As filed with the Securities and Exchange Commission on August 27, 1999
Registration No. 33-48606
(The 59 Wall Street Tax Free Short/Intermediate Fixed Income
Fund)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 44
THE 59 WALL STREET TRUST
(Exact name of Registrant as specified in charter)
21 Milk Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(617) 423-0800
PHILIP W. COOLIDGE
21 Milk Street, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
JOHN E. BAUMGARDNER, JR., ESQ.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (i)
[X] on October 28, 1999 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
(par value $.001)
<PAGE>
PROSPECTUS
The 59 Wall Street Tax Free
Short/Intermediate Fixed Income Fund
21 Milk Street, Boston, Massachusetts 02109
The 59 Wall Street Tax Free Short/Intermediate Fixed Income Fund is a
separate portfolio of The 59 Wall Street Trust. Shares of the Fund are offered
by this Prospectus. The Fund seeks to provide investors with as high a level of
income exempt from federal income tax as is consistent with minimizing price
fluctuations in net asset value and maintaining liquidity.
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.
- -------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
The date of this Prospectus is November 1, 1999.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objective and Strategies ...............................
Principal Risk Factors ............................................
Fund Performance ..................................................
Fees and Expenses of the Fund .....................................
Investment Adviser.................................................
Shareholder Information ...........................................
Financial Highlights...............................................
Additional Investment Information .................................
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Fund is to provide investors with as high
a level of income exempt from federal income tax as is consistent with
minimizing price fluctuations in net asset value and maintaining liquidity.
The Fund invests primarily in high quality municipal securities and the
dollar weighted average maturity of the Fund's portfolio does not exceed three
years. Under normal circumstances the Investment Adviser fully invests the
assets of the Fund in a broad range of high quality municipal securities issued
by or on behalf of states, territories and possessions of the United States, the
District of Columbia and their subdivisions, agencies and instrumentalities.
These securities include municipal bonds, notes, commercial paper, variable and
floating rate instruments and when-issued and delayed delivery securities.
PRINCIPAL RISK FACTORS
Although the assets of the Fund are invested in high quality municipal
securities, the portfolio is subject to certain risks. The principal risks of
investing in the Fund and the circumstances reasonably likely to adversely
affect an investment are described below. As with any fund other than a money
market mutual fund, the share price of the Fund changes daily based on market
conditions and other factors. A shareholder may lose money by investing in the
Fund.
o Credit risk refers to the likelihood that an issuer will default on
interest or principal payments. The Fund is investing in high quality
bonds with a rating of A or better, which limits the portfolio's exposure
to credit risk.
o Bond prices fluctuate in response to changes in interest rates. In
general, bonds with shorter maturities are less sensitive to interest rate
movements than those with longer maturities. Given that the average
weighted maturity of the portfolio's holdings is limited to three years,
the Fund normally has less exposure to interest rate risk than longer-term
bond funds.
o Changes in the financial condition of an issuer, changes in specific
economic or political conditions that affect a particular type of issuer, and
changes in general economic or political conditions can adversely affect the
credit quality or value of an issuer's securities. Entities providing credit
support or a maturity-shortening structure also can be affected by these types
of changes. Municipal securities backed by current or anticipated revenues from
a specific project or specific assets can be negatively affected by the
discontinuance of the taxation supporting the project or assets or the inability
to collect revenues for the project or from the assets. If a security's
structure fails to function as intended, the security could become taxable or
decline in value.
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. or any other bank, and the shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other federal, state or other governmental agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE>
FUND PERFORMANCE
The chart and table below give an indication of the Fund's risks and
performance. The chart shows changes in the Fund's performance from year to
year. The table shows how the Fund's average annual returns for the periods
indicated compare to those of a broad measure of market performance.
When you consider this information, please remember that the Fund's
performance in past years is not necessarily an indication of how the Fund will
do in the future.
<TABLE>
<S> <C> <C>
Total Return (% per calendar year) [TO BE UPDATED]
- ------------------------------------------------------------------ ------------------------- -------------------------
Highest and Lowest Return
(Quarterly 1993-1998)
- ------------------------------------------------------------------ ------------------------- -------------------------
Return Quarter Ending
Highest %
Lowest %
- ---------------------------------------- ------------------------- ---------------------------------------------------
Average Annual Total Returns
(through December 31, 1998)
- ---------------------------------------- ------------------------- ---------------------------------------------------
1 Year 5 Years Life of Fund
(Since )
Tax Free Short/Intermediate
Fixed Income Fund
Merrill Lynch 0-3 General Obligation
Municipal Bond Index
- ---------------------------------------- ------------------------- ------------------------- -------------------------
</TABLE>
<PAGE>
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that an investor may pay
if that investor buys and holds shares of the Fund:
SHAREHOLDER FEES
(Fees paid directly from an investor's account)
Maximum Sales Charge (Load)
Imposed on Purchases .................................. None
Maximum Deferred Sales Charge (Load) .................. None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends ....................... None
Redemption Fee .......................................... None
Exchange Fee ........................................... None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets as a percentage of average
net assets)
Management Fees ....................................... 0.25%
Distribution (12b-1) Fees.......................... None
Other Expenses
Administration Fee............................. 0.15%
Shareholder Servicing/Eligible Institution Fee 0.25
Other Expenses................................. 0.18 0.58
---- ----
Total Annual Fund Operating Expenses........................ 0.83%
====
-------------------------
EXAMPLE
The example is intended to help an investor compare the cost of
investing in the Fund to the cost of investing in other mutual funds. The
example assumes that an investor invests $10,000 in the Fund for the time
periods indicated and then sells all of his shares at the end of those periods.
The example also assumes that an investment has a 5% return each year and that
the Fund's operating expenses remain the same as shown in the table above.
Although actual costs and the return on an investor's investment may be higher
or lower, based on these assumptions the investor's costs would be:
1 year ............................ $85
3 years ........................... $265
5 years ........................... $460
10 years ........................... $1025
<PAGE>
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. The Investment
Adviser is located at 59 Wall Street, New York, NY 10005.
The Investment Adviser provides investment advice and portfolio
management services to the Fund. Subject to the general supervision of the
Trustees of The 59 Wall Street Trust (the "Trust"), the Investment Adviser 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. The Investment Adviser provides a broad range of investment
management services for customers in the United States and abroad. At June 30,
1999, it managed total assets of approximately $33 billion.
A team of individuals manages the Fund's portfolio on a day-to-day
basis. This team includes Mr. Jeffrey A. Schoenfeld, Mr. Glenn E. Baker, Mr.
John P. Nelson, Ms. Barbara A. Brinkley and Ms. Debra L. Croviez of Brown
Brothers Harriman & Co. Mr. Schoenfeld holds a B.A. from the University of
California, Berkeley and a M.B.A. from the Wharton School of the University of
Pennsylvania. He joined Brown Brothers Harriman & Co. in 1984. Mr. Baker holds a
B.A. and a M.B.A. from the University of Michigan and is a Chartered Financial
Analyst. He joined Brown Brothers Harriman & Co. in 1991. Mr. Nelson holds a
B.S. from St. Vincent's College. He joined Brown Brothers Harriman & Co. in
1987. Ms. Brinkley holds a B.A. from Smith College. She joined Brown Brothers
Harriman & Co. in 1967. Ms. Croviez holds a B.B.A. from George Washington
University. She joined Brown Brothers Harriman & Co. in 1997.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Investment Adviser, under the
Investment Advisory Agreement, the Fund pays the Investment Adviser an annual
fee, computed daily and payable monthly, equal to 0.25% of the Fund's average
daily net assets.
SHAREHOLDER INFORMATION
NET ASSET VALUE
The Trust determines the Fund's net asset value once daily at 4:00 P.M.,
New York time on each day the New York Stock Exchange is open for regular
trading and the New York banks are open for business.
The Trust values the assets in the Fund's portfolio on the basis of their
market quotations and valuations provided by independent pricing services. If
quotations are not readily available, the assets are valued at fair value in
accordance with procedures established by the Trustees of the Trust.
PURCHASE OF SHARES
The Trust offers shares of the Fund on a continuous basis at its net
asset value without a sales charge. The Trust reserves the right to determine
the purchase orders for Fund shares that it will accept. Investors may purchase
shares on any day the net asset value is calculated if the Trust receives the
purchase order and acceptable payment for such order prior to such calculation.
The Trust then executes purchases of Fund shares at the net asset value per
share next determined on that same day. Shares are entitled to dividends
declared on the next business day following the day the Trust executes the
purchase order on the books of the Trust.
An investor who has an account with an Eligible Institution or a
Financial Intermediary may place purchase orders for Fund shares through that
Eligible Institution or Financial Intermediary, which holds such shares in its
name on behalf of that customer pursuant to arrangements made between that
customer and that Eligible Institution or Financial Intermediary. 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. Currently, such minimum purchase requirements range from $1,000 to
$5,000. Each Eligible Institution or Financial Intermediary arranges payment for
Fund shares on behalf of its customers. An Eligible Institution or a Financial
Intermediary may charge a transaction fee 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 through Brown Brothers Harriman & Co., 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. The Trust executes all purchase orders for
initial and subsequent purchases at the net asset value per share next
determined after the Trust's Custodian, State Street Bank and Trust Company has
receive payment in the form of a cashier's check drawn on a U.S. bank, a check
certified by a U.S. bank or a wire transfer. The Shareholder Servicing Agent has
established a minimum initial purchase requirement for the Fund of $100,000 and
a minimum subsequent purchase requirement for the Fund of $25,000. The
Shareholder Servicing Agent may amend these minimum purchase requirements from
time to time.
REDEMPTION OF SHARES
If the Trust receives a redemption request prior to the net asset value
determination on that day, the Trust will execute such a redemption at the net
asset value per share next determined. Shares continue to earn dividends
declared through the business day that the Trust executes the redemption request
on the books of the Trust.
Shareholders must redeem shares held by an Eligible Institution or a
Financial Intermediary on behalf of such shareholder pursuant to arrangements
made between that shareholder and that Eligible Institution or Financial
Intermediary. The Trust pays proceeds of a redemption to that shareholder's
account at that Eligible Institution or Financial Intermediary on a date
established by the Eligible Institution or Financial Intermediary. An Eligible
Institution or a Financial Intermediary may charge a transaction fee on the
redemption of Fund shares.
Shareholders may redeem shares held directly in the name of a shareholder
on the books of the Trust by submitting a redemption request in good order to
the Trust through the Shareholder Servicing Agent. The Trust pays proceeds
resulting from such redemption directly to the shareholder generally on the next
business day after the redemption request is executed, and in any event within
seven days.
Redemptions By the Trust
The Shareholder Servicing Agent has established a minimum account size of
$25,000, which may be amended from time to time. If the value of a shareholder's
holdings in the Fund falls below that amount because of a redemption of shares,
the Trust may redeem the shareholder's remaining shares. If such remaining
shares are to be redeemed, the Trust notifies the shareholder and allows the
shareholder 60 days to make an additional investment to meet the minimum
requirement before the redemption is processed. Each Eligible Institution and
each Financial Intermediary may establish and amend from time to time for their
respective customers a minimum account size, each of which is currently lower
than that established by the Shareholder Servicing Agent.
Further Redemption Information
Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
The Trust may suspend a shareholder's right to receive payment with
respect to any redemption or postpone the payment of the redemption proceeds for
up to seven days and for such other periods as applicable law may permit.
DIVIDENDS AND DISTRIBUTIONS
All of the Fund's net investment income and a discretionary portion of
any net short-term capital gains are declared as a dividend daily and paid
monthly.
Determination of the Fund's net income is made each business day
immediately prior to the determination of the net asset value per share of the
Fund. Net income for days other than such business days is determined at the
time of the determination of the net asset value per share of the Fund on the
immediately preceding business day. Substantially all of the Fund's realized net
long-term capital gains, if any, are declared and paid to shareholders on an
annual basis as a capital gains distribution. The Trust may make an additional
dividend and/or capital gains distribution in a given year to the extent
necessary to avoid the imposition of federal excise tax on the Fund. The Trust
pays dividends and capital gains distributions to shareholders of record on the
record date.
Unless a shareholder whose shares are held directly in the shareholder's
name on the books of the Trust elects to have dividends and capital gains
distributions paid in cash, the Trust automatically reinvests dividends and
capital gains distributions in additional Fund shares without reference to the
minimum subsequent purchase requirement.
Each Eligible Institution and each Financial Intermediary may establish
its own policy with respect to the reinvestment of dividends and capital gains
distributions in additional Fund shares.
TAXES
The Fund expects that most of its net income will be attributable to
interest on municipal obligations and as a result most of the Fund's dividends
to shareholders will not be subject to federal income taxes. The non-exempt
portion of dividends are taxable to shareholders of the Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Capital gains may be taxable at different rates depending on the length of time
the Fund holds its assets. Capital gains distributions are taxable to
shareholders as long-term capital gains, whether paid in cash or reinvested in
additional shares and regardless of the length of time a particular shareholder
has held Fund shares.
State and Local Taxes
Fund dividends that are not taxable to shareholders for federal income
tax purposes may still be subject to tax under the income or other tax laws of
state or local taxing authorities. You should consult your own tax adviser in
this regard.
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 are available which would not be subject to United
States withholding tax.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help an investor understand
the Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<S> <C> <C> <C> <C> <C>
For the years ended June 30,
1999 1998 1997 1996 1995
Net asset value, beginning of period...... $10.40 $ 10.33 $ 10.26 $ 10.28 $ 10.11
Income from investment operations:
Net investment income ................... 0.35 0.36 0.37 0.37 0.37
Net realized and unrealized
gain (loss) on investments............... (0.10) 0.07 0.07 (0.02) 0.17
Less dividends and distributions:
Dividends to shareholders from
net investment income.................... (0.35) (0.36) (0.37) (0.37) (0.37)
Net asset value, end of period............ $ 10.30 $ 10.40 $ 10.33 $ 10.26 $ 10.28
Total return*............................. 2.44% 4.25% 4.34% 3.60% 5.42%
Ratios/supplemental data:
Net assets, end of period
(000's omitted)........................... $75,719 $80,160 $55,714 $44,776 $51,828
Ratio of expenses to average net
assets:*
Expenses paid by the Fund................ 0.83% 0.78% 0.70% 0.70% 0.70%
Expense offset arrangement............... (0.01) 0.02% n/a n/a n/a
Total expenses............................ 0.82 0.80% 0.70% 0.70% 0.70%
Ratio of net investment income to
average net assets ...................... 3.37% 3.49% 3.55% 3.61% 3.67%
Portfolio turnover rate .................. 44% 20% 48% 48% 39%
<FN>
* Had the expense payment agreement not been in place, the ratio of
expenses to average net assets for the years ended June 30, 1997, 1996 and 1995
would have been 0.96%, 0.90% and 0.99%, respectively. For the same periods, the
total return of the Fund would have been 4.16%, 3.40% and 5.13%, respectively.
The expense payment agreement terminated on July 1, 1997.
Further information about the performance of the Fund is contained in
the Fund's annual report to shareholders which may be obtained without charge.
</FN>
</TABLE>
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The following information describes the securities the Fund may purchase,
the interest on which is exempt from federal income tax other than the
alternative minimum tax. However, other such securities not mentioned below may
be purchased for the Fund if they meet the quality and maturity guidelines set
forth in the Fund's investment policies.
Municipal Bonds-debt obligations issued by states, local governments and
regional authorities which provide interest income that is exempt from regular
federal income tax, other than the alternative minimum tax. They generally meet
the longer-term capital needs of their issuers and have maturities of one year
or more. These securities include:
- General Obligation Bonds-bonds backed by the municipality's pledge
of full faith, credit and taxing power.
- Revenue Bonds-bonds backed by the revenue of a specific project,
facility or tax. These include municipal water, sewer and power
utilities; transportation projects; education or housing
facilities; industrial development and resource recovery bonds.
- Refunded Bonds-general obligation or revenue bonds that have been
fully secured or collateralized by an "escrow fund" consisting of
U.S. Government obligations that can adequately meet interest and
principal payments.
- - Lease Obligation Bonds-bonds backed by lease obligations of a
state or local authority for the use of land, equipment and
facilities. These securities are not backed by the full faith and
credit of the municipality and may be riskier than general
obligation bonds or revenue bonds.
- - Asset-Backed Bonds-bonds secured by interests in pools of
municipal purchase contracts, financing leases and sales
agreements. These obligations are collateralized by the assets
purchased or leased by the municipality.
- Zero Coupon Bonds-securities issued at a discount from their face
value that pay all interest and principal upon maturity.
Municipal Notes-debt obligations issued by states, local governments and
regional authorities which provide interest income that is exempt from regular
federal income taxes, other than the alternative minimum tax. They generally
meet the shorter-term capital needs of their issuers and have maturities of less
than one year. These securities include:
- Tax and Revenue Anticipation Notes-notes issued in expectation of
future taxes or revenues.
- Bond Anticipation Notes-notes issued in anticipation of the
sale of long-term bonds.
Municipal Commercial Paper-obligations issued to meet short-term working
capital or operating needs.
Variable and Floating Rate Instruments-securities whose interest rates
are reset daily, weekly or at another periodic date so that the security remains
close to par, minimizing changes in its market value. These securities often
have a demand feature which entitles the investor to repayment of principal plus
accrued interest on short notice.
Year 2000 issue. Information technology experts are concerned about
computer systems' ability to process data-related information on and after
January 1, 2000. This situation, commonly known as the "Year 2000" issue, could
have an adverse impact on the Fund. The cost of addressing the Year 2000 issue,
if substantial, could adversely affect companies and governments that issue
securities held by the Fund. The Investment Adviser is addressing the Year 2000
issue for its systems. The Fund has been informed by its other service providers
that they are taking similar measures. Although the Fund does not expect the
Year 2000 issue to adversely effect it, the Fund cannot guarantee that the
efforts of the Fund, which are limited to requesting and receiving reports from
its services providers, or the efforts of its services providers to correct the
problem will be successful.
<PAGE>
The 59 Wall Street Tax Free/Short Intermediate
Fixed Income Fund
SEC file number: 811-03779
More information on the Fund is available free
upon request, including the following:
o Annual/Semi-Annual Report
Describes the Fund's performance, lists portfolio holdings and contains a
letter from the Fund's Investment Adviser discussing recent market
conditions, economic trends and Fund strategies that significantly
affected the Fund's performance during its last fiscal year.
o Statement of Additional Information
Provides more details about the Fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is
incorporated by reference (is legally considered part of this
prospectus).
To obtain information:
o By telephone
1-800-625-5759
o By mail write to the Fund's Shareholder Servicing Agent:
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
o By E-mail send your request to:
[email protected]
o On the Internet:
Text-only versions of Fund documents can be viewed online or
downloaded from:
Brown Brothers Harriman & Co.
http://www.bbhco.com
SEC
http://www.sec.gov
You can also review or obtain copies by visiting the SEC's Public Reference Room
in Washington, D.C. or by sending your request and a duplicating fee to the
SEC's Public Reference Section, Washington, D.C. 20549-6009. Information on the
operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
<PAGE>
Tax Free Short/Intermediate
Fixed Income Fund
Prospectus
November 1, 1999
<PAGE>
WS5089K
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET TAX FREE SHORT/INTERMEDIATE
FIXED INCOME FUND
21 Milk Street, Boston, Massachusetts 02109
The 59 Wall Street Tax Free Short/Intermediate Fixed Income 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 investment objective of the Fund is to
provide investors with as high a level of income exempt from federal income tax
as is consistent with minimizing price fluctuations in net asset value and
maintaining liquidity. The Fund invests primarily in high quality municipal
securities and the dollar-weighted average maturity of the Fund's portfolio does
not exceed three years. The Fund is an appropriate investment for investors
seeking tax free income returns greater than those provided by tax free money
market funds and who are able to accept fluctuations in the net asset value of
their investment. The Fund is designed to have lesser price fluctuations than
long term bond funds. There can be no assurance that the investment objective of
the Fund will be achieved.
Brown Brothers Harriman & Co. is the investment adviser of the Fund
(the "Investment Adviser"). This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated November
1, 1999, a copy of which may be obtained from the Trust at the address noted
above.
<TABLE>
<S> <C> <C>
Table of Contents
Cross-Reference to
Page Page in Prospectus
Investments
Investment Objective and Policies . . . . . 3 3-4
Investment Restrictions . . . . . . . . 8
Management
Trustees and Officers . . . . . 10
Investment Adviser . . . . . . . . . . 14 6
Administrators. . . . . . . . . . . . 16
Distributor . . . . . . . . . . . . 17
Shareholder Servicing Agent,
Financial Intermediaries and Eligible Institutions 18-19
Custodian, Transfer and Dividend Disbursing
Agent 19
Independent Auditors 19
Net Asset Value; Redemption in Kind . . . . 19 6
</TABLE>
<PAGE>
Table of Contents
Page
Computation of Performance . . . . . . . 20
Purchases and Redemptions 22
Federal Taxes . . . . . . . . . . . . 23
Description of Shares . . . . . . . . . 25
Portfolio Brokerage Transactions . . . . 27
Bond, Note and Commercial Paper Ratings 28
Additional Information. . . . . . . . . . . . . . . 30
Financial Statements . . . . . . . . . 31
The date of this Statement of Additional Information is November 1,
1999.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund.
While the Fund intends to continue to be fully invested in tax-exempt
municipal obligations in order to provide investors with tax-free income, a
portion of the assets may temporarily be held in cash or invested in short-term
taxable securities if market conditions warrant. These would include obligations
issued by the U.S. Government, its agencies or instrumentalities, commercial
paper issued by corporations, bank obligations (such as certificates of deposit
and bankers' acceptances) and repurchase agreements.
The Fund invests in high quality municipal securities. At the time of
purchase, municipal bond investments either are rated in one of the three
highest quality categories of the Standard & Poor's Corporation (meaning AAA, AA
or A), Moody's Investors Service, Inc. (meaning Aaa, Aa or A) or Fitch Investors
Service, Inc. (meaning AAA, AA or A) or, if unrated, are of comparable quality
as judged by the Investment Adviser. The Investment Adviser may at any time
purchase municipal bonds it believes to be defeased. Defeased municipal bonds
are either general obligation or revenue bonds that have been fully secured or
collateralized by an escrow account consisting of U.S. Government obligations
that can adequately meet interest and principal payments. As such, the original
issuer's credit obligation has been replaced by the escrowed securities. In
determining whether a municipal bond has been defeased, the Investment Adviser
relies upon brokers and dealers and upon various information reporting services
it believes to be reliable. At the time of purchase, tax-exempt note and
variable interest rate investments either are rated in one of the highest
quality categories of the Standard & Poor's Corporation (meaning SP-1 or SP-2),
Moody's Investors Service, Inc. (meaning MIG 1 or MIG 2), or Fitch Investors
Service, Inc. (meaning F-1+, F-1 or F-2) or, if unrated, are of comparable
quality as judged by the Investment Adviser. At the time of purchase, municipal
commercial paper investments either are rated in the highest quality category of
the Standard & Poor's Corporation (meaning A-1), Moody's Investors Service, Inc.
(meaning Prime-1) or Fitch Investors Service, Inc. (meaning F-1+ or F-1) or, if
unrated, are of comparable quality as judged by the Investment Adviser. Taxable
money market instruments purchased for the Fund are of high quality and meet the
credit standards established by the Trust's Board of Trustees.
The dollar-weighted average maturity of the Fund's portfolio is not to
exceed three years, and the maximum maturity of an issue at the time of purchase
is limited to five years. Since bonds with shorter maturities are less sensitive
to interest rate movements than those with longer maturities, the three-year
restriction on the Fund's dollar-weighted average maturity is designed to lessen
the price fluctuation of the Fund. For example, the following table illustrates
the effect a 2 percentage point change in interest rates would have on the price
of bonds of varying maturities. The 10- and 20-year bonds have more exposure to
interest rate movements and are subject to greater price volatility than the
shorter term bonds.
<TABLE>
<CAPTION>
Change in the Price of a Municipal Bond at Par
Yielding 5%
<S> <C> <C> <C> <C>
2 Percentage Point 2 Percentage Point
Stated Increase In Decrease In
Maturity Interest Rates Interest Rates
Eligible 1 Year -2% +2%
for 3 Years -5% +6%
Investment 5 Years -8% +9%
Not Eligible 10 Years -14% +17%
for Investment 20 Years -21% +30%
</TABLE>
The Fund is actively managed by a team of investment professionals. (See
"Investment Adviser".) The Investment Adviser analyzes and monitors economic
trends, monetary policy, and bond credit ratings on a continuous basis. The
holdings in the portfolio are regularly reviewed in an effort to enhance
returns.
The Investment Adviser does not intend to invest the Fund's assets in securities
the interest on which would be taxable for investors subject to the federal
alternative minimum tax. Depending on the investor's tax bracket, the Fund may
provide higher after-tax income than is normally provided by comparable taxable
investments. The chart below illustrates the return a taxable investment would
have to yield in order to equal various tax-free returns for the taxable year
1998.
<TABLE>
<CAPTION>
A TAXABLE INVESTMENT WOULD HAVE TO YIELD: [TO BE UPDATED]
<S> <C> <C> <C> <C> <C> <C>
TO EQUAL A TAX- 15% 28% 31% 36% 39.6%
FREE YIELD OF: Tax Bracket* Tax Bracket* Tax Bracket* Tax Bracket* Tax Bracket*
2% 2.4% 2.8% 2.9% 3.1% 3.3%
3% 3.5% 4.2% 4.3% 4.7% 5.0%
4% 4.7% 5.6% 5.8% 6.3% 6.6%
5% 5.9% 6.9% 7.2% 7.8% 8.3%
6% 7.1% 8.3% 8.7% 9.4% 9.9%
* Joint Return Up to $42,350 $42,350-$102,300 $102,300-$155,950 $155,950-$278,450 Above $278,450
* Single Return Up to $25,350 $25,350-$61,400 $61,400-$128,100 $128,100-$278,450 Above $278,450
</TABLE>
Loans of Portfolio Securities
Securities of the Fund may be loaned if such loans are secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the 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.
Variable and Floating Rate Instruments
The Fund may invest in variable rate and floating rate instruments. These
are securities whose interest rates are reset daily, weekly or at another
periodic date so that the security remains close to par, minimizing changes in
its market value. These securities often have a demand feature which entitles
the investor to repayment of principal plus accrued interest on short notice. In
calculating the maturity of a variable rate or floating rate instrument for the
Fund, the date of the next interest rate reset is used.
Zero Coupon Bonds
The Fund may invest in zero coupon bonds. These are securities issued at a
discount from their face value that pay all interest and principal upon
maturity. The difference between the purchase price and par is a specific
compounded interest rate for the investor. In calculating the daily income of
the Fund, a portion of the difference between a zero coupon bond's purchase
price and its face value is taken into account as income.
Lease Obligation Bonds
The Fund may invest in lease obligation bonds. These ar backed by lease
obligations of a state or local authority for the use of land, equipment and
facilities. These securities are not backed by the full faith and credit of the
municipality and may be riskier than general obligation bonds or revenue bonds.
Leases and installment purchase or conditional sale contracts have been
developed to allow for government issuers to acquire property without meeting
the statutory and constitutional requirements generally required for the
issuance of debt.
When-Issued and Delayed Delivery
The Fund may purchase municipal securities on a when-issued or delayed
delivery basis. For example, delivery and payment may take place a month or more
after the date of the transaction. The purchase price and the interest rate
payable on the securities are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no interest accrues to the Fund
until delivery and payment take place.
At the time the commitment to purchase securities for the Fund on a
when-issued or delayed delivery basis is made, the transaction is recorded and
thereafter the value of such securities is reflected each day in determining the
Fund's net asset value. At the time of its acquisition, a when-issued security
may be valued at less than the purchase price. Commitments for such when-issued
securities are made only when there is an intention of actually acquiring the
securities. To facilitate such acquisitions, a segregated account with the
Custodian is maintained for the Fund with liquid assets in an amount at least
equal to such commitments. Such segregated account consists of liquid assets
marked to the market daily, with additional liquid assets added when necessary
to insure that at all times the value of such account is equal to the
commitments. On delivery dates for such transactions, such obligations are met
from maturities or sales of the securities held in the segregated account and/or
from cash flow. If the right to acquire a when-issued security is disposed of
prior to its acquisition, the Fund could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation.
When-issued commitments for the Fund may not be entered into if such commitments
exceed in the aggregate 15% of the market value of the Fund's total assets, less
liabilities other than the obligations created by when-issued commitments.
U.S. Government Securities
Assets of the Fund may be invested in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. These securities,
including those which are guaranteed by federal agencies or instrumentalities,
may or may not be backed by the "full faith and credit" of the United States. In
the case of securities not backed by the full faith and credit of the United
States, it may not be possible to assert a claim against the United States
itself in the event the agency or instrumentality issuing or guaranteeing the
security for ultimate repayment does not meet its commitments. Securities which
are not backed by the full faith and credit of the United States include, but
are not limited to, securities of the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA) and the U.S. Postal Service, each of which
has a limited right to borrow from the U.S. Treasury to meet its obligations,
and securities of the Federal Farm Credit System, the Federal Home Loan Banks,
the Federal Home Loan Mortgage Corporation ("FHLMC") and the Student Loan
Marketing Association, the obligations of each of which may be satisfied only by
the individual credit of the issuing agency. Securities which are backed by the
full faith and credit of the United States include Treasury bills, Treasury
notes, Treasury bonds and pass through obligations of the Government National
Mortgage Association ("GNMA"), the Farmers Home Administration and the
Export-Import Bank. There is no percentage limitation with respect to
investments in U.S. Government securities.
Commercial Paper
Assets of the Fund may be invested in commercial paper including
variable rate demand master notes issued by U.S. corporations or by non-U.S.
corporations which are direct parents or subsidiaries of U.S. corporations.
Master notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to arrangements
between the issuer and a U.S. commercial bank acting as agent for the payees of
such notes. Master notes are callable on demand, but are not marketable to third
parties. Consequently, the right to redeem such notes depends on the borrower's
ability to pay on demand.
At the date of investment, commercial paper must be rated within the
highest rating category for short-term debt obligations by at least two (unless
only rated by one) nationally recognized statistical rating organizations (e.g.,
Moody's and S&P) or, if unrated, are of comparable quality as determined by or
under the direction of the Board of Trustees. Any commercial paper issued by a
non-U.S. corporation must be U.S. dollar-denominated and not subject to non-U.S.
withholding tax at the time of purchase. Aggregate investments in non-U.S.
commercial paper of non-U.S. issuers cannot exceed 10% of the Fund's net assets.
Bank Obligations
Assets of the Fund may be invested in U.S. dollar-denominated negotiable
certificates of deposit, fixed time deposits and bankers' acceptances of banks,
savings and loan associations and savings banks organized under the laws of the
United States or any state thereof, including obligations of non-U.S. branches
of such banks, or of non-U.S. banks or their U.S. or non-U.S. branches, provided
that in each case, such bank has more than $500 million in total assets and has
an outstanding short-term debt issue rated within the highest rating category
for short-term debt obligations by at least two (unless only rated by one)
nationally recognized statistical rating organizations (e.g., Moody's and S&P)
or, if unrated, are of comparable quality as determined by or under the
direction of the Board of Trustees. (See "Bond, Note and Commercial Paper
Ratings" in the Statement of Additional Information.) There is no percentage
limitation with respect to investments in negotiable certificates of deposit,
fixed time deposits and bankers' acceptances of U.S. branches of U.S. banks and
U.S. branches of non-U.S. banks that are subject to the same regulation as U.S.
banks. While early withdrawals are not contemplated, fixed time deposits are not
readily marketable and may be subject to early withdrawal penalties, which may
vary. Assets of the Fund will not be invested in obligations of Brown Brothers
Harriman & Co. or the Distributor, or in the obligations of the affiliates of
any such organization or in fixed time deposits with a maturity of over seven
calendar days, or in fixed time deposits with a maturity of from two business
days to seven calendar days if more than 10% of the Fund's total assets would be
invested in such deposits.
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 are
assets of the Fund 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 has 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 Fund's Custodian. If the Lender defaults, the Fund might incur a
loss if the value of the collateral securing the repurchase agreement declines
and might incur disposition costs in connection with liquidating the collateral.
In addition, if bankruptcy proceedings are commenced with respect to the Lender,
realization upon the collateral on behalf of the 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.
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"). Money is not borrowed in an
amount in excess of 331/3% 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.
In addition, as a fundamental policy, the Fund does not purchase more
than 10% of all outstanding debt securities of any one issuer.
As a non-fundamental policy, at least 80% of the Fund's assets are
invested in securities the interest on which is exempt from federal income
taxation.
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:
(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 will 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), provided that collateral arrangements with respect
to options and futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of this restriction
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;
(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 and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures or the purchase, ownership,
holding, sale or writing of options;
(3) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933, as
amended in selling a portfolio security;
(4) 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;
(5) 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 its total
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(6) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and options 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);
(7) 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; such
sales would not be made of securities subject to outstanding options);
(8) concentrate its investments in securities of issuers 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 securities of issuers in any one industry,
except that positions in futures or option contracts shall not be subject to
this restriction (industrial development and pollution control bonds are grouped
into industries based upon the business in which the issuer of such obligations
is engaged);
(9) 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, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction;
(10) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than obligations issued by the U.S.
Government, its agencies or instrumentalities); provided, however, that up to
25% of its total assets may be invested without regard to this restriction (for
the purpose of this restriction, it will regard each state and each political
subdivision, agency or instrumentality of such state and each multi-state agency
of which such state is a member and each public authority which issues
industrial development bonds on behalf of a private entity as a separate
issuer); or
(11) purchase more than 10% of all outstanding debt obligations of any
one issuer (other than obligations issued by the U.S. Government, its agencies
or instrumentalities).
As an operating policy, the Fund has no current intention to engage in
options or futures transactions or to lend portfolio securities.
Non-Fundamental Restrictions. The Fund may not as a matter of operating
policy (except that the Trust may invest all of the Fund's assets in an open-end
investment company with substantially the same investment objective, policies
and restrictions as the Fund): (i) purchase securities of any investment company
if such purchase at the time thereof would cause more than 10% of its total
assets (taken at the greater of cost or market value) to be invested in the
securities of such issuers or would cause more than 3% of the outstanding voting
securities of any such issuer to be held; or (ii) invest more than 10% of its
net assets (taken at the greater of cost or market value) in restricted
securities. These policies are not fundamental and may be changed without
shareholder approval.
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.
The Fund is classified as "diversified" under the 1940 Act, which means
that at least 75% of its total assets is represented by cash; obligations issued
by the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one issuer to an amount no greater in value than 5% of
the Fund's total assets (for the purpose of this restriction, the Fund regards
each state and each political subdivision, agency or instrumentality of such
state and each multi-state agency of which such state is a member and each
public authority which issues industrial development bonds on behalf of a
private entity as a separate issuer).
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
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.
The Trustees and executive officers of the Trust, their principal
occupations during the past five years (although their titles may have varied
during the period) and business addresses are:
TRUSTEES OF THE TRUST
J.V. SHIELDS, JR.* - Chairman of the Board and Trustee; Director of The
59 Wall Street Fund, Inc.; Trustee of the Portfolios(1) (since October 1999);
Managing Director, Chairman of Shields & Company; Chairman and Chief Executive
Officer of Capital Management Associates, Inc.; Director of Flowers Industries,
Inc.(1). Vice Chairman and Trustee of New York Racing Association. His business
address is Shields & Company, 140 Broadway, New York, NY 10005.
EUGENE P. BEARD** - Trustee; Director of The 59 Wall Street Fund, Inc.;
Trustee of the Portfolios (since October 1999); Executive Vice President -
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.; Trustee of the Portfolios (since October 1999); Retired; Vice President
and Investment Manager of AT&T Investment Management Corporation (prior to
October 1997); Director of Dreyfus Mutual Funds, Jeffrey Co. and Heitman
Financial. His business address is 3 Tall Oaks Drive, Warren, NJ 07059.
ALAN G. LOWY** - Trustee; Director of The 59 Wall Street Fund, Inc.;
Trustee of the Portfolios (since October 1999); 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.; Trustee of the Portfolios (since October 1999); Retired, Executive
Vice President and Chief Financial Officer of Richard K. Mellon and Sons (prior
to June 1998); Treasurer of Richard King Mellon Foundation (prior to June 1998);
Trustee, R.K. Mellon Family Trusts; General Partner, Mellon Family Investment
Company IV, V and VI; Director of Aerostructures Corporation (since 1996) (2).
His business address is Richard K. Mellon and Sons, P.O. Box RKM, Ligonier, PA
15658.
RICHARD L. CARPENTER - Trustee (since October 1999); Trustee of the Portfolios;
Trustee of Dow Jones Islamic Market Index Portfolio (since March 1999); Director
of The 59 Wall Street Fund, Inc. (since October 1999); Retired; Director of
Investments, Pennsylvania Public School Employees' Retirement System (prior to
December 1997). His business address is 12664 Lazy Acres Court, Nevada City, CA
95959.
CLIFFORD A. CLARK - Trustee (since October 1999); Trustee of the
Porfolios; Trustee of Dow Jones Islamic Market Index Portfolio (since March
1999); Director of The 59 Wall Street Fund, Inc. (since October 1999); Retired.
His business address is 42 Clowes Drive, Falmouth, MA 02540.
DAVID M. SEITZMAN - Trustee (since October 1999); Trustee of the
Porfolios; Director of The 59 Wall Street Fund, Inc. (since October 1999);
Physician, Private Practice. His business address is 7117 Nevis Road, Bethesda,
MD 20817.
J. ANGUS IVORY - Trustee (since October 1999); Trustee of the
Portfolios (since October 1999); Director of The 59 Wall Street Fund, Inc.
(since October 1999); Trustee of Dow Jones Islamic Market Index Portfolio (since
March 1999); Director of Brown Brothers Harriman Ltd., subsidiary of Brown
Brothers Harriman & Co.; Director of Old Daily Saddlery; Advisor, RAF Central
Fund; Committee Member, St. Thomas Hospital Pain Clinic (since 1999).
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").
JAMES E. HOOLAHAN - Vice President; Senior Vice President of SFG.
JOHN R. ELDER - Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON - Secretary, Senior Vice President and Secretary of SFG;
Secretary of 59 Wall Street Distributors and 59 Wall Street Administrators.
SUSAN JAKUBOSKI - Assistant Treasurer; Assistant Secretary, Assistant
Treasurer and Vice President of Signature Financial Group (Cayman) Limited.
LINWOOD C. DOWNS - Assistant Treasurer; Senior Vice President and
Treasurer of SFG.
MOLLY S. MUGLER - Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; and Assistant Secretary of 59 Wall Street Distributors and 59
Wall Street Administrators.
CHRISTINE A. DRAPEAU - Assistant Secretary; Vice President of SFG (since
January 1996); Paralegal and Compliance Officer, various financial companies
(July 1992 to January 1996); Graduate Student, Bentley College (prior to
December 1994).
- -------------------------
* 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) The Portfolios consist of the following active investment companies:
U.S. Money Market Portfolio, U.S. Small Company Portfolio and International
Equity Portfolio and the following inactive investment companies: U.S. Equity
Portfolio, European Equity Portfolio, Pacific Basin Equity Portfolio and
Inflation-Indexed Securities Portfolio
(2) 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.
(3) Richard K. Mellon and Sons, Richard King Mellon Foundation, R.K. Mellon
Family Trusts, Mellon Family Investment Company IV, V and VI and
Aerostructures Corporation, with which Mr. Miltenberger is or has been
associated, are a private foundation, a private foundation, a trust, an
investment company and an aircraft manufacturer, respectively.
Each Trustee and officer listed above holds the equivalent position
with The 59 Wall Street Fund, Inc. The address of each officer is 21 Milk
Street, Boston, Massachusetts 02109. Messrs. Coolidge, Hoolahan, Elder and
Downs, and Mss. Gibson, Jakuboski, Mugler and Drapeau 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) and such base annual fee
is allocated among all series of the Trust, all series of The 59 Wall Street
Fund, Inc. and the Portfolios and any other active Portfolios having the same
Board of Trustees based upon their respective net assets. In addition, each
series of the Trust and The 59 Wall Street Fund, Inc., the Portfolios and any
other active Portfolios which has commenced operations pays an annual fee to
each Trustee of $1,000.
* The Fund Complex consists of the Trust, The 59 Wall Street Fund, Inc.
(which currently consists of seven series) and seven Portfolios.
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued Estimated Annual from Fund
Name of Person, from the Fund as Part of Benefits upon Complex* Paid
Position Complex* Fund Expenses Retirement to Trustees
J.V. Shields, Jr., $ none none $
Trustee
Eugene P. Beard, $ none none $
Trustee
Richard L. Carpenter**, $ none none $
Trustee
Clifford A. Clark**, $ none none $
Trustee
David P. Feldman, $ none none $
Trustee
J. Angus Ivory**, $0 none none $0
Trustee
Alan G. Lowy, $ none none $
Trustee
Arthur D. Miltenberger, $ none none $
Trustee
David M. Seitzman**, $ none none $
Trustee
<FN>
**Prior to October 8, 1999, these Trustees received no compensation from The 59 Wall Street Trust or The 59 Wall
Street Fund, Inc.
</FN>
</TABLE>
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.
[BBH TO UPDATE] As of September 30, 1999, the Trust's Trustees and
officers as a group beneficially owned less than 1% of the 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. As of that date, the Partners of Brown Brothers Harriman & Co. and their
immediate families owned 1,024,446 (1.0%) shares of the Fund. Brown Brothers
Harriman & Co. and its affiliates separately were able to direct the disposition
of an additional 3,855,939 (4.0%) shares of the Fund, as to which shares 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 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 June 9, 1992, 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 at least 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 November 10, 1998. 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 0.25% of the Fund's
average daily net assets. Prior to July 1, 1997, the investment advisory fee was
at an annual rate equal to 0.35% of the Fund's average daily net assets. For the
fiscal years ended June 30, 1999, 1998 and 1997, the Fund incurred $[ ],
$190,988 and $188,843, respectively for advisory services.
The investment advisory services of Brown Brothers Harriman & Co. to the
Fund are not exclusive under the terms of the Investment Advisory Agreement.
Brown Brothers Harriman & Co. is free to and does render investment advisory
services to others, including other registered investment companies.
Pursuant to a license agreement between the Trust and Brown Brothers
Harriman & Co. dated August 24, 1989, as amended as of December 15, 1993, the
Trust may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co. The agreement may be terminated by
Brown Brothers Harriman & Co. at any time upon written notice to the Trust upon
the expiration or earlier termination of any investment advisory agreement
between the Trust 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".
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 terminate its 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
Brown Brothers Harriman & Co. acts as Administrator of the Trust.
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.
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. The Independent Trustees most recently approved the Trust's
Administration Agreement on November 10, 1998. 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 Trust's outstanding voting securities"
(as defined in the 1940 Act. 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 payable to Brown Brothers Harriman & Co. from
the Fund is calculated daily and payable monthly at an annual rate equal to
0.15% of the Fund's average daily net assets. For the fiscal years ended June
30, 1999, 1998 and 1997, the Fund incurred $[ ], $114,593 and $81,463,
respectively, for administrative services.
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 21 Milk Street, Boston,
Massachusetts 02109. 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.
DISTRIBUTOR
59 Wall Street Distributors acts as exclusive Distributor of shares of
the Fund. Its office is located at 21 Milk Street, Boston, Massachusetts 02109.
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.
The Distribution Agreement (dated August 31, 1990) between the Trust
and 59 Wall Street Distributors remains in effect indefinitely, but only so long
as such agreement is specifically approved at least annually in the same manner
as the Investment Advisory. The Distribution Agreement was most recently
approved by the Independent Trustees of the Trust on February 9, 1999. 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). 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.
59 Wall Street Distributors holds itself available to receive purchase
orders for Fund shares.
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 0.25% 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, each financial
institution receives from the Fund an annual fee, computed daily and payable
monthly, equal to 0.25% 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 the financial institution was the holder or agent of record.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company ("State Street" or the "Custodian"),
225 Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is the Fund's
Custodian and 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 the ownership of the Fund's
shares.
INDEPENDENT AUDITORS
Deloitte & Touche LLP are the independent auditors for the Fund.
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, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor 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.
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Trust's Trustees.
Such procedures include the use of indications as to values from dealers; and
general market conditions. Short-term investments which mature in 60 days or
less are valued at amortized cost if their original maturity was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if their
original maturity when acquired for the Fund was more than 60 days, unless this
is determined not to represent fair value by the Trustees.
COMPUTATION OF PERFORMANCE
The average annual total rate of return of the Fund is calculated for
any period by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period, and
(c) subtracting 1 from the result.
The total rate of return of the Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
The annualized total rate of return for the Fund for the fiscal year
ended June 30, 1999 and the period July 23, 1992 (commencement of operations) to
June 30, 1999 were [FROM BBH]% and [FROM BBH]%, respectively. The total rate of
return should not be considered a representation of the total rate of return of
the Fund in the future since the total rate of return is not fixed. Actual total
rates of return depend on changes in the market value of, and dividends and
interest received from, the investments held by the Fund and the Fund's expenses
during the period.
Total rate of return 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 total rate of
return fluctuates, and this should be considered when reviewing performance or
making comparisons.
Any "yield" quotation of the Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a
30-day or one-month period and is calculated by (a) raising to the sixth power
the sum of 1 plus the quotient obtained by dividing the Fund's net investment
income earned during the period by the product of the average daily number of
shares outstanding during the period that were entitled to receive dividends and
the maximum offering price per share on the last day of the period, (b)
subtracting 1 from the result, and (c) multiplying the result by 2.
Any tax equivalent yield quotation of the Fund is calculated as
follows: If the entire current yield quotation for such period is tax-exempt,
the tax equivalent yield is the current yield quotation divided by 1 minus a
stated income tax rate or rates. If a portion of the current yield quotation is
not tax-exempt, the tax equivalent yield is the sum of (a) that portion of the
yield which is tax-exempt divided by 1 minus a stated income tax rate or rates,
and (b) the portion of the yield which is not tax-exempt.
The 30-day yield and tax equivalent yield assuming a tax rate of 36%
for the period ended June 30, 1998 were 3.19% and 4.98%, respectively. 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.
The Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance 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 (such as the Lehman 3-Year General Obligation Municipal Bond
Index or the Merrill Lynch 0-3 Year General Obligation Municipal Bond Index) and
to investments for which reliable performance data is available. Performance
information may also include comparisons to averages, performance rankings or
other information prepared by recognized mutual fund statistical services. To
the extent that unmanaged indexes are so included, the same indexes are used on
a consistent basis. The Fund's investment results as used in such communications
are calculated on a total rate of return basis in the manner set forth below.
Period and average annualized "total rates of return" may be provided in
such communications. The "total rate of return" refers to the change in the
value of an investment in the Fund over a stated period based on any change in
net asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributions during such period. Period total
rates of return may be annualized. An annualized total rate of return is a
compounded total rate of return which assumes that the period total rate of
return is generated over a one year period, and that all dividends and capital
gains distributions are reinvested. An annualized total rate of return is
slightly higher than a period total rate of return if the period is shorter than
one year, because of the assumed reinvestment.
The Fund's "yield", "effective yield" and "tax equivalent yield" may be
used from time to time in shareholder reports or other communications to
shareholders or prospective investors. Such yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period is stated). This income is then
annualized. 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. The "tax equivalent yield" is the yield a
fully taxable investment would have to return to an investor subject to the
highest marginal federal tax rate to provide a comparable return.
PURCHASES AND REDEMPTIONS
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
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.
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, the Fund's portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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.
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.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares
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. 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.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or other
income derived with respect to its business of investing in such securities; (b)
less than 30% of the Fund's annual gross income be derived from gains (without
offset for losses) from the sale or other disposition of securities held for
less than three months; and (c) the holdings of the Fund be diversified so that,
at the end of each quarter of its fiscal year, (i) at least 50% of the market
value of the Fund's assets be represented by cash, U.S. Government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
assets be invested in the securities of any one issuer (other than U.S.
Government securities). 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.
In accordance with the investment objective of the Fund, it is expected
that the Fund's net income is attributable to interest from municipal bonds and,
as a result, dividends to shareholders are designated by the Trust as "exempt
interest dividends" under Section 852(b)(5) of the Code, which may be treated as
items of interest excludible from a shareholder's gross income. In order for the
Fund to be entitled to pay exempt interest dividends to shareholders, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets must consist of obligations whose interest is exempt from federal
income tax.
The non-exempt portion of dividends is taxable to shareholders of the
Fund as ordinary income, whether such dividends are paid in cash or reinvested
in additional shares. These dividends are not eligible for the
dividends-received deduction allowed to corporate shareholders. Capital gains
distributions are taxable to shareholders as long-term capital gains, whether
paid in cash or reinvested in additional shares and regardless of the length of
time a particular shareholder has held Fund shares.
Any dividend or capital gains distribution has the effect of reducing the
net asset value of Fund shares held by a shareholder by the same amount as the
dividend or capital gains distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a dividend or capital
gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in the Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
Any short-term capital loss realized upon the redemption of shares within
six months from the date of their purchase is disallowed to the extent of any
tax-exempt dividends received during such period.
The Code provides that interest on indebtedness incurred, or continued,
to purchase or carry shares of the Fund is not deductible. Further, entities or
persons who may be "substantial users" (or persons related to "substantial
users") of facilities financed by industrial development bonds should consult
with their own tax advisors before purchasing shares of the Fund.
Return of Capital. If the net asset value of shares is reduced below a
shareholder's cost as a result of a dividend or capital gains distribution from
the Fund, such dividend or capital gains distribution would be taxable even
though it represents a return of invested capital.
Redemption of Shares. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities is treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
Other Taxes. The Fund may be subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws. Shareholders
should consult their own tax advisors with respect to any state or local taxes.
The exemption for federal income tax purposes of dividends derived from
interest on municipal bonds does not necessarily result in an exemption under
the income or other tax laws of any state or local taxing authority.
Shareholders of the Fund may be exempt from state and local taxes on
distributions of tax-exempt interest income derived from obligations of the
state and/or municipalities of the state in which they may reside but may be
subject to tax on income derived from obligations of other jurisdictions.
Shareholders are advised to consult with their own tax advisors about the status
of distributions from the Fund in their own states and localities
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. 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.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Statement of Additional Information, 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.
DECLARATION OF SERIES
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 21 Milk Street,
Boston, Massachusetts 02109; its telephone number is (617) 423-0800. 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
four series.
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 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 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 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.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder's incurring financial loss because of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Trust
are not binding upon the 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.
PORTFOLIO BROKERAGE TRANSACTIONS
The securities in which the Fund invests are traded primarily in the
over-the-counter market 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 from an underwriter or
market maker for the securities involved. Purchases from underwriters of
securities may include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers may include a
spread between bid and asked price. The policy of the Fund regarding purchases
and sales of securities is that primary consideration is 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. While
reasonably competitive spreads or commissions are sought for the Fund, it will
not necessarily be paying the lowest spread or commission available. 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 also furnish research and other
services to the Fund 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. For the fiscal years ended June 30, 1998 and 1999, the
portfolio turnover rates for the Fund were 20% and [ ]%, respectively.
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. Purchases and sales of securities on a stock
exchange, while infrequent, are effected through brokers who charge a commission
for their services. From time to time certificates of deposit may be purchased
through intermediaries who may charge a commission for their services.
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.
BOND, NOTE AND COMMERCIAL PAPER RATINGS
Bond Ratings
Moody's Investors Service, Inc. ("Moody's")
Aaa, Aa and A - Tax-exempt bonds rated Aaa are judged to be of the
"best quality". The rating of Aa is assigned to bonds that are of "high quality
by all standards", but long-term risks appear somewhat larger than Aaa rated
bonds. The Aaa and Aa rated bonds are generally known as "high grade bonds". The
foregoing ratings for tax-exempt bonds are sometimes presented in parentheses
preceded with a "con" indicating that the bonds are rated conditionally. Issues
rated Aaa or Aa may be further modified by the numbers 1, 2 or 3 (3 being the
highest) to show relative strength within the rating category. Bonds for which
the security depends upon the completion of some act or upon the fulfillment of
some condition are rated conditionally. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals that begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Such parenthetical
rating denotes the probable credit stature upon completion of construction or
elimination of the basis of the condition. Bonds rated A are considered as upper
medium grade obligations. Principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future.
Standard & Poor's Corporation ("S&P")
AAA, AA and A - The AAA rating is the highest rating assigned to debt
obligations and indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA are considered "high grade", are only slightly less
marked than those of AAA ratings and have the second strongest capacity for
payment of debt service. Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat susceptible to adverse effects or
changes in circumstances and economic conditions. Bonds rated AA or A may be
modified with a plus (+) or a minus (-) sign to show relative strength within
the rating category. The foregoing ratings are sometimes followed by a "p"
indicating that the rating is provisional. A provisional rating assumes the
successful completion of the project financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. Although a
provisional rating addresses credit quality subsequent to completion of the
project, it makes no comment on the likelihood of, or the risk of default upon
failure of, such completion.
Fitch Investors Service ("Fitch")
AAA, AA and A - Bonds rated AAA are considered to be investment grade
and of the highest quality. The obligor has an extraordinary ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
high quality. The obligor's ability to pay interest and repay principal, while
very strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue. Bonds rated A are considered to be
investment grade and of good quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings.
Tax-Exempt Note and Variable Rate Investment Ratings
Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the
best quality, enjoying strong protection from established cash flow of funds for
their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, through not as large as MIG-1.
S&P - SP-1 and SP-2. SP-1 denotes a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal and interest.
Fitch - F-1+, F-1 and F-2. Notes assigned F-1+ are regarded as having
the strongest degree of assurance for timely payment. An F-1 rating reflects an
assurance of timely payment only slightly less in degree than an F-1+ rating.
Notes assigned F-2 have a satisfactory degree of assurance for timely payment,
but margins of protection are not as great as for issues rated F-1+ and F-1. The
symbol LOC may follow a note rating which indicates that a letter of credit
issued by a commercial bank is attached to the note.
Tax-Exempt and Corporate Commercial Paper Ratings
Moody's - Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Prime-1 indicates highest quality repayment
capacity of rated issue.
S&P - Commercial Paper ratings are a current assessment of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Issues rated A-1 have the greatest capacity for timely payment.
Issues rated "A-1+" are those with an "overwhelming degree of credit
protection."
Fitch - Commercial Paper ratings reflect current appraisal of the
degree of assurance of timely payment. F-1+ issues are regarded as having the
strongest degree of assurance for timely payment. An F-1 rating reflects an
assurance of timely payment only slightly less in degree than an F-1+ rating.
The symbol LOC may follow either category and indicates that a letter of credit
issued by a commercial bank is attached to the commercial paper.
Other Considerations
The ratings of S&P, Moody's and Fitch represent their respective
opinions of the quality of the municipal securities they undertake to rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, municipal securities with the same maturity,
coupon and rating may have different yields and municipal securities of the same
maturity and coupon with different ratings may have the same yield.
Among the factors considered by Moody's in assigning bond, note and
commercial paper ratings are the following: (i) evaluation of the management of
the issuer; (ii) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(iii) evaluation of the issuer's products in relation to competition and
customer acceptance; (iv) liquidity; (v) amount and quality of long-term debt;
(vi) trend of earnings over a period of 10 years; (vii) financial strength of a
parent company and the relationships which exist with the issuer; and (viii)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
Among the factors considered by S&P in assigning bond, note and
commercial paper ratings are the following: (i) trend of earnings and cash flow
with allowances made for unusual circumstances, (ii) stability of the issuer's
industry, (iii) the issuer's relative strength and position within the industry
and (iv) the reliability and quality of management.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the 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.
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, 1999 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 the Annual Report will be provided, without charge, to each person
receiving this Statement of Additional Information.
<PAGE>
ITEM 23. EXHIBITS:
1(a) Amended and Restated Declaration of Trust of the Registrant (10)
(b) Designation of Series of The 59 Wall Street U.S. Treasury Money
Fund (10)
(c) Designation of Series of The 59 Wall Street Tax Free
Short/Intermediate Fixed Income Fund (10)
(d) Designation of Series of The 59 Wall Street Tax Exempt Money
Fund (11)
2 By-Laws of the Registrant (10)
3 Not Applicable
4 Not Applicable
5(a) Advisory Agreement with respect to The 59 Wall Street Tax Free
Short/Intermediate Fixed Income Fund (10)
5(b) Amended and Restated Investment Advisory Agreement with respect
to Tax Free/Short Intermediate Fixed Income Fund (11)
5(c) Investment Advisory Agreement with respect
to Tax Exempt Money Fund (11)
6 Distribution Agreement (2)
7 Not Applicable
8(a) Custody Agreement (1)
(b) Transfer Agency Agreement (1)
9(a) Amended and Restated Administration Agreement (8)
(b) Subadministrative Services Agreement (8)
(c) License Agreement (2)
(e) Eligible Institution Agreement (8)
(f) Expense Reimbursement Agreement with respect to The 59 Wall
Street Money Market Fund (6)
(g) Expense Reimbursement Agreement with respect to The 59 Wall
Street U.S. Treasury Money Fund (7)
(h) Expense Reimbursement Agreement with respect to The 59 Wall
Street Tax Free Short/Intermediate Fixed Income Fund (8)
(i) Expense Reimbursement Agreement with respect to The 59 Wall
Street Tax Exempt Money Fund (11)
10 Opinion of Counsel (including consent) (10)
11 Consent of independent auditors (12)
12 Not Applicable
13 Purchase Agreement (1)
14 Not Applicable
15 Not Applicable
16(a) Schedule of Computation of Performance Quotations (8)
17 Financial Data Schedule (12)
(1) Filed with Amendment No. 1 to this Registration Statement on
October 28, 1983.
(2) Filed with Amendment No. 10 to this Registration Statement on
August 31, 1990.
(3) Filed with Amendment No. 11 to this Registration Statement on
February 14, 1991.
(4) Filed with Amendment No. 14 to this Registration Statement on
June 15, 1992.
(5) Filed with Amendment No. 15 to this Registration Statement on
October 27, 1992.
(6) Filed with Amendment No. 16 to this Registration Statement on
October 27, 1992.
(7) Filed with Amendment No. 17 to this Registration Statement on
September 3, 1993.
(8) Filed with Amendment No. 18 to this Registration Statement on
September 3, 1993.
(9) Filed with Amendment No. 19 to this Registration Statement on
September 3, 1993.
(10) Filed with Amendment No. 31 to this Registration Statement on
October 27, 1995.
(11) Filed with Amendment No. 41 to this Registration Statment on
November 30, 1998.
(12) To be filed by Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See "Trustees and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.
ITEM 25. INDEMNIFICATION.
As permitted by Section 17(h) of the Investment Company Act of 1940, as
amended (the "1940 Act"), and pursuant to Article VII of the Registrant's
By-Laws, officers, Trustees, employees and agents of the Registrant may be
indemnified against certain liabilities in connection with the Registrant. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 5 of the
Distribution Agreement, 59 Wall Street Distributors, Inc., as Distributor of
shares of each series of the Registrant, may be indemnified against certain
liabilities which it may incur. Such Article VII of the By-Laws and Section 5 of
the Distribution Agreement are hereby incorporated by reference in their
entirety.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Trustees, officers and
controlling persons of the Registrant and the principal underwriter pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a Trustee,
officer of controlling person of the Registrant or the principal underwriter in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such Trustee, officer or controlling person
or the principal underwriter in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The investment adviser of the Registrant's Money Market Fund, Brown
Brothers Harriman & Co. ("BBH & Co."), is a New York limited partnership. BBH &
Co. conducts a general banking business and is a member of the New York Stock
Exchange, Inc.
To the knowledge of the Registrant, none of the general partners or
officers of BBH & Co. is engaged in any other business, profession, vocation or
employment of a substantial nature.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) 59 Wall Street Distributors, Inc. ("59 Wall Street
Distributors") and its affiliates also serve as administrator
and/or distributor to other registered investment companies.
(b) Set forth below are the names, principal business addresses and
positions of each Director and officer of 59 Wall Street
Distributors. The principal business address of these individuals
is c/o 59 Wall Street Distributors, Inc., 21 Milk Street,
Boston, MA 02109. Unless otherwise specified, no officer or
Director of 59 Wall Street Distributors serves as an officer or
Trustee of the Registrant.
PHILIP W. COOLIDGE: President, Chief Executive Officer and Director of 59
Wall Street Distributors. President of Registrant.
JOHN R. ELDER: Assistant Treasurer of 59 Wall Street Distributors. Treasurer
of the Registrant.
LINDA T. GIBSON: Secretary of 59 Wall Street Distributors. Secretary
of the Registrant.
MOLLY S. MUGLER: Assistant Secretary of 59 Wall Street Distributors. Assistant
Secretary of Registrant.
CHRISTINE A. DRAPEAU: Assistant Secretary of the Registrant.
SUSAN JAKUBOSKI: Assistant Treasurer of 59 Wall Street Distributors. Assistant
Treasurer of Registrant.
LINWOOD C. DOWNS: Treasurer of 59 Wall Street Distributors. Assistant
Treasurer of Registrant.
ROBERT G. DAVIDOFF: Director of 59 Wall Street Distributors; CMNY Capital, L.P.,
135 East 57th Street, New York, NY 10022.
DONALD S. CHADWICK: Director of 59 Wall Street Distributors; 4609 Bayard Street,
Apartment 411, Pittsburgh, PA 15213.
LEEDS HACKETT: Director of 59 Wall Street Distributors; Hackett Associates
Limited, 1260 Avenue of the Americas, 12th Floor, New York, NY 10020.
LAURENCE B. LEVINE: Director of 59 Wall Street Distributors; Blair Corporation,
250 Royal Palm Way, Palm Beach, FL 33480.
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of:
The 59 Wall Street Trust
59 Wall Street Distributors, Inc.
59 Wall Street Administrators, Inc.
21 Milk Street
Boston, MA 02109
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
ITEM 29. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Trust" in the
Prospectus constituting Part A of this Registration Statement, Registrant is not
a party to any management-related service contract.
ITEM 30. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is
contained in the latest annual report to shareholders, the
Registrant shall furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and State of New York on the
27th day of August 27, 1999.
THE 59 WALL STREET TRUST
By /S/PHILIP W. COOLIDGE
(Philip W. Coolidge, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Trustee and
/S/ JOSEPH V. SHIELDS, JR. Chairman of the Board August 27, 1999
J.V. Shields, Jr.
/S/PHILIP W. COOLIDGE President (Principal August 27, 1999
Philip W. Coolidge Executive Officer)
/S/ EUGENE P. BEARD Trustee August 27, 1999
(Eugene P. Beard)
/S/ DAVID P. FELDMAN Trustee August 27, 1999
David P. Feldman
/S/ ARTHUR D. MILTENBERGER Trustee August 27, 1999
Arthur D. Miltenberger
/S/ ALAN G. LOWY Trustee August 27, 1999
Alan G. Lowy
Treasurer (Principal August 27, 1999
/S/JOHN R. ELDER Financial and Principal
John R. Elder Accounting Officer)