U.S. Treasury Money Fund
PROSPECTUS
November 1, 1996
[LOGO] PHOTO
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PROSPECTUS
THE 59 WALL STREET U.S. TREASURY MONEY FUND
6 St. James Avenue, Boston, Massachusetts 02116
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The 59 Wall Street U.S. Treasury Money 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
only in short-term securities backed as to principal and interest payments by
the full faith and credit of the United States of America. Although investments
held for the Fund are issued by the U.S. Government, an investment in the Fund
is not insured or guaranteed by the U.S. Government.
Dividends from the Fund which are derived from interest on direct
obligations of the U.S. Government are generally expected to be exempt from
state and local income taxes in all states. However, a shareholder of the Fund
is subject to federal income tax on the dividends and capital gain distributions
received from the Fund.
Brown Brothers Harriman & Co. is the investment adviser to, 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.
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
Investment Objective and Policies.............. 4
Investment Restrictions........................ 6
Purchase of Shares.............................. 6
Redemption of Shares........................... 7
Management of the Trust ........................ 8
Net Asset Value................................ 11
Dividends and Distributions.................... 11
Taxes.......................................... 12
Description of Shares.......................... 14
Additional Information ......................... 15
TERMS USED IN THIS PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
Trust ................................. The 59 Wall Street Trust
Fund .................................. The 59 Wall Street U.S. Treasury Money Fund
Investment Adviser and Administrator... Brown Brothers Harriman & Co.
Subadministrator....................... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Distributor............................ 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act............................... The Investment Company Act of 1940, as amended.
</TABLE>
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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, 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.
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 .................................. 0.100%
Shareholder Servicing/Eligible Institution Fee....... 0.225
Other Expenses....................................... 0.095 0.42
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Total Fund Operating Expenses.......................... 0.57%
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* The Annual Fund Operating Expenses for the past fiscal year have
been restated for purposes of this table to reflect fees currently
in effect.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
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 $19 $32 $73
</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.
For more information with respect to the expenses of the Fund see "Management
of the Trust" herein.
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FINANCIAL HIGHLIGHTS
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The following information for the five 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.
<TABLE>
<CAPTION>
For the period
March 12, 1991
For the years ended June 30, (commencement
----------------------------------------------------------------- of operations)
1996 1995 1994 1993 1992 to June 30, 1991
--------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 1.00 $ 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 0.04 0.02
Dividends to shareholders
from net investment
income..................... (0.05) (0.05) (0.03) (0.03) (0.04) (0.02)
------ -------- -------- -------- -------- -------
Net asset value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======== ======== ======== ======== =======
Total return*................ 4.96% 4.67% 2.74% 2.75% 4.48% 5.45%**
Ratios/supplemental data:
Net assets, end of period
(000's omitted).......... $146,225 $144,969 $141,731 $136,584 $118,706 $70,241
Ratio of expenses to
average net assets* ..... 0.56% 0.55% 0.55% 0.55% 0.55% 0.55%**
Ratio of net investment
income to average net
assets................... 4.78% 4.52% 2.72% 2.70% 4.35% 5.27%**
</TABLE>
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* Had the expense reimbursement agreement not been in place, the ratio of
expenses to average net assets, for the years ended June 30, 1996, 1995,
1994, 1993 and 1992 and the period March 12, 1991 (commencement of
operations) to June 30, 1991, would have been 0.57%, 0.58%, 0.57%, 0.55%,
0.56%, and 0.74%, respectively. For the same periods, the total return of the
Fund would have been 4.91%, 4.64%, 2.72%, 2.75%, 4.47%, and 5.26%,
respectively. The expense reimbursement fee agreement terminated on February
1, 1996.
** Annualized.
INVESTMENT OBJECTIVE AND POLICIES
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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 investment objective of the Fund is a fundamental policy and may be
changed only with the approval of the holders of a "majority of the Fund's
outstanding voting securities as defined in the 1940 Act". (See "Additional
Information" in this Prospectus.) However, the investment policies of the Fund
as described below are not fundamental and may be changed without such approval.
Investments for the Fund mature or are deemed to mature within 397 days from
the date of purchase and the average maturity of the investments held by the
Fund (on a dollar-weighted basis) is 90 days or less.
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Assets of the Fund are invested only in securities backed as to principal and
interest payments by the full faith and credit of the United States of America.
These securities are issues of the U.S. Treasury, such as bills, certificates of
indebtedness, notes and bonds as well as unmatured interest coupons of U.S.
Treasury bonds and notes which have been separated and resold in a custodial
receipt program administered by the U.S. Treasury.
The Trust may, in the future, seek to achieve the Fund's investment objective
by investing all of the Fund's assets in a no-load, diversified, open-end
management investment company having substantially the same investment objective
as the Fund. Shareholders will receive 30 days prior written notice with respect
to any such investment.
Risk Factors
Although investments held for the Fund are issued by the U.S. Government, an
investment in the Fund is not insured or guaranteed by the U.S. Government. The
portfolio is subject to interest rate risk which causes fluctuations in the
amount of daily dividends, 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 a response to general changes in interest rates.
Portfolio Brokerage
Although the Fund 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.
U.S. Treasury 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 Fund are entered directly with the issuer or
market maker for the securities involved. Purchases from dealers serving as
market makers may include a spread between the bid and asked price. The policy
of the Fund 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 Fund'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 and dealers
who furnish research and other services to the Fund 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 Fund 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
Fund. In some instances, this procedure might adversely affect the Fund.
5
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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 Fund's investment
policies. 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 Fund's outstanding voting securities as defined in the 1940 Act" (see
"Additional Information" in this Prospectus), including a restriction that,
excluding 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 may be
invested in securities that are subject to legal or contractual restrictions on
resale.
As a non-fundamental policy, money is not borrowed in an amount in excess
of 10% of the assets of the Fund. It is intended that money will be borrowed
only from banks and only either to accommodate requests for the redemption of
shares 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 Fund at any time at which the amount of its borrowings exceed
5% of its assets.
Also, as a non-fundamental policy, up to 5% of the Fund's assets may be
invested in repurchase agreements although it is the intention of the Adviser to
do so only when other means of efficiently investing cash flows are unavailable.
All repurchase agreement transactions are collateralized by U.S. Treasury
securities and are entered into only with "primary dealers" (as designated by
the Federal Reserve Bank of New York) in U.S. Government securities. A
shareholder of the Fund is subject to state and local income taxes in most
jurisdictions on the portion of dividends received from the Fund which is
derived from income from repurchase agreements. It is the intention of the
Investment Adviser to minimize the portion of the Fund's income which is derived
from repurchase agreements to the extent practicable.
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 and 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 10)
or a Financial Intermediary (see page 10) 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. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the purchase of Fund shares.
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
6
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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
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 10), each Eligible
Institution and each Financial Intermediary (see page 10) 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.
7
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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.)
MANAGEMENT OF THE TRUST
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Trustees and Officers
The Trustees, in addition to supervising the actions of the Administrator,
Investment Adviser and Distributor of the Fund, as set forth below, decide upon
matters of general policy. Because of the services rendered to the Trust by the
Investment Adviser and the Administrator, the Trust itself requires no employees
other than its officers, none of whom, other than the Chairman, receive
compensation from the Fund and all of whom, other than the Chairman, are
employed by 59 Wall Street Administrators. (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
Investment Adviser
The Investment Adviser to the Fund 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 Fund. Subject to the general supervision of the
Trust's Trustees, Brown Brothers Harriman & Co. makes the day-to-day investment
decisions for the Fund, places the purchase and sale orders for the portfolio
transactions of the Fund, and generally manages the Fund'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
Fund an annual fee, computed daily and payable monthly, equal to 0.15% of the
Fund's average daily net assets. Brown Brothers Harriman & Co. also receives an
annual administration fee and shareholder servicing/eligible institution fee
from the Fund equal to 0.10% and 0.225%, respectively, of the average daily net
assets of the Fund.
The investment advisory services of Brown Brothers Harriman & Co. to the
Fund are not exclusive under the terms of the Investment Advisory Agreement.
8
<PAGE>
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".
Administrator
Brown Brothers Harriman & Co. acts as Administrator of the Trust. (See
"Administrator" in the Statement of Additional Information.)
In its capacity as Administrator, 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 Custodian, 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 Trust and for the Fund and reports to
the Fund's 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, Brown Brothers Harriman & Co.
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.10% of the Fund'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.
9
<PAGE>
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
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
10
<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.
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 Fund's Custodian, Transfer and Dividend
Disbursing Agent. As Custodian, it is responsible for maintaining books and
records of the Fund's portfolio transactions and holding the Fund's portfolio
securities and cash 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, the Custodian maintains the Fund's accounting
and portfolio transaction records and for each day computes the Fund's net asset
value, net investment income and dividend payable. As Transfer and Dividend
Disbursing Agent it is responsible for maintaining the books and records
detailing ownership of the Fund's shares.
Independent Auditors
Deloitte & Touche LLP are the independent auditors for the Fund.
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 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 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 Fund's portfolio
securities 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 Fund 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) accrued interest, accretion of
discount and amortization of premium, (ii) plus net short-term capital gains or
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losses realized on sales of portfolio securities of the Fund, and (iii) less the
accrued expenses of the Fund applicable to that dividend period. (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 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. 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 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.
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.
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 to provide a correct taxpayer identification number (Social Security
Number for individuals) or to make required 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
Assets of the Fund are invested in direct obligations of the U.S.
Government, the interest from which is specifically exempted from state and
local income taxes when held directly by taxpayers. All states by legislation or
regulation allow the character of interest income from direct obligations of the
U.S. Government received by a regulated investment company organized as a series
of a Massachusetts business trust, such as the Fund, to pass through to
shareholders. However, a shareholder of the Fund is subject to state and local
income taxes in most jurisdictions on the portion of dividends received from the
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<PAGE>
Fund which is derived from income from repurchase agreements. It is the
intention of the Investment Adviser to minimize the portion of the Fund's income
which is derived from repurchase agreements to the extent practicable. The Trust
intends to advise shareholders of the proportion of the Fund's dividends which
is derived from interest on direct obligations of the U.S. Government.
Dividends paid from the Fund which are derived from interest on direct
obligations of the U.S. Government are generally expected to be exempt from
income taxation in the District of Columbia and the following states:
Alabama Louisiana Ohio
Arizona Maine Oklahoma
Arkansas Maryland Oregon
Colorado Massachusetts Pennsylvania
Delaware Michigan Rhode Island
Dist. Columbia Minnesota South Carolina
Georgia Missouri Tennessee
Hawaii Mississippi Utah
Idaho Montana Vermont
Illinois Nebraska Virginia
Indiana New Hampshire West Virginia
Iowa New Mexico Wisconsin.
Kansas North Carolina
Kentucky North Dakota
Such dividends are also generally expected to be so exempt in the following
states provided that a certain minimum percentage of the Fund's assets consist
of direct obligations of the U.S. Government. It is the Trust's intention to
meet these minimum percentage requirements, none of which is greater than 80%.
California New Jersey New York.
Connecticut
There is currently no state income tax in the following states:
Alaska South Dakota Washington
Florida Texas Wyoming.
Nevada
Shareholders are urged to consult their tax advisors regarding the possible
exclusion for state and local income tax purposes of the portion of dividends
paid from the Fund which is derived from interest on direct obligations of the
U.S. Government.
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.
13
<PAGE>
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 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 themselves have the power to alter the number and the terms of
office of the Trustees, 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 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
fully paid and nonassessable, except as set forth below. It is the intention of
the Trust not to hold meetings of shareholders annually. The Trustees 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 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. Shareholders also have the right to remove one or more Trustees
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 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.
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<PAGE>
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the Fund's outstanding
voting securities as defined in the 1940 Act" currently means the vote of (i)
67% or more of the Fund's shares present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present in person
or represented by proxy; or (ii) more than 50% of the Fund's 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.
15
<PAGE>
The 59 Wall Street Trust
Investment Adviser And
Administrator
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 U.S. TREASURY MONEY FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
The 59 Wall Street U.S. Treasury Money 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 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. There can be no
assurance that the investment objective of the Fund will be achieved.
The Trust pursues the investment objective of the Fund by investing in
short-term obligations backed as to principal and interest payments by the full
faith and credit of the United States of America. Although investments held for
the Fund are issued by the U.S. Government, an investment in the Fund is not
insured or guaranteed by the U.S. Government.
Brown Brothers Harriman & Co. is the Fund'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 4-5
Investment Restrictions 3 6
Trustees and Officers 5 8
Investment Adviser 8 8-9
Administrator 9 9
Distributor 9 11
Net Asset Value 10 12
Computation of Performance 11 15
Federal Taxes 12 12-13
Massachusetts Trust 12 14
Portfolio Transactions 14 5
Additional Information 15 15
Financial Statements 16 4
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS NOVEMBER 1, 1996
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund.
TREASURY RECEIPTS. Assets of the Fund are not invested in stripped
securities issued by any entity other than the U.S. Treasury.
REPURCHASE AGREEMENTS. 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 seller (the
"Lender") of a security agrees to repurchase from the Fund 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 Fund are invested in the agreement and is not
related to the coupon rate on the underlying security. The period of these
repurchase agreements is usually short, from overnight to one week, and at no
time will assets of the Fund be 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 Fund 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 have
a market value including accrued interest at least equal to 100% of the dollar
amount invested on behalf of the Fund in each agreement along with accrued
interest. Payment for such securities is made for the Fund only upon physical
delivery or evidence of book entry transfer to the account of State Street Bank
and Trust Company (the "Custodian"). If the Lender defaults, the Fund might
incur a loss if the value of the collateral securing the repurchase agreement
declines and might
3
<PAGE>
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 Fund 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 Fund if, as a result, more than 10% of
the market value of the Fund's total assets would be invested in such repurchase
agreements together with any other investment being held for the Fund for which
market quotations are not readily available.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements may also
be entered into for the Fund, although the current intention is not to do so.
LOANS OF PORTFOLIO SECURITIES. Securities of the Fund may be loaned if
such loans would be secured continuously by cash or equivalent collateral or by
an irrevocable letter of credit in favor of the Fund 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 Fund any income accruing
thereon, and cash collateral may be invested for the Fund, 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 Trust 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 Fund
and its shareholders. 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 Fund. Securities of the Fund are
not loaned to Brown Brothers Harriman & Co. or to any affiliate of the Trust or
Brown Brothers Harriman & Co.
INVESTMENT RESTRICTIONS
The Fund is 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 Fund's outstanding voting securities as defined in
the 1940 Act" (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, the Trust, with respect to the Fund, may
not:
4
<PAGE>
(1) borrow money or mortgage or hypothecate its assets, except that in
an amount not to exceed 1/3 of the current value of its net assets, it may
borrow money as a temporary measure for extraordinary or emergency purposes and
enter into repurchase agreements, and except that it may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that money be borrowed only from banks and only either to accommodate
requests for the redemption of Fund shares 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) or reverse repurchase agreements, and except that assets may
be pledged to secure letters of credit solely for the purpose of participating
in a captive insurance company sponsored by the Investment Company Institute;
for additional related restrictions, see clause (i) under the caption "State and
Federal Restrictions" hereafter;
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained;
(3) write, purchase or sell any put or call option or any combination
thereof;
(4) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(5) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its
total assets (taken at market value), (b) through the use of repurchase
agreements or the purchase of short-term obligations and provided that not more
than 10% of its total assets are invested in repurchase agreements maturing in
more than seven days, or (c) by purchasing, subject to the limitation in
paragraph 6 below, a portion of an issue of debt securities of types commonly
distributed privately to financial institutions, for which purposes the purchase
of a portion of an issue of debt securities which are part of an issue to the
public shall not be considered the making of a loan;
(6) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of the its
total assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real
5
<PAGE>
estate or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business (the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities is reserved);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue and equal in amount
to, the securities sold short, and unless not more than 10% of its net assets
(taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (it is the
present intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes);
(9) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective, up to 25%
of its assets, at market value at the time of each investment, may be invested
in any one industry; or
(10) 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.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies the Fund may not as a matter of operating
policy (except that the Fund 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 for
the Fund's portfolio at any time at which the amount of its borrowings exceed 5%
of the Fund's 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 would be
conditional the sale is 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
6
<PAGE>
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, (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 shall be 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 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 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 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.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust, their principal
occupation during the past five years (although their titles may have varied
during the period) and business addresses are:
7
<PAGE>
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.
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); 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.
OFFICERS OF THE TRUST
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).
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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 Funds (prior to April 1995).
MOLLY S. MUGLER - Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall
Street Administrators (since June 1993).
* Mr. Shields is an "interested person" of the Trust because of
his affiliation with a registered broker-dealer.
** These Trustees are members of the Audit Committee of the Trust.
(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.
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Each Trustee and officer listed above holds the equivalent position
with The 59 Wall Street Fund, Inc. The address of each officer is 6 St. James
Avenue, Boston, Massachusetts 02116. Messrs. Coolidge, Hoolahan, and Elder, and
Ms. 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 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.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement and the Administration Agreement
(see "Investment Adviser" and "Administrator"), the Trust itself requires no
employees other than its officers, and none of its officers devote full time to
the affairs of the Trust or, other than the Chairman, receive any compensation
from the Fund.
As of October 31, 1996, the Trust's Trustees and officers as a group
owned less than 1% of the Fund's outstanding shares of the Trust. 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 except American
Saw and Manufacturing Co. owned 23,562,954 (13.56%) and Mr. Joseph C. McNay
owned 11,040,524 (6.36%) shares of the Fund c/o Brown Brothers Harriman & Co.,
59 Wall Street, New York, New York 10005. As of that date, the Partners of Brown
Brothers Harriman & Co. and their immediate families owned 999,244 (0.58%)
shares of the Fund. Brown Brothers Harriman & Co. and its affiliates separately
were able to direct the disposition of an additional 30,375,286 (17.49%) shares
of the Fund, as to which Brown Brothers Harriman & Co. disclaims beneficial
ownership.
INVESTMENT ADVISER
Under its Investment Advisory Agreement with the Trust, subject to the
general supervision of the Trust's Trustees and in conformance with the stated
policies of the Fund, Brown Brothers
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Harriman & Co. provides investment advice and portfolio management services to
the Fund. In this regard, it is the responsibility of Brown Brothers Harriman &
Co. to make the day-to-day investment decisions for the Fund, to place the
purchase and sale orders for portfolio transactions of the Fund and to manage,
generally, the Fund's investments.
The Investment Advisory Agreement between Brown Brothers Harriman &
Co. and the Trust is dated February 12, 1991, as amended and restated November
1, 1993 and remains in effect for two years from such date and thereafter, but
only as long as the agreement is specifically approved annually (i) by a vote of
the holders of a "majority of the Fund's outstanding voting securities as
defined in the 1940 Act" or by the Trust's Trustees, and (ii) by a vote of a
majority of the Trustees of the Trust who are not parties to the Investment
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of the
Trust ("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 August 20, 1996. 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 Trust or by
a vote of the holders of a "majority of the Fund's outstanding voting securities
as defined in the 1940 Act" on 60 days' written notice to Brown Brothers
Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written notice
to the Trust (see "Additional Information").
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 Fund's
average daily net assets. Prior to November 1, 1993, the investment advisory fee
was an annual rate equal to 0.40% of the Fund's average daily net assets. For
the fiscal years ended June 30, 1996, 1995 and 1994 , the Fund incurred
$239,680, $177,219 and $296,035, 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 Fund or were prohibited from acting in such capacity, it is expected that
the Trustees would recommend to the shareholders that they approve a new
investment advisory agreement for the Fund with another qualified adviser. If
Brown Brothers Harriman & Co. were to
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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
Trust 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.
ADMINISTRATOR
The Administration Agreement between the Trust and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, 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 Independent Trustees of the Trust most
recently approved the Trust's Administration Agreement on August 20, 1996. The
agreement will terminate automatically if assigned by either party thereto and
is terminable 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 Trust (see
"Additional Information"). The Administration Agreement is terminable by the
Trust's Trustees or shareholders of the Trust on 60 days' written notice to
Brown Brothers Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days'
written notice to the Trust.
The administrative fee paid to Brown Brothers Harriman & Co. is
calculated daily and payable monthly 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 for the Trust and was paid 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 $159,787, $118,146 and
$107,165 , 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
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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 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 Fund's outstanding voting securities as defined in the 1940
Act" (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 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 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 employs specific investment policies
and procedures to accomplish this result.
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 its shareholders. The use of amortized cost valuations for the Fund
is subject to the following conditions: (i) as a particular responsibility
within the overall duty of care owed to the Fund's shareholders, the Trustees
have established procedures reasonably designed, taking into account current
market conditions and the Fund's investment objective, to stabilize the net
asset value per share as computed for the purpose of distribution and redemption
at $1.00 per share; (ii) the procedures include periodic review by the Trustees,
as they deem appropriate and at such intervals as are reasonable in light of
current market conditions, of the
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relationship between the net asset value per share using amortized cost and the
net asset value per share based upon available indications of market value with
respect to such portfolio securities; (iii) the Trustees 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 will take such steps
as they consider appropriate, such as changing the dividend policy, shortening
the average portfolio maturity, realizing gains or losses, establishing a net
asset value per share by using available market quotations, or reducing the
value of the Fund's outstanding shares, 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
Fund be limited to instruments which the Trustees 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; (ii) a dollar-weighted average portfolio maturity
of not more than 90 days be maintained appropriate to the Fund's objective of
maintaining a stable net asset value of $1.00 per share and no instrument is
purchased with a remaining maturity of more than 13 months; (iii) the Fund'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 Fund'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
4.54%. 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 4.64%.
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 depend on the
type, quality and maturities of the investments held for the Fund, 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.
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
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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). 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 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. 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 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. Shareholders also have the right to remove one or more Trustees
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.
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The Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees are not liable for any action or failure to
act, but nothing in the Declaration of Trust protects a 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.
The Trust may, in the future, seek to achieve the Fund's investment
objective by investing all of the Fund's investable assets in a no-load,
diversified, open-end management investment company having substantially the
same investment objective as those applicable to the Fund. In such event, the
Fund would no longer directly require investment advisory services and therefore
would pay no investment advisory fees. Further, the administrative services fee
paid from the Fund would be reduced. At a shareholder's meeting held on
September 23, 1993, the Fund's shareholders approved changes to the investment
restrictions of the Fund to authorize such an investment. Such an investment
would be made only if the Trustees believe that the aggregate per share expenses
of the Fund and such other investment company would be less than or
approximately equal to the expenses which the Fund would incur if the Trust were
to continue to retain the services of an investment adviser for the Fund and the
assets of the Fund were to continue to be invested directly in portfolio
securities.
It is expected that the investment in another investment company will
have no preference, preemptive, conversion or similar rights, and will be fully
paid and non-assessable. It is expected that the investment company will not be
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. It is expected that each investor will be
entitled to a vote in proportion to the share of its investment in such
investment company. Except as described below, whenever the Trust is requested
to vote on matters pertaining to the investment company, the Trust would hold a
meeting of the Fund's shareholders and would cast its votes on each matter at a
meeting of investors in the investment company proportionately as instructed by
the Fund's shareholders.
However, subject to applicable statutory and regulatory requirements,
the Trust would not request a vote of the Fund's shareholders with respect to
(a) any proposal relating to the investment company in which the Fund's assets
were invested, which proposal, if made with respect to the Fund, would not
require the vote of the shareholders of the Fund, or (b) any proposal with
respect to the investment company that is identical, in all material respects,
to a proposal that has previously been approved by shareholders of the Fund.
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PORTFOLIO TRANSACTIONS
Brown Brothers Harriman & Co., as Investment Adviser, 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.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Fund 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 Fund 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 Fund. In some instances, this procedure might adversely
affect the Fund.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the
Prospectus, the term "majority of the Fund's outstanding voting securities as
defined in the 1940 Act" currently means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present in person or represented
by proxy; or (ii) more than 50% of the Fund's outstanding voting securities,
whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by the 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
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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, the
Fund's portfolio securities to be unreasonable or impracticable, or (iii) for
such other periods as the Securities and Exchange Commission may permit.
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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