional services
to the Trust by others, including the Fund's Transfer and Dividend Disbursing
Agent; (iii) provides the Trust with adequate office space and communications
and other facilities; and (iv) prepares and/or arranges for the preparation, but
does not pay for, the periodic updating of the Trust's registration statement
and the Fund's prospectus, the printing of such documents for the purpose of
filings with the Securities and Exchange Commission and state securities
administrators, and the preparation of tax returns for the Fund and reports to
shareholders and the Securities and Exchange Commission.
For the services rendered to the Trust and related expenses borne by Brown
Brothers Harriman & Co., as Administrator of the Trust, Brown Brothers Harriman
& Co. receives from the Fund an annual fee, computed daily and payable monthly,
equal to 0.075% of the Fund's average daily net assets.
Brown Brothers Harriman Trust Company (Cayman) Limited, in its capacity as
Administrator of the Portfolio, administers all aspects of the Portfolio's
operations subject to the supervision of the Portfolio's Trustees except as set
11
<PAGE>
forth above under "Investment Adviser". In connection with its responsibilities
as Administrator for the Portfolio and at its own expense, Brown Brothers
Harriman Trust Company (Cayman) Limited (i) provides the Portfolio with the
services of persons competent to perform such supervisory, administrative and
clerical functions as are necessary in order to provide effective administration
of the Portfolio, including the maintenance of certain books and records,
receiving and processing requests for increases and decreases in the beneficial
interests in the Portfolio, notification to the Investment Adviser of available
funds for investment, reconciliation of account information and balances between
the Custodian and the Investment Adviser, and processing, investigating and
responding to investor inquiries; (ii) oversees the performance of
administrative and professional services to the Portfolio by others, including
the Custodian; (iii) provides the Portfolio with adequate office space and
communications and other facilities; and (iv) prepares and/or arranges for the
preparation, but does not pay for, the periodic updating of the Portfolio's
registration statement for filing with the Securities and Exchange Commission,
and the preparation of tax returns for the Portfolio and reports to investors
and the Securities and Exchange Commission.
For the services rendered to the Portfolio and related expenses borne by
Brown Brothers Harriman Trust Company (Cayman) Limited as Administrator of the
Portfolio, Brown Brothers Harriman Trust Company (Cayman) Limited receives from
the Portfolio an annual fee, computed daily and payable monthly, equal to 0.035%
of the Portfolio's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the Trust as are from time to time agreed upon by the parties. The
offices of 59 Wall Street Administrators are located at 6 St. James Avenue,
Boston, Massachusetts 02116. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Trust, participation in the
preparation of documents required for compliance by the Trust with applicable
laws and regulations, preparation of certain documents in connection with
meetings of Trustees and shareholders of the Trust, and other functions that
would otherwise be performed by the Administrator as set forth above. For
performing such subadministrative services, 59 Wall Street Administrators
receives such compensation as is from time to time agreed upon, but not in
excess of the amount paid to the Administrator from the Fund.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company (Cayman) Limited, SFG-Cayman performs such
subadministrative duties for the Portfolio as are from time to time agreed upon
by the parties. The offices of SFG-Cayman are located at Elizabethan Square,
George Town, Grand Cayman BWI. SFG-Cayman is a wholly-owned subsidiary of SFG.
SFG-Cayman's subadministrative duties may include providing equipment and
clerical personnel necessary for maintaining the organization of the Portfolio,
participation in the preparation of documents required for compliance by the
Portfolio with applicable laws and regulations, preparation of certain documents
in connection with meetings of Trustees of and investors in the Portfolio, and
other functions that would otherwise be performed by the Administrator of the
Portfolio as set forth above. For performing such subadministrative services,
SFG-Cayman receives such compensation as is from time to time agreed upon, but
not in excess of the amount paid to the Administrator from the Portfolio.
Shareholder Servicing Agent
The Trust has entered into a shareholder servicing agreement with Brown
Brothers Harriman & Co. pursuant to which Brown Brothers Harriman & Co., as
agent for the Fund, among other things: answers inquiries from shareholders of
and prospective investors in the Fund regarding account status and history, the
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<PAGE>
manner in which purchases and redemptions of Fund shares may be effected and
certain other matters pertaining to the Fund; assists shareholders of and
prospective investors in the Fund in designating and changing dividend options,
account designations and addresses; and provides such other related services as
the Trust or a shareholder of or prospective investor in the Fund may reasonably
request. For these services, Brown Brothers Harriman & Co. receives from the
Fund an annual fee, computed daily and payable monthly, equal to 0.225% of the
average daily net assets of the Fund represented by shares owned during the
period for which payment was being made by shareholders who did not hold their
shares with an Eligible Institution.
Financial Intermediaries
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Fund who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Trust; assists in processing purchase and redemption
transactions; arranges for the wiring of funds; transmits and receives funds in
connection with customer orders to purchase or redeem shares of the Fund;
provides periodic statements showing a customer's account balance and, to the
extent practicable, integrates such information with information concerning
other customer transactions otherwise effected with or through it; furnishes,
either separately or on an integrated basis with other reports sent to a
customer, monthly and annual statements and confirmations of all purchases and
redemptions of Fund shares in a customer's account; transmits proxy statements,
annual reports, updated prospectuses and other communications from the Trust to
its customers; and receives, tabulates and transmits to the Trust proxies
executed by its customers with respect to meetings of shareholders of the Fund.
For these services, the Financial Intermediary receives such fees from the
Shareholder Servicing Agent as may be agreed upon from time to time between the
Shareholder Servicing Agent and such Financial Intermediary.
Eligible Institutions
The Trust enters into eligible institution agreements with banks, brokers and
other financial institutions pursuant to which that financial institution, as
agent for the Trust with respect to shareholders of and prospective investors in
the Fund who are customers of that financial institution among other things:
provides necessary personnel and facilities to establish and maintain certain
shareholder accounts and records enabling it to hold, as agent, its customers'
shares in its name or its nominee name on the shareholder records of the Trust;
assists in processing purchase and redemption transactions; arranges for the
wiring of funds; transmits and receives funds in connection with customer orders
to purchase or redeem shares of the Fund; provides periodic statements showing a
customer's account balance and, to the extent practicable, integrates such
information with information concerning other customer transactions otherwise
effected with or through it; furnishes, either separately or on an integrated
basis with other reports sent to a customer, monthly and annual statements and
confirmations of all purchases and redemptions of Fund shares in a customer's
account; transmits proxy statements, annual reports, updated prospectuses and
other communications from the Trust to its customers; and receives, tabulates
and transmits to the Trust proxies executed by its customers with respect to
meetings of shareholders of the Fund. For these services, that financial
institution receives from the Fund an annual fee, computed daily and payable
13
<PAGE>
monthly, equal to 0.225% of the average daily net assets of the Fund represented
by shares owned during the period for which payment was being made by customers
for whom that financial institution was the holder or agent of record.
Expense Reimbursement Agreement
Under an agreement dated July 1, 1993, 59 Wall Street Administrators pays the
Fund's expenses (see "Expense Table") other than fees paid to Brown Brothers
Harriman & Co. under the Trust's Administration Agreement for the Fund, subject
to reimbursement from the Fund. To accomplish such reimbursement, 59 Wall Street
Administrators receives an expense reimbursement fee from the Fund such that
after such reimbursement the aggregate expenses of the Fund, including the
allocation of aggregate expenses of the Portfolio, do not exceed an agreed upon
annual rate, currently 0.55% of the average daily net assets of the Fund. Such
expense reimbursement fees are computed daily and paid monthly. During the
fiscal year ended June 30, 1996, 59 Wall Street Administrators incurred
$1,802,856 in expenses on behalf of the Fund including shareholder
servicing/eligible institution fees of $1,618,695 and received expense
reimbursement fees of $1,723,274 from the Fund.
The expense reimbursement fee agreement will terminate on the earlier of
either (i) June 30, 1997, or (ii) the date on which the payments made thereunder
equal the prior payment of such reimbursable expenses. The Trustees of the Trust
are unable to predict with any degree of certainty whether the Fund's assets
will reach a size that will allow its aggregate expenses to reach or drop below
0.55% of its average annual net assets. Had this expense reimbursement agreement
not been in place, the total operating expenses of the Fund for the year ended
June 30, 1996 would have been 0.56% of the Fund's average annual net assets.
The expenses of the Fund paid by 59 Wall Street Administrators under the
expense reimbursement agreement include the shareholder servicing/eligible
institution fees; the compensation of the Trustees of the Trust; governmental
fees; interest charges; taxes; membership dues in the Investment Company
Institute allocable to the Fund; fees and expenses of independent auditors, of
legal counsel and of any transfer agent, custodian, registrar or dividend
disbursing agent of the Fund; insurance premiums; expenses of calculating the
net asset value of shares of the Fund; expenses of preparing, printing and
mailing prospectuses, reports, notices, proxy statements and reports to
shareholders and to governmental officers and commissions; expenses of
shareholder meetings; and expenses relating to the issuance, registration and
qualification of shares of the Fund.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Fund. Its office is located at 6 St. James Avenue, Boston, Massachusetts 02116.
59 Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Trust pays for the preparation, printing
and filing of copies of the Trust's registration statement and the Fund's
prospectus as required under federal and state securities laws. (See
"Distributor" in the Statement of Additional Information.)
59 Wall Street Distributors holds itself available to receive purchase orders
for Fund shares.
Custodian, Transfer and
Dividend Disbursing Agent
State Street Bank and Trust Company, 225 Franklin Street, P.O. Box 351,
Boston, Massachusetts 02110, is the Custodian for the Fund and the Portfolio and
Transfer and Dividend Disbursing Agent for the Fund.
As Custodian for the Fund, it is responsible for holding the Fund's assets
(i.e., cash and the Fund's interest in the Portfolio) pursuant to a custodian
agreement with the Trust. Cash is held for the Fund in demand deposit accounts
at the Custodian. Subject to the supervision of the Administrator of the Trust,
the Custodian maintains the accounting records for the Fund and each day
14
<PAGE>
computes the net asset value and net income per share of the Fund. As Transfer
and Dividend Disbursing Agent it is responsible for maintaining the books and
records detailing ownership of the Fund's shares.
As Custodian for the Portfolio, it is responsible for maintaining books and
records of portfolio transactions and holding the Portfolio's securities and
cash pursuant to a custodian agreement with the Portfolio. Cash is held for the
Portfolio in demand deposit accounts at the Custodian. Subject to the
supervision of the Administrator of the Portfolio, the Custodian maintains the
accounting and portfolio transaction records for the Portfolio and each day
computes the net asset value and net income of the Portfolio.
Independent Auditors
Deloitte & Touche LLP, Boston, Massachusetts are the independent auditors for
the Fund. Deloitte & Touche, Grand Cayman are the independent auditors of the
Portfolio.
NET ASSET VALUE
================================================================================
The Fund's net asset value per share is determined once daily at 4:00 P.M.,
New York time on each day the New York Stock Exchange is open for regular
trading and New York banks are open for business.
The determination of the Fund's net asset value per share is made by
subtracting from the value of the total assets of the Fund (i.e., the value of
its investment in the Portfolio and other assets) the amount of its liabilities
and dividing the difference by the number of shares of the Fund outstanding at
the time the determination is made. It is anticipated that the net asset value
per share of the Fund will remain constant at $1.00. No assurance can be given
that this goal can be achieved.
The value of the Fund's investment in the Portfolio is also determined once
daily at 4:00 P.M., New York time on each day the New York Stock Exchange is
open for regular trading and New York banks are open for business.
The determination of the value of the Fund's investment in the Portfolio is
made by subtracting from the value of the total assets of the Portfolio the
amount of the Portfolio's liabilities and multiplying the difference by the
percentage, effective for that day, which represents the Fund's share of the
aggregate beneficial interests in the Portfolio.
The Portfolio's assets are valued by using the amortized cost method of
valuation. This method involves valuing a security at its cost at the time of
purchase and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. The market value of the securities held by
the Portfolio fluctuates on the basis of the creditworthiness of the issuers of
such securities and on the levels of interest rates generally. While the
amortized cost method provides certainty in valuation, it may result in periods
when the value so determined is higher or lower than the price the Portfolio
would receive if the security were sold. (See "Net Asset Value" in the Statement
of Additional Information.)
DIVIDENDS AND DISTRIBUTIONS
================================================================================
All the Fund's net income and short-term capital gains and losses, if any,
are declared as a dividend daily and paid monthly.
Net income of the Fund consists of (i) all income accrued on the assets of
the Fund (i.e., the Fund's pro rata share of the net income of the Portfolio),
less (ii) all actual and accrued expenses of the Fund. (See "Net Asset Value".)
Determination of the Fund's net income is made immediately prior to the
determination of the net asset value per share of the Fund at 4:00 P.M., New
York time on each day the New York Stock Exchange is open for regular trading
15
<PAGE>
and New York banks are open for business. Net income for days other than such
business days is determined as of 4:00 P.M., New York time on the immediately
preceding business day. Dividends declared are payable to shareholders of record
on the date of determination. Shares purchased through submission of a purchase
order prior to 11:00 A.M., New York time on such a business day begin earning
dividends on that business day. Shares redeemed do not qualify for a dividend on
the business day that the redemption is executed. (See "Redemption of Shares".)
Unless a shareholder whose shares are held directly in the shareholder's name
on the books of the Trust elects to have dividends paid in cash, dividends are
automatically reinvested in additional Fund shares without reference to the
minimum subsequent purchase requirement. Such shareholder who elects to have
dividends paid in cash receives a check in the amount of such dividends. In the
event a shareholder redeems all shares held at any time during the month, all
accrued but unpaid dividends are included in the proceeds of the redemption and
future purchases of shares by such shareholder will be subject to the minimum
initial purchase requirements. The Trust reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time, but will
provide shareholders prior written notice of any such discontinuance, alteration
or limitation.
Each Eligible Institution and each Financial Intermediary may establish its
own policy with respect to the reinvestment of dividends in additional Fund
shares.
The net income and capital gains and losses, if any, of the Portfolio are
determined at 4:00 P.M., New York time on each business day. Net income for days
other than business days is determined as of 4:00 P.M., New York time on the
immediately preceding business day. All the net income, as defined below, and
capital gains and losses, if any, so determined are allocated pro rata among the
Fund and the other investors in the Portfolio at the time of such determination.
For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) accrued interest,
accretion of discount and amortization of premium on securities held by the
Portfolio, less (ii) all actual and accrued expenses of the Portfolio (including
the fees payable to the Investment Adviser and Administrator of the Portfolio).
TAXES
================================================================================
Each year, the Trust intends to continue to qualify the Fund and elect that
the Fund be treated as a separate "regulated investment company" under the
Internal Revenue Code of 1986, as amended. Accordingly, the Fund is not subject
to federal income taxes on its net income and realized net capital gains that
are distributed to its shareholders. A 4% non-deductible excise tax is imposed
on the Fund to the extent that certain distribution requirements for the Fund
for each calendar year are not met. The Trust intends to continue to meet such
requirements. The Portfolio is also not required to pay any federal income or
excise taxes.
Dividends of net income (as defined under "Dividends and Distributions") and
net short-term capital gains, if any, are taxable to shareholders of the Fund as
ordinary income, whether such dividends are paid in cash or reinvested in
additional shares. These distributions are not eligible for the
dividends-received deduction allowed to corporate shareholders.
Under U.S. Treasury regulations, the Trust and each Eligible Institution are
required to withhold and remit to the U.S. Treasury a portion (31%) of dividends
and capital gains distributions on the accounts of those shareholders who fail
16
<PAGE>
to provide a correct taxpayer identification number (Social certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
State and Local Taxes
The treatment of the Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments in money market instruments would not be subject
to United States withholding tax.
Other Information
Annual notification as to the tax status of capital gains distributions, if
any, is provided to shareholders shortly after June 30, the end of the Fund's
fiscal year. Additional tax information is mailed to shareholders in January.
This tax discussion is based on the tax laws and regulations in effect on the
date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
================================================================================
The Trust is an open-end management investment company organized on June 7,
1983, as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts. Its offices are located at 6 St. James Avenue, Boston,
Massachusetts 02116; its telephone number is (617) 423-0800.
Pursuant to the Trust's Declaration of Trust, the Trustees have authorized
the issuance of an unlimited number of full and fractional shares of each series
of the Trust, one of which is the Fund. The Trustees of the Trust may divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in the Trust and may authorize
the creation of additional series of shares, the proceeds of which would be
invested in separate, independently managed portfolios. Currently there are two
series in addition to the Fund.
The Trustees of the Trust themselves have the power to alter the number and
the terms of office of the Trustees of the Trust, to lengthen their own terms,
or to make their terms of unlimited duration subject to certain removal
procedures, and to appoint their own successors; provided that at least
two-thirds of the Trustees of the Trust have been elected by the shareholders.
Each share of the Fund represents an equal proportional interest in the Fund
with each other share. Upon liquidation of the Fund, shareholders are entitled
to share pro rata in the net assets of the Fund available for distribution to
shareholders.
Shareholders of the Fund are entitled to a full vote for each full share held
and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
The rights of redemption are described elsewhere herein. Shares when issued are
17
<PAGE>
fully paid and nonassessable by the Trust, except as set forth below. It is the
intention of the Trust not to hold meetings of shareholders annually. The
Trustees of the Trust may call meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or as may be permitted by
the Declaration of Trust or By-Laws. Shareholders have under certain
circumstances (e.g., upon application and submission of certain specified
documents to the Trustees of the Trust by a specified number of shareholders)
the right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees of the
Trust. Shareholders also have the right to remove one or more Trustees of the
Trust without a meeting by a declaration in writing by a specified number of
shareholders.
The By-Laws of the Trust provide that the presence in person or by proxy of
the holders of record of one half of the shares of the Fund outstanding and
entitled to vote thereat shall constitute a quorum at all meetings of Fund
shareholders, except as otherwise required by applicable law. The By-Laws
further provide that all questions shall be decided by a majority of the votes
cast at any such meeting at which a quorum is present, except as otherwise
required by applicable law.
The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Fund, each eligible institution, may vote any shares as to
which that eligible institution is the agent of record and which are otherwise
not represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by holders of all shares otherwise represented at
the meeting in person or by proxy as to which that eligible institution is the
agent of record. Any shares so voted by an eligible institution are deemed
represented at the meeting for purposes of quorum requirements.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss because
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Portfolio, in which all of the assets of the Fund are invested, is
organized as a trust under the law of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) are each liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the investment of all of
the assets of the Fund in the Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange is open for
regular trading and New York banks are open for business. At 4:00 P.M., New York
time on each such business day, the value of each investor's beneficial interest
in the Portfolio is determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio is then recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 P.M., New York time on such day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's investment in
18
<PAGE>
the Portfolio effected on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 P.M., New York time on
such day plus or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in the Portfolio by all investors
in the Portfolio. The percentage so determined is then applied to determine the
value of the investor's interest in the Portfolio as of 4:00 P.M., New York time
on the following business day of the Portfolio.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the outstanding voting
securities as defined in the 1940 Act" currently means the vote of (i) 67% or
more of the outstanding voting securities present at a meeting, if the holders
of more than 50% of the outstanding voting securities are present in person or
represented by proxy; or (ii) more than 50% of the outstanding voting
securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited financial
statements and annual reports containing financial statements audited by
independent auditors.
The Fund's "yield" and "effective yield" may be used from time to time in
shareholder reports or other communications to shareholders or prospective
investors. Both yield figures are based on historical earnings and are not
intended to indicate future performance. Performance information may include the
Fund's investment results and/or comparisons of its investment results to
various unmanaged indexes. To the extent that unmanaged indexes are so included,
the same indexes will be used on a consistent basis. The Fund's investment
results as used in such communications are calculated in the manner set forth
below. From time to time, fund rankings from various sources may be quoted.
The "yield" of the Fund refers to the income generated by an investment in
the Fund over a seven-day period (which period will be stated). This income is
then "annualized". That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" is slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment.
This Prospectus omits certain of the information contained in the Statement
of Additional Information and the Registration Statement filed with the
Securities and Exchange Commission. The Statement of Additional Information may
be obtained from 59 Wall Street Distributors without charge and the Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the Rules and Regulations of the Commission.
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APPENDIX
- --------------------------------------------------------------------------------
THIS APPENDIX IS INTENDED TO PROVIDE DESCRIPTIONS OF THE SHORT-TERM
SECURITIES THE PORTFOLIO MAY PURCHASE. HOWEVER, OTHER SUCH SECURITIES NOT
MENTIONED BELOW MAY BE PURCHASED FOR THE PORTFOLIO IF THEY MEET THE QUALITY AND
MATURITY GUIDELINES SET FORTH IN THE PORTFOLIO'S INVESTMENT POLICIES.
- --------------------------------------------------------------------------------
U.S. Government Securities
Assets of the Portfolio may be invested in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. These securities,
including those which are guaranteed by federal agencies or instrumentalities,
may or may not be backed by the "full faith and credit" of the United States. In
the case of securities not backed by the full faith and credit of the United
States, it may not be possible to assert a claim against the United States
itself in the event the agency or instrumentality issuing or guaranteeing the
security for ultimate repayment does not meet its commitments. Securities which
are not backed by the full faith and credit of the United States include, but
are not limited to, securities of the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA), the U.S. Postal Service and the Resolution
Funding Corporation (REFCORP), each of which has a limited right to borrow from
the U.S. Treasury to meet its obligations, and securities of the Federal Farm
Credit System, the Federal Home Loan Banks, the Federal Home Loan Mortgage
Corporation (FHLMC) and the Student Loan Marketing Association, the obligations
of each of which may be satisfied only by the individual credit of the issuing
agency. Securities which are backed by the full faith and credit of the United
States include Treasury bills, Treasury notes, Treasury bonds and pass through
obligations of the Government National Mortgage Association (GNMA), the Farmers
Home Administration and the Export-Import Bank. There is no percentage
limitation with respect to investments in U.S. Government securities.
Bank Obligations
Assets of the Portfolio may be invested in U.S. dollar-denominated
negotiable certificates of deposit, fixed time deposits and bankers' acceptances
of banks, savings and loan associations and savings banks organized under the
laws of the United States or any state thereof, including obligations of
non-U.S. branches of such banks, or of non-U.S. banks or their U.S. or non-U.S.
branches, provided that in each case, such bank has more than $500 million in
total assets, and has an outstanding short-term debt issue rated within the
highest rating category for short-term debt obligations by at least two (unless
only rated by one) nationally recognized statistical rating organizations (e.g.,
Moody's and S&P) or, if unrated, are of comparable quality as determined by or
under the direction of the Portfolio's Board of Trustees. See "Bond, Note and
Commercial Paper Ratings" in the Statement of Additional Information. There is
no additional percentage limitation with respect to investments in negotiable
certificates of deposit, fixed time deposits and bankers' acceptances of U.S.
branches of U.S. banks and U.S. branches of non-U.S. banks that are subject to
the same regulation as U.S. banks. Since the Portfolio may contain U.S.
dollar-denominated certificates of deposit, fixed time deposits and bankers'
acceptances that are issued by non-U.S. banks and their non-U.S. branches, the
Portfolio may be subject to additional investment risks with respect to those
securities that are different in some respects from obligations of U.S. issuers,
such as currency exchange control regulations, the possibility of expropriation,
seizure or nationalization of non-U.S. deposits, less liquidity and more
volatility in non-U.S. securities markets and the impact of political, social or
diplomatic developments or the adoption of other foreign government restrictions
which might adversely affect the payment of principal and interest on securities
held by the Portfolio. If it should become necessary, greater difficulties might
be encountered in invoking legal processes abroad than would be the case in the
United States. Issuers of non-U.S. bank obligations may be subject to less
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<PAGE>
stringent or different regulations than are U.S. bank issuers, there may be less
publicly available information about a non-U.S. issuer, and non-U.S. issuers
generally are not subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
issuers. Income earned or received by the Portfolio from sources within
countries other than the United States may be reduced by withholding and other
taxes imposed by such countries. Tax conventions between certain countries and
the United States, however, may reduce or eliminate such taxes. All such taxes
paid by the Portfolio would reduce its net income available for distribution to
investors (i.e., the Fund and other investors in the Portfolio); however, the
Investment Adviser would consider available yields, net of any required taxes,
in selecting securities of non-U.S. issuers. While early withdrawals are not
contemplated, fixed time deposits are not readily marketable and may be subject
to early withdrawal penalties, which may vary. Assets of the Portfolio are not
invested in obligations of Brown Brothers Harriman & Co., or the Distributor, or
in the obligations of the affiliates of any such organization. Assets of the
Portfolio are also not invested in fixed time deposits with a maturity of over
seven calendar days, or in fixed time deposits with a maturity of from two
business days to seven calendar days if more than 10% of the Portfolio's net
assets would be invested in such deposits.
Commercial Paper
Assets of the Portfolio may be invested in commercial paper including
variable rate demand master notes issued by U.S. corporations or by non-U.S.
corporations which are direct parents or subsidiaries of U.S. corporations.
Master notes are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangements between the
issuer and a U.S. commercial bank acting as agent for the payees of such notes.
Master notes are callable on demand, but are not marketable to third parties.
Consequently, the right to redeem such notes depends on the borrower's ability
to pay on demand. At the date of investment, commercial paper must be rated
within the highest rating category for short-term debt obligations by at least
two (unless only rated by one) nationally recognized statistical rating
organizations (e.g., Moody's and S&P) or, if unrated, are of comparable quality
as determined by or under the direction of the Portfolio's Board of Trustees.
Any commercial paper issued by a non-U.S. corporation must be U.S.
dollar-denominated and not subject to non-U.S. withholding tax at the time of
purchase. Aggregate investments in non-U.S. commercial paper of non-U.S. issuers
cannot exceed 10% of the Portfolio's net assets. Since the Portfolio may contain
commercial paper issued by non-U.S. corporations, it may be subject to
additional investment risks with respect to those securities that are different
in some respects from obligations of U.S. issuers, such as currency exchange
control regulations, the possibility of expropriation, seizure or
nationalization of non-U.S. deposits, less liquidity and more volatility in
non-U.S. securities markets and the impact of political, social or diplomatic
developments or the adoption of other foreign government restrictions which
might adversely affect the payment of principal and interest on securities held
by the Portfolio. If it should become necessary, greater difficulties might be
encountered in invoking legal processes abroad than would be the case in the
United States. There may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Repurchase Agreements
Repurchase agreements may be entered into for the Portfolio only with a
"primary dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. This is an agreement in which the seller (the "Lender")
of a security agrees to repurchase from the Portfolio the security sold at a
mutually agreed upon time and price. As such, it is viewed as the lending of
money to the Lender. The resale price normally is in excess of the purchase
price, reflecting an agreed upon interest rate. The rate is effective for the
period of time assets of the Portfolio are invested in the agreement and is not
related to the coupon rate on the underlying security. The period of these
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<PAGE>
repurchase agreements is usually short, from overnight to one week, and at no
time are assets of the Portfolio invested in a repurchase agreement with a
maturity of more than one year. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. The Portfolio always receives as
collateral securities which are issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Collateral is marked to the market daily and has
a market value including accrued interest at least equal to 100% of the dollar
amount invested on behalf of the Portfolio in each agreement along with accrued
interest. Payment for such securities is made for the Portfolio only upon
physical delivery or evidence of book entry transfer to the account of State
Street Bank and Trust Company, the Portfolio's Custodian. If the Lender
defaults, the Portfolio might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the Lender, realization upon the
collateral on behalf of the Portfolio may be delayed or limited in certain
circumstances. A repurchase agreement with more than seven days to maturity may
not be entered into for the Portfolio if, as a result, more than 10% of the
Portfolio's net assets would be invested in such repurchase agreement together
with any other investment for which market quotations are not readily available.
Reverse Repurchase Agreements
Reverse repurchase agreements may be entered into only with a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. This is an agreement in which the Portfolio agrees to
repurchase securities sold by it at a mutually agreed upon time and price. As
such, it is viewed as the borrowing of money for the Portfolio. Proceeds of
borrowings under reverse repurchase agreements are invested for the Portfolio.
This is the speculative factor known as "leverage". If interest rates rise
during the term of a reverse repurchase agreement utilized for leverage, the
value of the securities to be repurchased for the Portfolio as well as the value
of securities purchased with the proceeds will decline. In these circumstances,
the Portfolio's entering into reverse repurchase agreements may have a negative
impact on the ability to maintain the Fund's net asset value of $1.00 per share.
Proceeds of a reverse repurchase transaction are not invested for a period which
exceeds the duration of the reverse repurchase agreement. A reverse repurchase
agreement is not entered into for the Portfolio if, as a result, more than
one-third of the market value of the Portfolio's total assets, less liabilities
other than the obligations created by reverse repurchase agreements, is engaged
in reverse repurchase agreements. In the event that such agreements exceed, in
the aggregate, one-third of such market value, the amount of the Portfolio's
obligations created by reverse repurchase agreements is reduced within three
days thereafter (not including weekends and holidays) or such longer period as
the Securities and Exchange Commission may prescribe, to an extent that such
obligations do not exceed, in the aggregate, one-third of the market value of
the Portfolio's assets, as defined above. A segregated account with the
Custodian is established and maintained for the Portfolio with liquid assets in
an amount at least equal to the Portfolio's purchase obligations under its
reverse repurchase agreements. Such a segregated account consists of liquid high
grade debt securities marked to the market daily, with additional liquid assets
added when necessary to insure that at all times the value of such account is
equal to the purchase obligations.
When-Issued and Delayed Delivery Securities
Securities may be purchased for the Portfolio on a when-issued or delayed
delivery basis. For example, delivery and payment may take place a month or more
after the date of the transaction. The purchase price and the interest rate
payable on the securities are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no interest accrues to the
Portfolio until delivery and payment take place. At the time the commitment to
purchase securities for the Portfolio on a when-issued or delayed delivery basis
22
<PAGE>
is made, the transaction is recorded and thereafter the value of such securities
is reflected each day in determining the Portfolio's net asset value. At the
time of its acquisition, a when-issued security may be valued at less than the
purchase price. Commitments for such when-issued securities are made only when
there is an intention of actually acquiring the securities. To facilitate such
acquisitions, a segregated account with the Custodian is maintained for the
Portfolio with liquid assets in an amount at least equal to such commitments.
Such a segregated account consists of liquid high grade debt securities marked
to the market daily, with additional liquid assets added when necessary to
insure that at all times the value of such account is equal to the commitments.
On delivery dates for such transactions, such obligations are met from
maturities or sales of the securities held in the segregated account and/or from
cash flow. If the right to acquire a when-issued security is disposed of prior
to its acquisition, the Portfolio could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation.
When-issued commitments for the Portfolio may not be entered into if such
commitments exceed in the aggregate 15% of the market value of the Portfolio's
total assets, less liabilities other than the obligations created by when-issued
commitments.
Other Obligations
Assets of the Portfolio may be invested in bonds, with maturities not
exceeding one year, issued by U.S. corporations which at the date of investment
are rated within the highest rating category for such obligations by at least
two (unless only rated by one) nationally recognized statistical rating
organizations (e.g., Moody's and S&P) or, if unrated, are of comparable quality
as determined by or under the direction of the Portfolio's Board of Trustees.
Assets of the Portfolio may also be invested in obligations of the
International Bank for Reconstruction and Development which may be supported by
appropriated but unpaid commitments of its member countries, although there is
no assurance that these commitments will be undertaken in the future. However,
assets of the Portfolio may not be invested in obligations of the Inter-American
Development Bank or the Asian Development Bank.
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<PAGE>
The 59 Wall Street Trust
Investment Adviser and
Administrator of the Trust
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus and the Statement of Additional Information, in connection with the
offer contained in this Prospectus, and if given or made, such other information
or representations must not be relied upon as having been authorized by the
Trust or the Distributor. This Prospectus does not constitute an offer by the
trust or by the distributor to sell or the solicitation of any offer to buy any
of the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Trust or the Distributor to make such offer in such
jurisdiction.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET MONEY MARKET FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
The 59 Wall Street Money Market Fund (the "Fund") is a separate
portfolio of The 59 Wall Street Trust (the "Trust"), a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund is a type of mutual fund commonly known as a money market
fund. The Fund is designed to be a cost effective and convenient means of making
substantial investments in money market instruments. The investment objective of
the Fund is to achieve as high a level of current income as is consistent with
the preservation of capital and the maintenance of liquidity. The Trust seeks to
achieve the investment objective of the Fund by investing all of the Fund's
assets in the U.S. Money Market Portfolio (the "Portfolio"), a diversified
open-end investment company having the same investment objective as the Fund.
The Portfolio pursues its investment objective by investing in high quality,
short-term money market instruments. There can be no assurance that the Fund's
investment objective will be achieved.
Brown Brothers Harriman & Co. is the Portfolio's investment adviser
(the "Investment Adviser"). This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated November
1, 1996, a copy of which may be obtained from the Trust at the address noted
above.
TABLE OF CONTENTS
CROSS-REFERENCE TO
PAGE PAGE IN PROSPECTUS
Investment Objective and Policies 2 6-7
Investment Restrictions 2 7-8
Trustees and Officers 5 10
Investment Adviser 8 10-11
Administrators 10 11
Distributor 10 14
Net Asset Value 11 15
Computation of Performance 12 19
Federal Taxes 13 16-17
Massachusetts Trust 14 17-18
Portfolio Transactions 15 6
Bond, Note and Commercial Paper Ratings 16 --
Additional Information 17 19
Financial Statements 18 4
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS NOVEMBER 1, 1996.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund and the
Portfolio. Since the investment characteristics of the Fund correspond directly
to those of the Portfolio, the following is a discussion of the various
investments and investment policies of the Portfolio.
LOANS OF PORTFOLIO SECURITIES. Securities of the Portfolio may be
loaned if such loans are secured continuously by cash or equivalent collateral
or by an irrevocable letter of credit in favor of the Portfolio at least equal
at all times to 100% of the market value of the securities loaned plus accrued
income. While such securities are on loan, the borrower pays the Portfolio any
income accruing thereon, and cash collateral may be invested for the Portfolio,
thereby earning additional income. All or any portion of interest earned on
invested collateral may be paid to the borrower. Loans are subject to
termination by the Portfolio in the normal settlement time, currently three
business days after notice, or by the borrower on one day's notice. Borrowed
securities are returned when the loan is terminated. Any appreciation or
depreciation in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its investors. Reasonable
finders' and custodial fees may be paid in connection with a loan. In addition,
all facts and circumstances, including the creditworthiness of the borrowing
financial institution, are considered before a loan is made and no loan is made
in excess of one year. There is the risk that a borrowed security may not be
returned to the Portfolio. Securities of the Portfolio are not loaned to Brown
Brothers Harriman & Co. or to any affiliate of the Trust, the Portfolio or Brown
Brothers Harriman & Co.
2
<PAGE>
INVESTMENT RESTRICTIONS
The Fund and the Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities
as defined in the 1940 Act" of the Fund or the Portfolio, as the case may be
(see "Additional Information").
Except that the Trust may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither the Portfolio nor the Trust, with
respect to the Fund, may:
(1) purchase securities which may not be resold to the public without
registration under the Securities Act of 1933;
(2) enter into repurchase agreements with more than seven days to
maturity if, as a result thereof, more than 10% of the market value of its net
assets would be invested in such repurchase agreements together with any other
investment for which market quotations are not readily available;
(3) enter into reverse repurchase agreements which, including any
borrowings under Investment Restriction No. 4, exceed, in the aggregate,
one-third of the market value of its total assets, less liabilities other than
obligations created by reverse repurchase agreements. In the event that such
agreements exceed, in the aggregate, one-third of such market value, it will,
within three days thereafter (not including weekends and holidays) or such
longer period as the Securities and Exchange Commission may prescribe, reduce
the amount of the obligations created by reverse repurchase agreements to an
extent that such obligations will not exceed, in the aggregate, one-third of the
market value of its assets;
(4) borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts not to exceed 10% of the value of its total
assets, taken at cost, at the time of such borrowing; mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not to exceed 10% of the value of its net assets at the time of such
borrowing. Neither the Portfolio nor the Trust on behalf of the Fund, as the
case may be, will purchase securities while borrowings exceed 5% of its total
assets. This borrowing provision is included to facilitate the orderly sale of
portfolio securities, for example,
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<PAGE>
in the event of abnormally heavy redemption requests, and is not for investment
purposes and does not apply to reverse repurchase agreements (see "Other
Investments - Reverse Repurchase Agreements");
(5) enter into when-issued commitments exceeding in the aggregate 15%
of the market value of its total assets, less liabilities other than obligations
created by when-issued commitments;
(6) purchase the securities or other obligations of issuers conducting
their principal business activity in the same industry if, immediately after
such purchase, the value of such investments in such industry would exceed 25%
of the value of its total assets. For purposes of industry concentration, there
is no percentage limitation with respect to investments in U.S. Government
securities and negotiable certificates of deposit, fixed time deposits and
bankers' acceptances of U.S. branches of U.S. banks and U.S. branches of
non-U.S. banks that are subject to the same regulation as U.S. banks;
(7) purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in securities or other obligations or any one such issuer.
This limitation does not apply to issues of the U.S. Government, its agencies or
instrumentalities;
(8) make loans, except through the purchase or holding of debt
obligations, repurchase agreements or loans of portfolio securities in
accordance with its investment objective and policies (see "Investment Objective
and Policies");
(9) purchase or sell puts, calls, straddles, spreads, or any
combinations thereof; real estate; commodities; commodity contracts or interests
in oil, gas or mineral exploration or development programs. However, bonds or
commercial paper issued by companies which invest in real estate or interests
therein including real estate investment trusts may be purchased;
(10) purchase securities on margin, make short sales of securities or
maintain a short position, provided that this restriction is not deemed to be
applicable to the purchase or sale of when-issued securities or of securities
for delivery at a future date;
(11) invest in fixed time deposits with a duration of over seven
calendar days, or in fixed time deposits with a duration of from two business
days to seven calendar days if more than 10% of its total assets would be
invested in such deposits;
(12) acquire securities of other investment companies;
(13) act as an underwriter of securities; or
4
<PAGE>
(14) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder.
Except with respect to Investment Restriction No. 3, there will be no
violation of any investment restriction if that restriction is complied with at
the time the relevant action is taken notwithstanding a later change in market
value of an investment, in net or total assets, in the securities rating of the
investment, or any other later change.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies neither the Portfolio nor the Trust, on behalf
of the Fund, may as a matter of operating policy (except that the Trust may
invest all of the Fund's assets in an open-end investment company with
substantially the same investment objective, policies and restrictions as the
Fund): (i) borrow money for any purpose in excess of 10% of its total assets
(taken at cost) (moreover, securities are not purchased at any time at which the
amount of its borrowings exceed 5% of its total assets (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of its net
assets (taken at market value), (iii) sell any security which it does not own
unless by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale would be made upon the same conditions, (iv)
invest for the purpose of exercising control or management, (v) purchase
securities issued by any investment company except by purchase in the open
market where no commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of merger or
consolidation; provided, however, that securities of any investment company are
not purchased if such purchase at the time thereof would cause more than 10% of
its total assets (taken at the greater of cost or market value) to be invested
in the securities of such issuers or would cause more than 3% of the outstanding
voting securities of any such issuer to be held for it, (vi) invest more than
10% of its net assets (taken at the greater of cost or market value) in
securities that are not readily marketable, (vii) purchase securities of any
issuer if such purchase at the time thereof would cause it to hold more than 10%
of any class of securities of such issuer, for which purposes all indebtedness
of an issuer is deemed a single class, (viii) invest more than 5% of its assets
in companies which, including predecessors, have a record of less than three
years of continuous operation, or (ix) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or the Portfolio, or is
an officer or partner of the Investment Adviser, if after the purchase of the
securities of such issuer, one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities, or
5
<PAGE>
both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market value. These
policies are not fundamental and may be changed without shareholder or investor
approval in response to changes in the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy. If the Fund's and the
Portfolio's respective investment restrictions relating to any particular
investment practice or policy are not consistent, the Portfolio has agreed with
the Trust, on behalf of the Fund, that the Portfolio will adhere to the more
restrictive limitation.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust and the Portfolio,
their principal occupation during the past five years (although their titles may
have varied during the period) and business addresses are:
TRUSTEES OF THE TRUST
J.V. SHIELDS, JR.* - Chairman of the Board and Trustee; Director of
The 59 Wall Street Fund, Inc.; Managing Director, Chairman and Chief Executive
Officer of Shields & Company; Chairman and Chief Executive Officer of Capital
Management Associates, Inc.; Director of Flowers Industries, Inc.(1) His
business address is Shields & Company, 71 Broadway, New York, NY 10006.
EUGENE P. BEARD** - Trustee; Director of The 59 Wall Street Fund, Inc.
(since April 1993); and Vice Chairman - Finance and Operations of The
Interpublic Group of Companies. His business address is The Interpublic Group of
Companies, Inc., 1271 Avenue of the Americas, New York, NY 10020.
DAVID P. FELDMAN** - Trustee; Director of The 59 Wall Street Fund,
Inc. ; Chairman and Chief Executive Officer - AT&T Investment Management
Corporation; Director of Dreyfus Mutual Funds, Equity Fund of Latin America, New
World Balanced Fund, India Magnum Fund , and U.S. Prime Properties Inc.; Trustee
of Corporate Property Investors. His business address is American Telephone and
Telegraph Co., Inc., One Oak Way, Room 2EA 176, Berkeley Heights, NJ 07922.
6
<PAGE>
ALAN G. LOWY** - Trustee; Director of The 59 Wall Street Fund, Inc.
(since April 1993); Private investor; Secretary of the Los Angeles County Board
of Investments (prior to March 1995). His business address is 4111 Clear Valley
Drive, Encino, CA 91436.
ARTHUR D. MILTENBERGER** - Trustee; Director of The 59 Wall Street
Fund, Inc. (since February 1992); Vice President and Chief Financial Officer of
Richard K. Mellon and Sons; Treasurer of Richard King Mellon Foundation;
Director of Enterprise Corporation (prior to 1992), Vought Aircraft Corporation
(prior to September 1994), Caterair International (prior to April 1994); and
Member of Valuation Committee of T. Rowe Price Threshold Fund, L.P. (prior to
1992), Advisory Committee of Carlyle Group and Pittsburgh Seed Fund and
Valuation Committee of Morgenthaler Venture Funds(2). His business address is
Richard K. Mellon and Sons, P.O. Box RKM, Ligonier, PA 15658.
TRUSTEES OF THE PORTFOLIO
H.B. ALVORD** - Chairman of the Board and Trustee; Retired; Trustee of
the Trust (from September 1990 to October 1994); Director of The 59 Wall Street
Fund, Inc. (from September 1990 to October 1994); and Trustee of Landmark Funds
III, Landmark Tax Free Reserves, Landmark Multi-State Tax Free Funds, Landmark
Tax Free Income Funds, Landmark Fixed Income Funds, Landmark Funds I, Landmark
Funds II, and Landmark International Equity Fund . His business address is P.O.
Box 1812, Pebble Beach, CA 93953.
RICHARD L. CARPENTER** - Trustee; Retired; Director of Internal
Investments, Public School Employees' Retirement System (prior to December
1995); His business address is Herrickbrook Road, Pawlet, VT 05761.
CLIFFORD A. CLARK** - Trustee; Retired; Director of Schmid, Inc.
(prior to July 1993); Managing Director of the Smith-Denison Foundation. His
business address is 42 Clowes Drive, Falmouth, MA 02540.
DAVID M. SEITZMAN** - Trustee; Practicing Physician with Seitzman,
Shuman, Kwart and Phillips; Director of the National Capital Underwriting
Company, Commonwealth Medical Liability Insurance Co. and National Capital
Insurance Brokerage, Limited. His business address is 2021 K. Street, N.W.,
Suite 408, Washington, DC 20006.
7
<PAGE>
OFFICERS OF THE TRUST AND THE PORTFOLIO
PHILIP W. COOLIDGE - President; Chief Executive Officer and President
of Signature Financial Group, Inc. ("SFG"), 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors") and 59 Wall Street Administrators, Inc. ("59
Wall Street Administrators") (since June 1993).
JAMES E. HOOLAHAN - Vice President; Senior Vice President of SFG.
JOHN R. ELDER - Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
SUSAN JAKUBOSKI*** - Assistant Treasurer and Assistant Secretary of
the Portfolio; Assistant Secretary, Assistant Treasurer and Vice President of
Signature Financial Group (Cayman) Limited (since August 1994); Fund Compliance
Administrator of Concord Financial Group, Inc. (from November 1990 to August
1994); Senior Fund Accountant of Neuberger & Berman Management Incorporated
(prior to November 1990). Her business address is Elizabethan Square, Shedden
Road, George Town, Grand Cayman, Cayman Islands, BWI.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; and Assistant Secretary of 59 Wall Street Distributors and 59
Wall Street Administrators (since June 1993).
* Mr. Shields is an "interested person" of the Trust and the Portfolio
because of his affiliation with a registered broker-dealer.
** These Trustees are members of the Audit Committee of the Trust or
the Portfolio, as the case may be.
*** Ms. Jakuboski is an officer of the Portfolio but is not an officer
of the Trust.
8
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(1) Shields & Company, Capital Management Associates, Inc. and Flowers
Industries, Inc., with which Mr. Shields is associated, are a
registered broker-dealer and a member of the New York Stock Exchange,
a registered investment adviser, and a diversified food company,
respectively.
(2) Richard K. Mellon and Sons, Richard King Mellon Foundation,
Enterprise Corporation, Vought Aircraft Corporation, Caterair
International, The Carlyle Group and Morgenthaler Venture Funds, with
which Mr. Miltenberger is or has been associated, are a private
foundation, a private foundation, a business development firm, an
aircraft manufacturer, an airline food services company, a merchant
bank, and a venture capital partnership, respectively.
Each Trustee and officer of the Trust listed above holds the
equivalent position with The 59 Wall Street Fund, Inc. The address of each
officer of the Trust is 6 St. James Avenue, Boston, Massachusetts 02116. Messrs.
Coolidge, Hoolahan, and Elder, and Mss. Jakuboski and Mugler also hold similar
positions with other investment companies for which affiliates of 59 Wall Street
Distributors serve as the principal underwriter.
Except for Mr. Shields, no Trustee is an "interested person" of the
Trust or the Portfolio as that term is defined in the 1940 Act.
The Trustees of the Trust receive a base annual fee of $15,000 (except
the Chairman who receives a base annual fee of $20,000) which is paid jointly by
all series of the Trust and The 59 Wall Street Fund, Inc. and allocated among
the series based upon their respective net assets. In addition, each series
which has commenced operations pays an annual fee to each Trustee of $1,000. The
aggregate compensation to each Trustee from the Trust and the Fund Complex (the
Fund Complex consists of the Trust and The 59 Wall Street Fund, Inc. which
currently consists of six series) was less than $60,000.
The Trustees of the Portfolio receive a base annual fee of $12,000
(except the Chairman who receives a base annual fee of $17,000) which is paid
jointly by the U.S. Small Company Portfolio, International Equity Portfolio
together with the Portfolio (the "Portfolios") and allocated among the
Portfolios based upon their respective net assets. In addition, each Portfolio
which has commenced operations pays an annual fee to each Trustee of $1,000. The
aggregate compensation to each Trustee from the Portfolios was less than
$60,000.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with the Portfolio and the
Administration Agreement with the Fund, and by Brown Brothers Harriman Trust
Company (Cayman) Limited under the Administration Agreement with the Portfolio
(see "Investment Adviser" and "Administrators"), neither the Trust nor the
Portfolio requires employees other than its officers, and none of
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its officers devote full time to the affairs of the Trust or the Portfolio, as
the case may be, or, other than the Chairmen, receive any compensation from the
Fund or the Portfolio.
As of October 31, 1996, the Trustees and officers of the Trust and
the Portfolio as a group owned less than 1% of the outstanding shares of the
Trust and less than 1% of the aggregate beneficial interests in the Portfolio.
At the close of business on that date no person, to the knowledge of management,
owned beneficially more than 5% of the outstanding shares of the Fund nor more
than 5% of the aggregate beneficial interests in the Portfolio. Partners of
Brown Brothers Harriman & Co. and their immediate families owned 26,957,825
(3.41%) shares of the Fund. Brown Brothers Harriman & Co. and its affiliates
separately were able to direct the disposition of an additional 191,181,394
(24.45%) shares of the Fund, as to which shares Brown Brothers Harriman & Co.
disclaims beneficial ownership.
INVESTMENT ADVISER
Under its Investment Advisory Agreement with the Portfolio, subject to
the general supervision of the Portfolio's Trustees and in conformance with the
stated policies of the Portfolio, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Portfolio. In this
regard, it is the responsibility of Brown Brothers Harriman & Co. to make the
day-to-day investment decisions for the Portfolio, to place the purchase and
sale orders for portfolio transactions and to manage, generally, the Portfolio's
investments.
The Investment Advisory Agreement between Brown Brothers Harriman &
Co. and the Portfolio is dated December 15, 1993 and remains in effect for two
years from such date and thereafter, but only as long as the agreement is
specifically approved at least annually (i) by a vote of the holders of a
"majority of the outstanding voting securities as defined in the 1940 Act" of
the Portfolio, or by the Portfolio's Trustees, and (ii) by a vote of a majority
of the Trustees of the Portfolio who are not parties to the Investment Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of the Portfolio
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on such approval. The Investment Advisory Agreement was most recently
approved by the Independent Trustees on December 13, 1995. The Investment
Advisory Agreement terminates automatically if assigned and is terminable at any
time without penalty by a vote of a majority of the Trustees of the Portfolio or
by a vote of the holders of a "majority of the outstanding voting securities as
defined in the 1940 Act" of the Portfolio on 60 days' written notice to Brown
Brothers Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written
notice to the Portfolio (see "Additional Information").
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With respect to the Portfolio, the investment advisory fee paid to the
Investment Adviser is calculated daily and paid monthly at an annual rate equal
to 0.15% of the Portfolio's average daily net assets. Prior to November 1, 1994,
Brown Brothers Harriman & Co. managed the assets of the Fund pursuant to an
Investment Advisory Agreement which was terminated by the Trust, on behalf of
the Fund, upon the Fund's investment of all of its assets in the Portfolio. For
the fiscal year ended June 30, 1996 and the period November 1, 1994 through June
30, 1995, the Portfolio incurred $1,081,720 and $614,606, respectively, for
advisory services. For the period July 1, 1994 through October 31, 1994 and the
fiscal year ended June 30, 1994, the Fund incurred $281,568 and $1,471,193 ,
respectively, for advisory services.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Fund.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing investment advisory,
administrative or shareholder servicing/eligible institution functions. If Brown
Brothers Harriman & Co. were to terminate its Investment Advisory Agreement with
the Portfolio, or were prohibited from acting in such capacity, it is expected
that the Trustees of the Portfolio would recommend to the investors that they
approve a new investment advisory agreement for the Portfolio with another
qualified adviser. If Brown Brothers Harriman & Co. were to terminate its
Shareholder Servicing Agreement, Eligible Institution Agreement or
Administration Agreement with the Trust or were prohibited from acting in any
such capacity, its customers would be permitted to remain shareholders of the
Fund and alternative means for providing shareholder services or administrative
services, as the case may be, would be sought. In such event, although the
operation of the Trust might change, it is not expected that any shareholders
would suffer any adverse financial consequences. However, an alternative means
of providing shareholder services might afford less convenience to shareholders.
ADMINISTRATORS
The Administration Agreements between the Trust and Brown Brothers
Harriman & Co. (dated November 1, 1993) and between the Portfolio and Brown
Brothers Harriman Trust Company (Cayman) Limited (dated December 15, 1993) will
remain in effect for two years from such respective date and thereafter, but
only so long as each such agreement is specifically approved at least annually
in the same manner as the Investment Advisory Agreement (see "Investment
Adviser"). The Independent Trustees last approved
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the Trust's Administration Agreement and the Portfolio's Administration
Agreement on August 22, 1995 and December 13, 1995, respectively. Each agreement
will terminate automatically if assigned by either party thereto and is
terminable with respect to the Trust or the Portfolio at any time without
penalty by a vote of a majority of the Trustees of the Trust or the Trustees of
the Portfolio, as the case may be, or by a vote of the holders of a "majority of
the outstanding voting securities as defined in the 1940 Act" of the Trust or
the Portfolio, as the case may be (see "Additional Information"). The Trust's
Administration Agreement is terminable by the Trustees of the Trust or
shareholders of the Trust on 60 days' written notice to Brown Brothers Harriman
& Co. The Portfolio's Administration Agreement is terminable by the Trustees of
the Portfolio or by the Fund and other investors in the Portfolio on 60 days'
written notice to Brown Brothers Harriman Trust Company (Cayman) Limited. Each
agreement is terminable by the respective Administrator on 90 days' written
notice to the Trust or the Portfolio, as the case may be.
The administrative fee payable to Brown Brothers Harriman & Co. from
the Fund is calculated daily and payable monthly at an annual rate equal to
0.075% of the Fund's average daily net assets. From November 1, 1993 to October
31, 1994, Brown Brothers Harriman & Co. was paid at an annual rate equal to
0.10% of the Fund's average daily net assets. Prior to November 1, 1993, 59 Wall
Street Distributors served as administrator of the Trust and was paid at an
annual rate equal to 0.05% of the Fund's average daily net assets. For the
fiscal years ended June 30, 1996, 1995, and 1994, the Fund incurred $539,565,
$494,282 and $515,818 , respectively, for administrative services.
The administrative fee paid to Brown Brothers Harriman Trust Company
(Cayman) Limited by the Portfolio is calculated and paid monthly at an annual
rate equal to 0.035% of the Portfolio's average daily net assets. Brown Brothers
Harriman Trust Company (Cayman) Limited is a wholly-owned subsidiary of Brown
Brothers Harriman Trust Company of New York, which is a wholly-owned subsidiary
of Brown Brothers Harriman & Co. For the period October 31, 1994 through June
30, 1995 and the fiscal year ended June 30, 1996, the Portfolio incurred
$143,408 and $252,401, respectively, for administrative services.
DISTRIBUTOR
The Distribution Agreement (dated August 31, 1990) between the Trust
and 59 Wall Street Distributors remains in effect indefinitely, but only so long
as such agreement is specifically approved at least annually in the same manner
as the Investment Advisory Agreement (see "Investment Adviser"). The
Distribution Agreement was most recently approved by the Independent Trustees of
the Trust on February 21, 1996. The agreement
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terminates automatically if assigned by either party thereto and is terminable
with respect to the Fund at any time without penalty by a vote of a majority of
the Trustees of the Trust or by a vote of the holders of a "majority of the
outstanding voting securities as defined in the 1940 Act" of the Fund (see
"Additional Information"). The Distribution Agreement is terminable with respect
to the Fund by the Trust's Trustees or shareholders of the Fund on 60 days'
written notice to 59 Wall Street Distributors. The agreement is terminable by 59
Wall Street Distributors on 90 days' written notice to the Trust.
NET ASSET VALUE
The net asset value of each of the Fund's shares is determined each
day the New York Stock Exchange is open for regular trading and New York banks
are open for business. (As of the date of this Statement of Additional
Information, such Exchange and banks are so open every weekday except for the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas.) This determination of net asset value of
each share of the Fund is made once during each such day as of the close of
regular trading on such Exchange by subtracting from the value of the Fund's
total assets (I.E., the value of its investment in the Portfolio and other
assets) the amount of its liabilities, including expenses payable or accrued,
and dividing the difference by the number of shares of the Fund outstanding at
the time the determination is made. It is anticipated that the net asset value
of each share of the Fund will remain constant at $1.00 and, although no
assurance can be given that it will be able to do so on a continuing basis, the
Trust and the Portfolio employ specific investment policies and procedures to
accomplish this result.
The value of the Portfolio's net assets (I.E., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the Fund is determined. The value of the Fund's investment in
the Portfolio is determined by multiplying the value of the Portfolio's net
assets by the percentage, effective for that day, which represents the Fund's
share of the aggregate beneficial interests in the Portfolio.
The securities held by the Portfolio are valued at their amortized
cost. Pursuant to a rule of the Securities and Exchange Commission, an
investment company may use the amortized cost method of valuation subject to
certain conditions and the determination that such method is in the best
interests of the Fund's shareholders and the Portfolio's other investors. The
use of amortized cost valuations is subject to the following conditions: (i) as
a particular responsibility within the overall
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duty of care owed to the Portfolio's investors, the Trustees of the Portfolio
have established procedures reasonably designed, taking into account current
market conditions and the investment objective of its investors, to stabilize
the net asset value as computed; (ii) the procedures include periodic review by
the Trustees of the Portfolio, as they deem appropriate and at such intervals as
are reasonable in light of current market conditions, of the relationship
between the value of the Portfolio's net assets using amortized cost and the
value of the Portfolio's net assets based upon available indications of market
value with respect to such portfolio securities; (iii) the Trustees of the
Portfolio will consider what steps, if any, should be taken if a difference of
more than 1/2 of 1% occurs between the two methods of valuation; and (iv) the
Trustees of the Portfolio will take such steps as they consider appropriate,
such as shortening the average portfolio maturity, realizing gains or losses,
establishing the value of the Portfolio's net assets by using available market
quotations, or reducing the value of interests in the Portfolio, to minimize any
material dilution or other unfair results which might arise from differences
between the two methods of valuation.
Such conditions also generally require that: (i) investments for the
Portfolio be limited to instruments which the Trustees of the Portfolio
determine present minimal credit risks and which are of high quality as
determined by any nationally recognized statistical rating organization that is
not an affiliated person of the issuer of, or any issuer, guarantor or provider
of credit support for, the instrument, or, in the case of any instrument that is
not so rated, is of comparable quality as determined by the Investment Adviser
under the general supervision of the Trustees of the Portfolio; (ii) a
dollar-weighted average portfolio maturity of not more than 90 days be
maintained and no instrument is purchased with a remaining maturity of more than
397 days; (iii) the Portfolio's available cash will be invested in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable, if the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity of more than 90 days; and (iv) no
more than 5% of the Portfolio's total assets may be invested in the securities
of any one issuer (other than U.S. Government securities).
It is expected that the Fund will have a positive net income at the
time of each determination thereof. If for any reason the Fund's net income is a
negative amount, which could occur, for instance, upon default by an issuer of a
portfolio security, the Fund would first offset the negative amount with respect
to each shareholder account from the dividends declared during the month with
respect to those accounts. If and to the extent that negative net income exceeds
declared dividends at the end of the month, the Fund would reduce the number of
outstanding Fund shares by treating each shareholder as having contributed to
the capital of the Fund that number of full and fractional shares in his or her
account which represents his or her share of the amount of such excess. Each
shareholder would be deemed to have agreed to such contribution in these
circumstances by his or her investment in the Fund.
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COMPUTATION OF PERFORMANCE
The current and effective yields of the Fund may be used from time to
time in shareholder reports or other communications to shareholders or
prospective investors. Seven-day current yield is computed by dividing the net
change in account value (exclusive of capital changes) of a hypothetical
pre-existing account having a balance of one share at the beginning of a
seven-day calendar period by the value of that account at the beginning of that
period, and multiplying the return over the seven-day period by 365/7. For
purposes of the calculation, net change in account value reflects the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but does not
reflect realized gains or losses or unrealized appreciation or depreciation. The
Fund's current yield for the seven-day calendar period ended June 30, 1996 was
4.84%. In addition, the Trust may use an effective annualized yield quotation
for the Fund computed on a compounded basis by adding 1 to the base period
return (calculated as described above), raising the sum to a power equal to
365/7, and subtracting 1 from the result. Based upon this latter method, the
Fund's effective annualized yield for the seven-day calendar period ended June
30, 1996 was 4.95%.
The yield should not be considered a representation of the yield of the
Fund in the future since the yield is not fixed. Actual yields will depend on
the type, quality and maturities of the investments held for the Portfolio,
changes in interest rates on investments, and the Fund's expenses during the
period.
Yield information may be useful for reviewing the performance of the
Fund and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Fund's yield does fluctuate, and
this should be considered when reviewing performance or making comparisons.
FEDERAL TAXES
Each year, the Trust intends to continue to qualify the Fund and elect
that the Fund be treated as a separate "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Under Subchapter M of the Code the Fund is not subject to federal income taxes
on amounts distributed to shareholders.
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Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or other
income derived with respect to its business of investing in such securities; (b)
less than 30% of the Fund's annual gross income be derived from gains (without
offset for losses) from the sale or other disposition of securities held for
less than three months; and (c) the holdings of the Fund be diversified so that,
at the end of each quarter of its fiscal year, (i) at least 50% of the market
value of the Fund's assets be 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 Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
assets be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other investment companies). In
addition, in order not to be subject to federal income tax, at least 90% of the
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's shareholders.
To maintain a constant $1.00 per share net asset value, the Trustees
may direct that the number of outstanding shares be reduced pro rata. If this
adjustment is made, it will reflect the lower market value of portfolio
securities and not realized losses.
MASSACHUSETTS TRUST
The Trust's Declaration of Trust permits the Trust's Board of Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest and to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Trust. Each Fund share represents an equal proportionate interest in the Fund
with each other share. Upon liquidation or dissolution of the Fund, the Fund's
shareholders are entitled to share pro rata in the Fund's net assets available
for distribution to its shareholders. Shares of each series participate equally
in the earnings, dividends and assets of the particular series. Shares of each
series are entitled to vote separately to approve advisory agreements or changes
in investment policy, but shares of all series vote together in the election or
selection of the Trust's Trustees, principal underwriters and auditors for the
Trust. Upon liquidation or dissolution of the Trust, the shareholders of each
series are entitled to share pro rata in the net assets of their respective
series available for distribution to shareholders. The Trust reserves the right
to create and issue additional series of shares. The Trust currently consists of
three series.
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Shareholders are entitled to one vote for each share held on matters
on which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee of the Trust. The Trust is not required and has
no current intention to hold meetings of shareholders annually but the Trust
will hold special meetings of shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (E.G., upon application and
submission of certain specified documents to the Trustees of the Trust by a
specified number of shareholders) the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees of the Trust. Shareholders also have
the right to remove one or more Trustees of the Trust without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of its outstanding shares. Shares
have no preference, pre-emptive, conversion or similar rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. The Trust
may enter into a merger or consolidation, or sell all or substantially all of
its assets, if approved by the vote of the holders of two-thirds of its
outstanding shares, except that if the Trustees of the Trust recommend such sale
of assets, the approval by vote of the holders of a majority of the Trust's
outstanding shares will be sufficient. The Trust may also be terminated upon
liquidation and distribution of its assets, if approved by the vote of the
holders of two-thirds of its outstanding shares.
Stock certificates are not issued by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder's incurring financial loss because of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trust's Trustees individually but only upon the
property of the Trust and that the
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Trust's Trustees are not liable for any action or failure to act, but nothing in
the Declaration of Trust protects a Trust's Trustee against any liability to
which he would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office.
Interests in the Portfolio have no preference, preemptive, conversion
or similar rights, and are fully paid and non-assessable. The Portfolio is not
required to hold annual meetings of investors, but will hold special meetings of
investors when, in the judgment of its trustees, it is necessary or desirable to
submit matters for an investor vote. Each investor is entitled to a vote in
proportion to the share of its investment in the Portfolio.
PORTFOLIO TRANSACTIONS
Brown Brothers Harriman & Co., as Investment Adviser for the
Portfolio, places orders for all purchases and sales of portfolio securities,
enters into repurchase and reverse repurchase agreements and executes loans of
portfolio securities. Fixed-income securities are generally traded at a net
price with dealers acting as principal for their own account without a stated
commission. The price of the security usually includes a profit to the dealer.
In underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to as
the underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. From time to time certificates of deposit may
be purchased through intermediaries who may charge a commission for their
services.
Brown Brothers Harriman & Co. does not seek profits through short-term
trading. However, Brown Brothers Harriman & Co. may on behalf of the Portfolio
dispose of any portfolio security prior to its maturity if it believes such
disposition is advisable even if this action realizes profits.
Since brokerage commissions are not normally paid on investments which
are made for the Portfolio, turnover resulting from such investments should not
adversely affect the net asset value of the Portfolio. In connection with
portfolio transactions for the Portfolio, Brown Brothers Harriman & Co. intends
to seek best price and execution on a competitive basis for both purchases and
sales of securities. For the fiscal year ended June 30, 1996, the Portfolio paid
no brokerage commissions.
Prior to the Fund's termination of its Investment Advisory Agreement
with Brown Brothers Harriman & Co. no brokerage commissions were paid from the
Fund during the fiscal years ended June 30, 1995 and 1994.
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On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Portfolio. In some instances, this procedure might adversely affect the
Portfolio.
BOND, NOTE AND COMMERCIAL PAPER RATINGS
Bond Ratings
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Aaa - Bonds rated Aaa are judged to be of the "best quality". Issues
rated Aaa may be further modified by the numbers 1, 2 or 3 (3 being the highest)
to show relative strength within the rating category.
STANDARD & POOR'S CORPORATION ("S&P")
AAA - The AAA rating is the highest rating assigned to debt
obligations and indicates an extremely strong capacity to pay principal and
interest.
Note and Variable Rate Investment Ratings
Moody's - MIG-1. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow of funds for
their services or from established and broad-based access to the market for
refinancing or both.
S&P - SP-1. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+).
Corporate Commercial Paper Ratings
Moody's - Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Prime-1 indicates highest quality repayment
capacity of rated issue.
S&P - Commercial Paper ratings are a current assessment of the
likelihood of timely payment of debts having an original
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maturity of no more than 365 days. Issues rated A-1 have the greatest capacity
for timely payment. Issues rated "A-1+" are those with an "overwhelming degree
of credit protection."
Other Considerations
Among the factors considered by Moody's in assigning bond, note and
commercial paper ratings are the following: (i) evaluation of the management of
the issuer; (ii) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(iii) evaluation of the issuer's products in relation to competition and
customer acceptance; (iv) liquidity; (v) amount and quality of long-term debt;
(vi) trend of earnings over a period of 10 years; (vii) financial strength of a
parent company and the relationships which exist with the issuer; and (viii)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
Among the factors considered by S&P in assigning bond, note and
commercial paper ratings are the following: (i) trend of earnings and cash flow
with allowances made for unusual circumstances, (ii) stability of the issuer's
industry, (iii) the issuer's relative strength and position within the industry
and (iv) the reliability and quality of management.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the
Prospectus, the term "majority of the outstanding voting securities as defined
in the 1940 Act" currently means the vote of (i) 67% or more of the outstanding
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
A shareholder's right to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed:
(i) during periods when the New York Stock Exchange is closed for other than
weekends and holidays or when regular trading on such Exchange is restricted as
determined by the Securities and Exchange Commission by rule or regulation, (ii)
during periods in which an emergency exists which causes disposal of, or
evaluation of the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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With respect to the securities offered by the Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
A copy of the Declaration of Trust establishing the Trust is on file
in the office of the Secretary of the Commonwealth of Massachusetts.
FINANCIAL STATEMENTS
The Annual Report of the Fund dated June 30, 1996 has been filed with
the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder and is hereby incorporated herein by reference. A
copy of the Annual Report will be provided without charge to each person
receiving this Statement of Additional Information.
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