59ws018q
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET MONEY MARKET FUND
21 Milk Street, Boston, Massachusetts 02109
The 59 Wall Street Money Market Fund (the "Fund") is a separate
diversified series of The 59 Wall Street Trust, organized as a Massachusetts
business trust on June 7, 1983 (the "Trust") and is a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund is a type of mutual fund commonly known as a money market
fund. The Fund is designed to be a cost effective and convenient means of making
substantial investments in money market instruments. The investment objective of
the Fund is to achieve as high a level of current income as is consistent with
the preservation of capital and the maintenance of liquidity. The Trust seeks to
achieve the investment objective of the Fund by investing all of the Fund's
assets in the BBH U.S. Money Market Portfolio (the "Portfolio"), a diversified
open-end investment company having the same investment objective as the Fund.
The Portfolio pursues its investment objective by investing in high quality,
short-term money market instruments. There can be no assurance that the Fund's
investment objective will be achieved.
The Annual Report of the Fund dated June 30, 2000 has been filed with
the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder and is hereby incorporated herein by reference. A
copy of the Annual Report will be provided without charge to each person
receiving this Statement of Additional Information.
Brown Brothers Harriman & Co. is the investment adviser of the
Portfolio (the "Investment Adviser"). This Statement of Additional Information
is not a prospectus and should be read in conjunction with the Prospectus dated
October 1, 2000, a copy of which may be obtained from the Trust at the address
noted above.
The date of this Statement of Additional Information is
October 1, 2000.
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Table of Contents
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Cross-Reference to
Page Page in Prospectus
Investments
Investment Objective and Policies . . . . . 3 3-4
Investment Restrictions . . . . . . . . 7
Management
Trustees and Officers . . . . . 10
Investment Adviser . . . . . . . . . . 14 6
Administrators. . . . . . . . . . . . 15-17
Distributor . . . . . . . . . . . . 17
Shareholder Servicing Agent,
Financial Intermediaries and Eligible Institutions 18-19
Custodian, Transfer and Dividend Disbursing
Agent 19
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<TABLE>
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Table of Contents
<S> <C> <C>
Cross-Reference to
Page Page in Prospectus
Independent Auditors 20
Net Asset Value; Redemption in Kind . . . . 20-21 6
Computation of Performance . . . . . . . 21-22
Purchases and Redemptions 24
Federal Taxes . . . . . . . . . . . . 23-24
Description of Shares . . . . . . . . . 24-27
Portfolio Brokerage Transactions . . . . 27-28
Bond, Note and Commercial Paper Ratings 28-30
Additional Information. . . . . . . . . . . . . . . 30
Financial Statements . . . . . . . . . 31
The date of this Statement of Additional Information is
October 1, 2000.
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INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund and the
Portfolio. Since the investment characteristics of the Fund correspond directly
to those of the Portfolio, the following is a discussion of the various
investments and investment policies of the Portfolio.
Loans of Portfolio Securities
Loans of portfolio securities up to 30% of the total value of the
Portfolio are permitted and may be entered into for not more than one year.
Securities of the Portfolio may be loaned if such loans are secured continuously
by cash or equivalent collateral or by an irrevocable letter of credit in favor
of the Portfolio at least equal at all times to 100% of the market value of the
securities loaned plus accrued income. While such securities are on loan, the
borrower pays the Portfolio any income accruing thereon, and cash collateral may
be invested for the Portfolio, thereby earning additional income. All or any
portion of interest earned on invested collateral may be paid to the borrower.
Loans are subject to termination by the Portfolio in the normal settlement time,
currently three business days after notice, or by the borrower on one day's
notice. Borrowed securities are returned when the loan is terminated. Any
appreciation or depreciation in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. Reasonable finders' and custodial fees may be paid in connection with
a loan. In addition, all facts and circumstances, including the creditworthiness
of the borrowing financial institution, are considered before a loan is made and
no loan is made in excess of one year. There is the risk that a borrowed
security may not be returned to the Portfolio. Securities of the Portfolio are
not loaned to Brown Brothers Harriman & Co. or to any affiliate of the Trust,
the Portfolio or Brown Brothers Harriman & Co.
U.S. Government Securities
Assets of the Portfolio may be invested in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. These
securities, including those which are guaranteed by federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. In the case of securities not backed by the full faith and
credit of the United States, it may not be possible to assert a claim against
the United States itself in the event the agency or instrumentality issuing or
guaranteeing the security for ultimate repayment does not meet its commitments.
Securities which are not backed by the full faith and credit of the United
States include, but are not limited to, securities of the Tennessee Valley
Authority, the Federal National Mortgage Association (FNMA), the U.S. Postal
Service and the Resolution Funding Corporation (REFCORP), each of which has a
limited right to borrow from the U.S. Treasury to meet its obligations, and
securities of the Federal Farm Credit System, the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation (FHLMC) and the Student Loan Marketing
Association, the obligations of each of which may be satisfied only by the
individual credit of the issuing agency. Securities which are backed by the full
faith and credit of the United States include Treasury bills, Treasury notes,
Treasury bonds and pass through obligations of the Government National Mortgage
Association (GNMA), the Farmers Home Administration and the Export-Import Bank.
There is no percentage limitation with respect to investments in U.S. Government
securities.
Bank Obligations
Assets of the Portfolio may be invested in U.S. dollar-denominated
negotiable certificates of deposit and fixed time deposits of banks, savings and
loan associations and savings banks organized under the laws of the United
States or any state thereof, including obligations of non-U.S. branches of such
banks, or of non-U.S. banks or their U.S. or non-U.S. branches, provided that in
each case, such bank has more than $500 million in total assets, and has an
outstanding short-term debt issue rated within the highest rating category for
short-term debt obligations by at least two (unless only rated by one)
nationally recognized statistical rating organizations (e.g., Moody's and S&P)
or, if unrated, are of comparable quality as determined by or under the
direction of the Portfolio's Board of Trustees. See "Bond, Note and Commercial
Paper Ratings" in the Statement of Additional Information. There is no
additional percentage limitation with respect to investments in negotiable
certificates of deposit and fixed time deposits of U.S. branches of U.S. banks
and U.S. branches of non-U.S. banks that are subject to the same regulation as
U.S. banks. Since the Portfolio may contain U.S. dollar-denominated certificates
of deposit and fixed time deposits that are issued by non-U.S. banks and their
non-U.S. branches, the Portfolio may be subject to additional investment risks
with respect to those securities that are different in some respects from
obligations of U.S. issuers, such as currency exchange control regulations, the
possibility of expropriation, seizure or nationalization of non-U.S. deposits,
less liquidity and more volatility in non-U.S. securities markets and the impact
of political, social or diplomatic developments or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on securities held by the Portfolio. If it should become necessary,
greater difficulties might be encountered in invoking legal processes abroad
than would be the case in the United States. Issuers of non-U.S. bank
obligations may be subject to less stringent or different regulations than are
U.S. bank issuers, there may be less publicly available information about a
non-U.S. issuer, and non-U.S. issuers generally are not subject to uniform
accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. Income earned or received by the
Portfolio from sources within countries other than the United States may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may reduce
or eliminate such taxes. All such taxes paid by the Portfolio would reduce its
net income available for distribution to investors (i.e., the Fund and other
investors in the Portfolio); however, the Investment Adviser would consider
available yields, net of any required taxes, in selecting securities of non-U.S.
issuers. While early withdrawals are not contemplated, fixed time deposits are
not readily marketable and may be subject to early withdrawal penalties, which
may vary. Assets of the Portfolio are not invested in obligations of Brown
Brothers Harriman & Co., or the Distributor, or in the obligations of the
affiliates of any such organization. Assets of the Portfolio are also not
invested in fixed time deposits with a maturity of over seven calendar days, or
in fixed time deposits with a maturity of from two business days to seven
calendar days if more than 10% of the Portfolio's net assets would be invested
in such deposits.
Commercial Paper
Assets of the Portfolio may be invested in commercial paper including
variable rate demand master notes issued by U.S. corporations or by non-U.S.
corporations which are direct parents or subsidiaries of U.S. corporations.
Master notes are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangements between the
issuer and a U.S. commercial bank acting as agent for the payees of such notes.
Master notes are callable on demand, but are not marketable to third parties.
Consequently, the right to redeem such notes depends on the borrower's ability
to pay on demand. At the date of investment, commercial paper must be rated
within the highest rating category for short-term debt obligations by at least
two (unless only rated by one) nationally recognized statistical rating
organizations (e.g., Moody's and S&P) or, if unrated, are of comparable quality
as determined by or under the direction of the Portfolio's Board of Trustees.
Any commercial paper issued by a non-U.S. corporation must be U.S.
dollar-denominated and not subject to non-U.S. withholding tax at the time of
purchase. Aggregate investments in non-U.S. commercial paper of non-U.S. issuers
cannot exceed 10% of the Portfolio's net assets. Since the Portfolio may contain
commercial paper issued by non-U.S. corporations, it may be subject to
additional investment risks with respect to those securities that are different
in some respects from obligations of U.S. issuers, such as currency exchange
control regulations, the possibility of expropriation, seizure or
nationalization of non-U.S. deposits, less liquidity and more volatility in
non-U.S. securities markets and the impact of political, social or diplomatic
developments or the adoption of other foreign government restrictions which
might adversely affect the payment of principal and interest on securities held
by the Portfolio. If it should become necessary, greater difficulties might be
encountered in invoking legal processes abroad than would be the case in the
United States. There may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers generally are not subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
Repurchase Agreements
A repurchase agreement is an agreement in which the seller (the "Lender")
of a security agrees to repurchase from the Portfolio the security sold at a
mutually agreed upon time and price. As such, it is viewed as the lending of
money to the Lender. The resale price normally is in excess of the purchase
price, reflecting an agreed upon interest rate. The rate is effective for the
period of time assets of the Portfolio are invested in the agreement and is not
related to the coupon rate on the underlying security. The period of these
repurchase agreements is usually short, from overnight to one week, and at no
time are assets of the Portfolio invested in a repurchase agreement with a
maturity of more than one year. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. The Portfolio always receives as
collateral securities which are eligible securities for the Portfolio to
purchase. Collateral is marked to the market daily and has a market value
including accrued interest at least equal to 100% of the dollar amount invested
on behalf of the Portfolio in each agreement along with accrued interest.
Payment for such securities is made for the Portfolio only upon physical
delivery or evidence of book entry transfer to the account of Brown Brothers
Harriman & Co, the Portfolio's Custodian. If the Lender defaults, the Portfolio
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the Lender, realization upon the collateral on behalf of the
Portfolio may be delayed or limited in certain circumstances. A repurchase
agreement with more than seven days to maturity may not be entered into for the
Portfolio if, as a result, more than 10% of the Portfolio's net assets would be
invested in such repurchase agreement together with any other investment for
which market quotations are not readily available.
Reverse Repurchase Agreements
Reverse repurchase agreements may be entered into only with a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. This is an agreement in which the Portfolio agrees to
repurchase securities sold by it at a mutually agreed upon time and price. As
such, it is viewed as the borrowing of money for the Portfolio. Proceeds of
borrowings under reverse repurchase agreements are invested for the Portfolio.
This is the speculative factor known as "leverage". If interest rates rise
during the term of a reverse repurchase agreement utilized for leverage, the
value of the securities to be repurchased for the Portfolio as well as the value
of securities purchased with the proceeds will decline. In these circumstances,
the Portfolio's entering into reverse repurchase agreements may have a negative
impact on the ability to maintain the Fund's net asset value of $1.00 per share.
Proceeds of a reverse repurchase transaction are not invested for a period which
exceeds the duration of the reverse repurchase agreement. A reverse repurchase
agreement is not entered into for the Portfolio if, as a result, more than
one-third of the market value of the Portfolio's total assets, less liabilities
other than the obligations created by reverse repurchase agreements, is engaged
in reverse repurchase agreements. In the event that such agreements exceed, in
the aggregate, one-third of such market value, the amount of the Portfolio's
obligations created by reverse repurchase agreements is reduced within three
days thereafter (not including weekends and holidays) or such longer period as
the Securities and Exchange Commission may prescribe, to an extent that such
obligations do not exceed, in the aggregate, one-third of the market value of
the Portfolio's assets, as defined above. A segregated account with the
Custodian is established and maintained for the Portfolio with liquid assets in
an amount at least equal to the Portfolio's purchase obligations under its
reverse repurchase agreements. Such a segregated account consists of liquid high
grade debt securities marked to the market daily, with additional liquid assets
added when necessary to insure that at all times the value of such account is
equal to the purchase obligations.
When-Issued and Delayed Delivery Securities
Securities may be purchased for the Portfolio on a when-issued or delayed
delivery basis. For example, delivery and payment may take place a month or more
after the date of the transaction. The purchase price and the interest rate
payable on the securities are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no interest accrues to the
Portfolio until delivery and payment take place. At the time the commitment to
purchase securities for the Portfolio on a when-issued or delayed delivery basis
is made, the transaction is recorded and thereafter the value of such securities
is reflected each day in determining the Portfolio's net asset value. At the
time of its acquisition, a when-issued security may be valued at less than the
purchase price. Commitments for such when-issued securities are made only when
there is an intention of actually acquiring the securities. To facilitate such
acquisitions, a segregated account with the Custodian is maintained for the
Portfolio with liquid assets in an amount at least equal to such commitments.
Such a segregated account consists of liquid high grade debt securities marked
to the market daily, with additional liquid assets added when necessary to
insure that at all times the value of such account is equal to the commitments.
On delivery dates for such transactions, such obligations are met from
maturities or sales of the securities held in the segregated account and/or from
cash flow. If the right to acquire a when-issued security is disposed of prior
to its acquisition, the Portfolio could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation.
When-issued commitments for the Portfolio may not be entered into if such
commitments exceed in the aggregate 15% of the market value of the Portfolio's
total assets, less liabilities other than the obligations created by when-issued
commitments.
Other Obligations
Assets of the Portfolio may be invested in bonds and asset-backed
securities, with maturities not exceeding thirteen months, issued by U.S.
corporations which at the date of investment are rated within the highest
short-term rating category for such obligations or the two highest long-term
rating categories by at least two (unless only rated by one) nationally
recognized statistical rating organizations (e.g., Moody's and S&P) or, if
unrated, are of comparable quality as determined by or under the direction of
the Portfolio's Board of Trustees.
Assets of the Portfolio may also be invested in obligations of the
International Bank for Reconstruction and Development which may be supported by
appropriated but unpaid commitments of its member countries, although there is
no assurance that these commitments will be undertaken in the future. However,
assets of the Portfolio may not be invested in obligations of the Inter-American
Development Bank or the Asian Development Bank.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Fund or the Portfolio, as the case may be
(see "Additional Information"). Since the investment restrictions of the Fund
correspond directly to those of the Portfolio, the following is a discussion of
the various investment restrictions of the Portfolio.
As a fundamental policy, money is not borrowed by the Portfolio in an
amount in excess of 10% of its assets. It is intended that money will be
borrowed only from banks and only either to accommodate requests for the
withdrawal of part or all of an interest while effecting an orderly liquidation
of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction or other
similar situations. Securities are not purchased for the Portfolio at any time
at which the amount of its borrowings exceed 5% of its net assets.
Except that the Trust may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither the Portfolio nor the Trust, with
respect to the Fund, may:
(1) purchase securities which may not be resold to the public without
registration under the Securities Act of 1933, as amended;
(2) enter into repurchase agreements with more than seven days to
maturity if, as a result thereof, more than 10% of the market value of its net
assets would be invested in such repurchase agreements together with any other
investment for which market quotations are not readily available;
(3) enter into reverse repurchase agreements which, including any
borrowings under Investment Restriction No. 4, exceed, in the aggregate,
one-third of the market value of its total assets, less liabilities other than
obligations created by reverse repurchase agreements. In the event that such
agreements exceed, in the aggregate, one-third of such market value, it will,
within three days thereafter (not including weekends and holidays) or such
longer period as the Securities and Exchange Commission may prescribe, reduce
the amount of the obligations created by reverse repurchase agreements to an
extent that such obligations will not exceed, in the aggregate, one-third of the
market value of its assets;
(4) borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts not to exceed 10% of the value of its total
assets, taken at cost, at the time of such borrowing; mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not to exceed 10% of the value of its net assets at the time of such
borrowing. Neither the Portfolio nor the Trust on behalf of the Fund, as the
case may be, will purchase securities while borrowings exceed 5% of its total
assets. This borrowing provision is included to facilitate the orderly sale of
portfolio securities, for example, in the event of abnormally heavy redemption
requests, and is not for investment purposes and does not apply to reverse
repurchase agreements (see "Other Investments - Reverse Repurchase Agreements");
(5) enter into when-issued commitments exceeding in the aggregate 15%
of the market value of its total assets, less liabilities other than obligations
created by when-issued commitments;
(6) purchase the securities or other obligations of issuers conducting
their principal business activity in the same industry if, immediately after
such purchase, the value of such investments in such industry would exceed 25%
of the value of its total assets. For purposes of industry concentration, there
is no percentage limitation with respect to investments in U.S. Government
securities and negotiable certificates of deposit, fixed time deposits and
bankers' acceptances of U.S. branches of U.S. banks and U.S. branches of
non-U.S. banks that are subject to the same regulation as U.S. banks;
(7) purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in securities or other obligations or any one such issuer.
This limitation does not apply to issues of the U.S. Government, its agencies or
instrumentalities;
(8) make loans, except through the purchase or holding of debt
obligations, repurchase agreements or loans of portfolio securities in
accordance with its investment objective and policies (see "Investment Objective
and Policies");
(9) purchase or sell puts, calls, straddles, spreads, or any
combinations thereof; real estate; commodities; commodity contracts or interests
in oil, gas or mineral exploration or development programs. However, bonds or
commercial paper issued by companies which invest in real estate or interests
therein including real estate investment trusts may be purchased;
(10) purchase securities on margin, make short sales of securities or
maintain a short position, provided that this restriction is not deemed to be
applicable to the purchase or sale of when-issued securities or of securities
for delivery at a future date;
(11) invest in fixed time deposits with a duration of over seven
calendar days, or in fixed time deposits with a duration of from two business
days to seven calendar days if more than 10% of its total assets would be
invested in such deposits;
(12) acquire securities of other investment companies;
(13) act as an underwriter of securities; or
(14) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder.
Except with respect to Investment Restriction No. 3, there will be no
violation of any investment restriction if that restriction is complied with at
the time the relevant action is taken notwithstanding a later change in market
value of an investment, in net or total assets, in the securities rating of the
investment, or any other later change.
Non-Fundamental Restrictions. The Portfolio or the Trust, on behalf of
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 more than 10% of all outstanding debt obligations of any one
issuer (other than securities issued by the U.S. government, its agencies
instrumentalities); 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 or investor 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. If the Fund's and the
Portfolio's respective investment restrictions relating to any particular
investment practice or policy are not consistent, the Portfolio has agreed with
the Trust, on behalf of the Fund, that the Portfolio will adhere to the more
restrictive limitation.
The Fund is classified as "diversified" under the 1940 Act, which means
that at least 75% of its total assets is represented by cash; securities issued
by the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one issuer to an amount no greater than 5% of the
Fund's total assets (other than securities issued by the U.S. Government, its
agencies or instrumentalities).
TRUSTEES AND OFFICERS
The Trust's Trustees, in addition to supervising the actions of the
Trust's Administrator and Distributor, as set forth below, decide upon matters
of general policy with respect to the Trust. The Portfolio's Trustees, in
addition to supervising the actions of the Portfolio's Investment Adviser and
Administrator, as set forth below, decide upon matters of general policy with
respect to the Portfolio. The Trust's Trustees are not the same individuals as
the Portfolio's Trustees.
Because of the services rendered to the Portfolio by the Investment
Adviser and to the Trust and the Portfolio by their respective Administrators,
the Trust and the Portfolio require no employees, and their respective officers,
other than the Chairmen, receive no compensation from the Fund or the Portfolio.
The Trustees and executive officers of the Trust and the Portfolio,
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 AND THE PORTFOLIO
J.V. SHIELDS, JR.* (aged 62) - Chairman of the Board and Trustee;
Director of The 59 Wall Street Fund, Inc.; Trustee of the BBH Portfolios(1)
(since October 1999); Director of BBH Common Settlement Fund, Inc. (since August
2000); Managing Director, Chairman and Chief Executive Officer of Shields &
Company; Chairman of Capital Management Associates, Inc.; Director of Flowers
Industries, Inc.(2). Vice Chairman and Trustee of New York Racing Association.
His business address is Shields & Company, 140 Broadway, New York, NY 10005.
EUGENE P. BEARD** (aged 65) - Trustee; Director of The 59 Wall Street
Fund, Inc.; Trustee of the BBH Portfolios (since October 1999); Director of BBH
Common Settlement Fund, Inc. (since August 2000); 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** (aged 60) - Trustee; Director of The 59 Wall Street
Fund, Inc.; Trustee of the BBH Portfolios (since October 1999); Director of BBH
Common Settlement Fund, Inc. (since August 2000); 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** (aged 61) - Trustee; Director of The 59 Wall Street
Fund, Inc.; Trustee of the BBH Portfolios (since October 1999); Director of BBH
Common Settlement Fund, Inc. (since August 2000); 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** (aged 61) - Trustee; Director of The 59 Wall
Street Fund, Inc.; Trustee of the BBH Portfolios (since October 1999); Director
of BBH Common Settlement Fund, Inc. (since August 2000); 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);
Vice President of the Richard King Mellon Foundation; 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** (aged 67) - Trustee (since October 1999);
Trustee of the BBH Portfolios; Trustee of Dow Jones Islamic Market Index
Portfolio (since March 1999); Director of The 59 Wall Street Fund, Inc. (since
October 1999); Director of BBH Common Settlement Fund, Inc. (since August 2000);
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** (aged 70) - Trustee (since October 1999); Trustee
of the BBH Porfolios; Trustee of Dow Jones Islamic Market Index Portfolio (since
March 1999); Director of The 59 Wall Street Fund, Inc. (since October 1999);
Director of BBH Common Settlement Fund, Inc. (since August 2000); Retired. His
business address is 42 Clowes Drive, Falmouth, MA 02540.
DAVID M. SEITZMAN** (aged 71) - Trustee (since October 1999); Trustee
of the BBH Porfolios; Director of The 59 Wall Street Fund, Inc. (since October
1999); Director of BBH Common Settlement Fund, Inc. (since August 2000);
Physician, Private Practice. His business address is 7117 Nevis Road, Bethesda,
MD 20817.
J. ANGUS IVORY (aged 68) - Trustee (since October 1999); Trustee of the
BBH 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 BBH Common Settlement Fund, Inc. (since August 2000);
Retired; 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 AND THE PORTFOLIO
PHILIP W. COOLIDGE (aged 49) - President; President of the Portfolio
and the BBH Portfolios; 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 (aged 52) - Vice President; Senior Vice President of
SFG.
LINWOOD C. DOWNS (aged 38) - Treasurer; Treasurer of the Portfolio and
the BBH Portfolios; Senior Vice President and Treasurer of SFG; and Treasurer of
59 Wall Street Distributors and 59 Wall Street Administrators.
MOLLY S. MUGLER (aged 48) -- Secretary; Secretary of the Portfolio and
the BBH Portfolios; Legal Counsel and Assistant Secretary of SFG; and Assistant
Secretary of 59 Wall Street Distributors and 59 Wall Street Administrators.
SUSAN JAKUBOSKI (aged 36) - Assistant Treasurer; Assistant Treasurer
and Assistant Secretary of the Portfolio and the BBH Portfolios; Assistant
Secretary, Assistant Treasurer and Vice President of Signature Financial Group
(Cayman) Limited; and Assistant Treasurer of 59 Wall Street Administrators and
59 Wall Street Distributors.
CHRISTINE D. DORSEY (aged 30) - Assistant Secretary; Assistant
Secretary of the Portfolio and the Portfolios; Vice President of SFG (since
January 1996); Paralegal and Compliance Officer, various financial companies
(July 1992 to January 1996).
-------------------------
* Mr. Shields is an "interested person" of the Trust and the Portfolio because
of his affiliation with a registered broker-dealer.
** These Trustees are members of the Audit Committee of the Trust or the
Portfolio, as the case may be.
(1) The BBH Portfolios consist of the following active investment
companies: BBH U.S. Money Market Portfolio, BBH International Equity
Portfolio, BBH U.S. Equity Portfolio, BBH European Equity Portfolio,
BBH Pacific Basin Equity Portfolio, BBH High Yield Fixed Income
Portfolio, BBH Broad Market Fixed Income Portfolio and BBH Global
Equity Portfolio and the following inactive investment companies: BBH
U.S. Balanced Growth Portfolio and BBH U.S. Intermediate Tax-Exempt
Bond 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 of the Trust listed above holds the equivalent
position with The 59 Wall Street Fund, Inc. The address of each officer of the
Trust is 21 Milk Street, Boston, Massachusetts 02109. Messrs. Coolidge, Hoolahan
and Downs, and Mss. Jakuboski, Mugler and Dorsey also hold similar positions
with other investment companies for which affiliates of 59 Wall Street
Distributors serve as the principal underwriter.
Except for Mr. Shields, no Trustee is an "interested person" of the
Trust or the Portfolio as that term is defined in the 1940 Act.
<PAGE>
<TABLE>
<CAPTION>
Trustees of the Trust and the Portfolio
The Trustees of the Trust and the Portfolio receive a base annual fee
of $15,000 (except the Chairmen who receive 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.
<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., $14,685 none none $35,000
Trustee
Eugene P. Beard, $12,013 none none $30,000
Trustee
Richard L. Carpenter, $8,001 none none $30,000
Trustee
Clifford A. Clark, $8,001 none none $30,000
Trustee
David P. Feldman, $12,013 none none $30,000
Trustee
J. Angus Ivory, $8,001 none none $30,000
Trustee
Alan G. Lowy, $12,013 none none $30,000
Trustee
Arthur D. Miltenberger, $12,013 none none $30,000
Trustee
David M. Seitzman, $8,001 none none $30,000
Trustee
<FN>
* The Fund Complex consists of the Trust, The 59 Wall Street Fund, Inc. (which currently consists of seven
series) and the seven Portfolios.
</FN>
</TABLE>
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with the Portfolio and the
Administration Agreement with the Fund, and by Brown Brothers Harriman Trust
Company under the Administration Agreement with the Portfolio (see "Investment
Adviser" and "Administrators"), neither the Trust nor the Portfolio requires
employees other than its officers, and none of its officers devote full time to
the affairs of the Trust or the Portfolio, as the case may be, or, other than
the Chairmen, receive any compensation from the Fund or the Portfolio.
As of August 31, 2000, the Trustees and officers of the Trust and the
Portfolio as a group owned less than 1% of the outstanding shares of the Trust
and less than 1% of the aggregate beneficial interests in the Portfolio. At the
close of business on that date no person, to the knowledge of management, owned
beneficially more than 5% of the outstanding shares of the Fund nor more than 5%
of the aggregate beneficial interests in the Portfolio. Partners of Brown
Brothers Harriman & Co. and their immediate families owned 51,596,903 (3.77%)
shares of the Fund. Brown Brothers Harriman & Co. and its affiliates separately
have investment discretion over an additional 529,941,941 (38.67%) shares of the
Fund, as to which shares Brown Brothers Harriman & Co. disclaims beneficial
ownership.
INVESTMENT ADVISER
Under its Investment Advisory Agreement with the Portfolio, subject to
the general supervision of the Portfolio's Trustees and in conformance with the
stated policies of the Portfolio, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Portfolio. In this
regard, it is the responsibility of Brown Brothers Harriman & Co. to make the
day-to-day investment decisions for the Portfolio, to place the purchase and
sale orders for portfolio transactions and to manage, generally, the Portfolio's
investments.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Portfolio is dated December 15, 1993, as amended and restated July 1,
2000, and remains in effect for two years from such date and thereafter, but
only as long as the agreement is specifically approved at least annually (i) by
a vote of the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio, or by the Portfolio's Trustees, and
(ii) by a vote of a majority of the Trustees of the Portfolio who are not
parties to the Investment Advisory Agreement or "interested persons" (as defined
in the 1940 Act) of the Portfolio ("Independent Trustees"), cast in person at a
meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement was most recently approved by the Independent Trustees on May
9, 2000. The Investment Advisory Agreement terminates automatically if assigned
and is terminable at any time without penalty by a vote of a majority of the
Trustees of the Portfolio or by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio on
60 days' written notice to Brown Brothers Harriman & Co. and by Brown Brothers
Harriman & Co. on 90 days' written notice to the Portfolio (see "Additional
Information").
With respect to the Portfolio, the investment advisory fee paid to the
Investment Adviser is calculated daily and paid monthly at an annual rate equal
to 0.10% of the Portfolio's average daily net assets. Prior to July 1, 2000, the
investment advisory fee paid to the Investment Adviser was calculated daily and
paid monthly at an annual rate equal to 0.15% of the Portfolio's average daily
net assets. For the fiscal years ended June 30, 2000, 1999 and 1998, the
Portfolio incurred $1,974,749, $1,593,123 and $1,466,761, respectively, for
advisory services.
The investment advisory services of Brown Brothers Harriman & Co. to
the Portfolio are not exclusive under the terms of the Investment Advisory
Agreement. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
Pursuant to a license agreement between the Trust and Brown Brothers
Harriman & Co. dated August 24, 1989, as amended as of December 15, 1993, the
Trust may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co. The agreement may be terminated by
Brown Brothers Harriman & Co. at any time upon written notice to the Trust upon
the expiration or earlier termination of any investment advisory agreement
between the 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".
Pursuant to a license agreement between the Portfolio and Brown
Brothers Harriman & Co. dated May 9, 2000, the Portfolio may continue to use in
its name BBH. The agreement may be terminated by Brown Brothers Harriman & Co.
at any time upon written notice to the Portfolio upon the expiration or earlier
termination of any investment advisory agreement between the Portfolio and Brown
Brothers Harriman & Co. Termination of the agreement would require the Portfolio
to change its name to eliminate all reference to BBH.
ADMINISTRATORS
Brown Brothers Harriman & Co. acts as Administrator of the Trust and
Brown Brothers Harriman Trust Company, LLC acts as Administrator of the
Portfolio. Brown Brothers Harriman Trust Company, LLC is a wholly-owned
subsidiary of Brown Brothers Harriman & Co.
In its capacity as Administrator of the Trust, Brown Brothers Harriman &
Co. administers all aspects of the Trust's operations subject to the supervision
of the Trust's Trustees except as set forth below under "Distributor". In
connection with its responsibilities as Administrator and at its own expense,
Brown Brothers Harriman & Co. (i) provides the Trust with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary in order to provide effective administration of the
Trust; (ii) oversees the performance of administrative and professional services
to the Trust by others, including the Fund's Transfer and Dividend Disbursing
Agent; (iii) provides the Trust with adequate office space and communications
and other facilities; and (iv) prepares and/or arranges for the preparation, but
does not pay for, the periodic updating of the Trust's registration statement
and the Fund's prospectus, the printing of such documents for the purpose of
filings with the Securities and Exchange Commission and state securities
administrators, and the preparation of tax returns for the Fund and reports to
shareholders and the Securities and Exchange Commission.
Brown Brothers Harriman Trust Company, LLC in its capacity as
Administrator of the Portfolio, administers all aspects of the Portfolio's
operations subject to the supervision of the Portfolio's Trustees except as set
forth above under "Investment Adviser". In connection with its responsibilities
as Administrator for the Portfolio and at its own expense, Brown Brothers
Harriman Trust Company, LLC (i) provides the Portfolio with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary in order to provide effective administration of the
Portfolio, including the maintenance of certain books and records, receiving and
processing requests for increases and decreases in the beneficial interests in
the Portfolio, notification to the Investment Adviser of available funds for
investment, reconciliation of account information and balances between the
Custodian and the Investment Adviser, and processing, investigating and
responding to investor inquiries; (ii) oversees the performance of
administrative and professional services to the Portfolio by others, including
the Custodian; (iii) provides the Portfolio with adequate office space and
communications and other facilities; and (iv) prepares and/or arranges for the
preparation, but does not pay for, the periodic updating of the Portfolio's
registration statement for filing with the Securities and Exchange Commission,
and the preparation of tax returns for the Portfolio and reports to investors
and the Securities and Exchange Commission.
For the services rendered to the Portfolio and related expenses borne
by Brown Brothers Harriman Trust Company, LLC as Administrator of the Portfolio,
Brown Brothers Harriman Trust Company, LLC receives from the Portfolio an annual
fee, computed daily and payable monthly, equal to 0.035% of the Portfolio's
average daily net assets. For the fiscal years ended June 30, 2000, 1999 and
1998, the Portfolio incurred $460,775, $371,729 and $342,244, respectively, for
administrative services.
The Administration Agreements between the Trust and Brown Brothers
Harriman & Co. (dated November 1, 1993) and between the Portfolio and Brown
Brothers Harriman Trust Company, LLC (dated March 1, 1999) will remain in effect
for two years from such respective date and thereafter, but only so long as each
such agreement is specifically approved at least annually in the same manner as
the Portfolio's Investment Advisory Agreement (see "Investment Adviser"). The
Independent Trustees last approved the Trust's Administration Agreement and the
Portfolio's Administration Agreement on May 9, 2000 and November 9, 1999,
respectively. Each agreement will terminate automatically if assigned by either
party thereto and is terminable with respect to the Trust or the Portfolio at
any time without penalty by a vote of a majority of the Trustees of the Trust or
the Trustees of the Portfolio, as the case may be, or by a vote of the holders
of a "majority of the outstanding voting securities" (as defined in the 1940
Act) of the Trust or the Portfolio, as the case may be. The Trust's
Administration Agreement is terminable by the Trustees of the Trust or
shareholders of the Trust on 60 days' written notice to Brown Brothers Harriman
& Co. The Portfolio's Administration Agreement is terminable by the Trustees of
the Portfolio or by the Fund and other investors in the Portfolio on 60 days'
written notice to Brown Brothers Harriman Trust Company, LLC. Each agreement is
terminable by the respective Administrator on 90 days' written notice to the
Trust or the Portfolio, as the case may be.
For the services rendered to the Trust and related expenses borne by
Brown Brothers Harriman & Co., as Administrator of the Trust, Brown Brothers
Harriman & Co. receives from the Fund an annual fee, computed daily and payable
monthly, equal to 0.095% of the Fund's average daily net assets. For the fiscal
years ended June 30, 2000, 1999 and 1998, the Fund incurred $980,250, $795,988
and $731,534, 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 is not affiliated with Brown Brothers
Harriman & Co. 59 Wall Street Administrators' subadministrative duties may
include providing equipment and clerical personnel necessary for maintaining the
organization of the Trust, participation in the preparation of documents
required for compliance by the Trust with applicable laws and regulations,
preparation of certain documents in connection with meetings of Trustees and
shareholders of the Trust, and other functions that would otherwise be performed
by the Administrator as set forth above. For performing such subadministrative
services, 59 Wall Street Administrators receives such compensation as is from
time to time agreed upon, but not in excess of the amount paid to the
Administrator from the Fund.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company, 59 Wall Street Administrators, Inc. ("59 Wall Street
Administrators") performs such subadministrative duties for the Portfolio as are
from time to time agreed upon by the parties. 59 Wall Street Administrator's
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Portfolio, participation in
the preparation of documents required for compliance by the Portfolio with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Trustees of and investors in the Portfolio, and other functions
that would otherwise be performed by the Administrator of the Portfolio as set
forth above. For performing such subadministrative services, 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 Portfolio.
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 for two years from the date of its
execution and therafter, but only so long as the continuance of such agreement
is specifically approved at least annually in conformity with the requirements
of the 1940 Act. The Distribution Agreement was most recently approved by the
Independent Trustees of the Trust on February 8, 2000. 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 outstanding
voting securities" (as defined in the 1940 Act) of the Fund. 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
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, is the Custodian for the Fund and the Portfolio.
As Custodian for the Fund, it is responsible for holding the Fund's
assets (i.e., cash and the Fund's interest in the Portfolio) pursuant to a
custodian agreement with the Trust. Cash is held for the Fund in demand deposit
accounts at the Custodian. Subject to the supervision of the Administrator of
the Trust, the Custodian maintains the accounting records for the Fund and each
day computes the net asset value and net income per share of the Fund.
As Custodian for the Portfolio, it is responsible for maintaining books
and records of portfolio transactions and holding the Portfolio's securities and
cash pursuant to a custodian agreement with the Portfolio. Cash is held for the
Portfolio in demand deposit accounts at the Custodian. Subject to the
supervision of the Administrator of the Portfolio, the Custodian maintains the
accounting and portfolio transaction records for the Portfolio and each day
computes the net asset value and net income of the Portfolio.
Forum Shareholder Services, LLC, Two Portland Square, Portland, ME 04101
is the Transfer and Dividend Disbursing Agent for the Fund. The Transfer and
Dividend Disbursing Agent is responsible for maintaining the books and records
detailing ownership of the Fund's shares.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Boston, Massachusetts are the independent auditors
for the Fund and Portfolio.
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, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas.) This determination of net asset value of each
share of the Fund is made once during each such day as of the close of regular
trading on such Exchange by subtracting from the value of the Fund's total
assets (i.e., the value of its investment in the Portfolio and other assets) the
amount of its liabilities, including expenses payable or accrued, and dividing
the difference by the number of shares of the Fund outstanding at the time the
determination is made. It is anticipated that the net asset value of each share
of the Fund will remain constant at $1.00 and, although no assurance can be
given that it will be able to do so on a continuing basis, the Trust and the
Portfolio employ specific investment policies and procedures to accomplish this
result.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the Fund is determined. The determination of the value of the
Fund's investment in the Portfolio is made by subtracting from the value of the
total assets of the Portfolio the amount of the Portfolio's liabilities and
multiplying the difference by the percentage, effective for that day, which
represents the Fund's share of the aggregate beneficial interests in the
Portfolio. The value of the Fund's investment in the Portfolio is determined
once daily at 4:00 P.M., New York time on each day the New York Stock Exchange
is open for regular trading and New York banks are open for business.
The Portfolio's assets are valued by using the amortized cost method of
valuation. This method involves valuing a security at its cost at the time of
purchase and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. The market value of the securities held by
the Portfolio fluctuates on the basis of the creditworthiness of the issuers of
such securities and on the levels of interest rates generally. While the
amortized cost method provides certainty in valuation, it may result in periods
when the value so determined is higher or lower than the price the Portfolio
would receive if the security were sold.
Pursuant to a rule of the Securities and Exchange Commission, an
investment company may use the amortized cost method of valuation subject to
certain conditions and the determination that such method is in the best
interests of the Fund's shareholders and the Portfolio's other investors. The
use of amortized cost valuations is subject to the following conditions: (i) as
a particular responsibility within the overall duty of care owed to the
Portfolio's investors, the Trustees of the Portfolio have established procedures
reasonably designed, taking into account current market conditions and the
investment objective of its investors, to stabilize the net asset value as
computed; (ii) the procedures include periodic review by the Trustees of the
Portfolio, as they deem appropriate and at such intervals as are reasonable in
light of current market conditions, of the relationship between the value of the
Portfolio's net assets using amortized cost and the value of the Portfolio's net
assets based upon available indications of market value with respect to such
portfolio securities; (iii) the Trustees of the Portfolio will consider what
steps, if any, should be taken if a difference of more than 1/2 of 1% occurs
between the two methods of valuation; and (iv) the Trustees of the Portfolio
will take such steps as they consider appropriate, such as shortening the
average portfolio maturity, realizing gains or losses, establishing the value of
the Portfolio's net assets by using available market quotations, or reducing the
value of interests in the Portfolio, to minimize any material dilution or other
unfair results which might arise from differences between the two methods of
valuation.
Such conditions also generally require that: (i) investments for the
Portfolio be limited to instruments which the Trustees of the Portfolio
determine present minimal credit risks and which are of high quality as
determined by any nationally recognized statistical rating organization that is
not an affiliated person of the issuer of, or any issuer, guarantor or provider
of credit support for, the instrument, or, in the case of any instrument that is
not so rated, is of comparable quality as determined by the Investment Adviser
under the general supervision of the Trustees of the Portfolio; (ii) a
dollar-weighted average portfolio maturity of not more than 90 days be
maintained and no instrument is purchased with a remaining maturity of more than
397 days; (iii) the Portfolio's available cash will be invested in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable, if the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity of more than 90 days; and (iv) no
more than 5% of the Portfolio's total assets may be invested in the securities
of any one issuer (other than U.S. Government securities).
It is expected that the Fund will have a positive net income at the
time of each determination thereof. If for any reason the Fund's net income is a
negative amount, which could occur, for instance, upon default by an issuer of a
portfolio security, the Fund would first offset the negative amount with respect
to each shareholder account from the dividends declared during the month with
respect to those accounts. If and to the extent that negative net income exceeds
declared dividends at the end of the month, the Fund would reduce the number of
outstanding Fund shares by treating each shareholder as having contributed to
the capital of the Fund that number of full and fractional shares in his or her
account which represents his or her share of the amount of such excess. Each
shareholder would be deemed to have agreed to such contribution in these
circumstances by his or her investment in the Fund.
COMPUTATION OF PERFORMANCE
The current and effective yields of the Fund may be used from time to
time in shareholder reports or other communications to shareholders or
prospective investors. Seven-day current yield is computed by dividing the net
change in account value (exclusive of capital changes) of a hypothetical
pre-existing account having a balance of one share at the beginning of a
seven-day calendar period by the value of that account at the beginning of that
period, and multiplying the return over the seven-day period by 365/7. For
purposes of the calculation, net change in account value reflects the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but does not
reflect realized gains or losses or unrealized appreciation or depreciation. The
Fund's current yield for the seven-day calendar period ended June 30, 2000 was
3.69%. In addition, the Trust may use an effective annualized yield quotation
for the Fund computed on a compounded basis by adding 1 to the base period
return (calculated as described above), raising the sum to a power equal to
365/7, and subtracting 1 from the result. Based upon this latter method, the
Fund's effective annualized yield for the seven-day calendar period ended June
30, 2000 was 3.76%
The yield should not be considered a representation of the yield of the
Fund in the future since the yield is not fixed. Actual yields will depend on
the type, quality and maturities of the investments held for the Portfolio,
changes in interest rates on investments, and the Fund's expenses during the
period.
Yield information may be useful for reviewing the performance of the
Fund and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Fund's yield does fluctuate, and
this should be considered when reviewing performance or making comparisons.
The Fund's "yield" and "effective yield" may be used from time to time in
shareholder reports or other communications to shareholders or prospective
investors. Both yield figures are based on historical earnings and are not
intended to indicate future performance. Performance information may include the
Fund's investment results and/or comparisons of its investment results to
various unmanaged indexes (such as 1-month LIBOR) 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 will be used on a consistent basis.
The Fund's investment results as used in such communications are calculated in
the manner set forth below.
The "yield" of the Fund refers to the income generated by an investment
in the Fund over a seven-day period (which period will be stated). This income
is then "annualized". That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" is slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment.
PURCHASES AND REDEMPTIONS
A confirmation of each purchase and redemption transaction is issued
on execution of that transaction.
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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 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.
FEDERAL TAXES
Dividends of net income and net short-term capital gains, if any, are
taxable to shareholders of the Fund as ordinary income, whether such dividends
are paid in cash or reinvested in additional shares. These distributions are not
eligible for the dividends-received deduction allowed to corporate shareholders.
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. The Portfolio is also not required to pay any federal income
or excise taxes.
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 by the
Portfolio for less than three months; and (c) the holdings of the Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of the Fund's assets be represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Fund's assets be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other investment companies). In
addition, in order not to be subject to federal income tax, at least 90% of the
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's shareholders.
To maintain a constant $1.00 per share net asset value, the Trustees
may direct that the number of outstanding shares be reduced pro rata. If this
adjustment is made, it will reflect the lower market value of portfolio
securities and not realized losses.
Other Taxes. The treatment of the Fund and its shareholders in those
states which have income tax laws might differ from treatment under the federal
income tax laws. Distributions to shareholders may be subject to additional
state and local taxes. Shareholders are urged to consult their tax advisors
regarding any state or local taxes.
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 Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company organized on
June 7, 1983, as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts. Its offices are located at 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 the Trust's Trustees, principal underwriters and auditors for the
Trust. Upon liquidation or dissolution of the Trust, the shareholders of each
series are entitled to share pro rata in the net assets of their respective
series available for distribution to shareholders. The Trust reserves the right
to create and issue additional series of shares. The Trust currently consists of
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 of the Trust. The Trust is not required and has
no current intention to hold meetings of shareholders annually but the Trust
will hold special meetings of shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees of the Trust by a
specified number of shareholders) the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees of the Trust. Shareholders also have
the right to remove one or more Trustees of the Trust without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of its outstanding shares. Shares
have no preference, pre-emptive, conversion or similar rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. The Trust
may enter into a merger or consolidation, or sell all or substantially all of
its assets, if approved by the vote of the holders of two-thirds of its
outstanding shares, except that if the Trustees of the Trust recommend such sale
of assets, the approval by vote of the holders of a majority of the Trust's
outstanding shares will be sufficient. The Trust may also be terminated upon
liquidation and distribution of its assets, if approved by the vote of the
holders of two-thirds of its outstanding shares.
Stock certificates are not issued by the Trust.
The 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 Trustees of the Trust themselves have the power to alter the number
and the terms of office of the Trustees of the Trust, to lengthen their own
terms, or to make their terms of unlimited duration subject to certain removal
procedures, and to appoint their own successors; provided that at least
two-thirds of the Trustees of the Trust have been elected by the shareholders.
The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Fund, each Eligible Institution or Financial Intermediary
may vote any shares as to which that Eligible Institution or Financial
Intermediary 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 or Financial Intermediary is the
agent of record. Any shares so voted by an Eligible Institution or Financial
Intermediary are deemed represented at the meeting for purposes of quorum
requirements.
The Portfolio, in which all of the assets of the Fund are invested, is
organized as a trust under the law of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) are each liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the investment of all of
the assets of the Fund in the Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange is open
for regular trading and New York banks are open for business. At 4:00 P.M., New
York time on each such business day, the value of each investor's beneficial
interest in the Portfolio is determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio is then recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 P.M., New York time on such day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's investment in
the Portfolio effected on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 P.M., New York time on
such day plus or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in the Portfolio by all investors
in the Portfolio. The percentage so determined is then applied to determine the
value of the investor's interest in the Portfolio as of 4:00 P.M., New York time
on the following business day of the Portfolio.
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.
Whenever the Trust is requested to vote on a matter pertaining to the
Portfolio, the Trust will vote its shares without a meeting of shareholders of
the Fund if the proposal is one, if which made with respect to the Fund, would
not require the vote of shareholders of the Fund as long as such action is
permissible under applicable statutory and regulatory requirements. For all
other matters requiring a vote, the Trust will hold a meeting of shareholders of
the Fund and, at the meeting of investors in the Portfolio, the Trust will cast
all of its votes in the same proportion as the votes of the Fund's shareholders
even if all Fund shareholders did not vote. Even if the Trust votes all its
shares at the Portfolio meeting, other investors with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio.
The Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trust's Trustees individually but only upon the
property of the Trust and that the Trust's Trustees are not liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trust's Trustee against any liability to which he would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his office.
Interests in the Portfolio have no preference, preemptive, conversion
or similar rights, and are fully paid and non-assessable. The Portfolio is not
required to hold annual meetings of investors, but will hold special meetings of
investors when, in the judgment of its trustees, it is necessary or desirable to
submit matters for an investor vote. Each investor is entitled to a vote in
proportion to the share of its investment in the Portfolio.
PORTFOLIO BROKERAGE TRANSACTIONS
Brown Brothers Harriman & Co., as Investment Adviser for the Portfolio,
places orders for all purchases and sales of portfolio securities, enters into
repurchase and reverse repurchase agreements and executes loans of portfolio
securities. Fixed-income securities are generally traded at a net price with
dealers acting as principal for their own account without a stated commission.
The price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. From time to time certificates of deposit may
be purchased through intermediaries who may charge a commission for their
services.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Portfolio. In some instances, this procedure might adversely affect the
Portfolio.
Although the Portfolio generally holds investments until maturity and
does not seek profits through short-term trading, it may dispose of any
portfolio security prior to its maturity if it believes such disposition
advisable.
Money market securities are generally traded on a net basis and do not
normally involve either brokerage commissions or transfer taxes. Where possible
transactions on behalf of the Portfolio are entered directly with the issuer or
from an underwriter or market maker for the securities involved. Purchases from
underwriters of securities may include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
may include a spread between the bid and asked price. The policy of the
Portfolio regarding purchases and sales of securities is that primary
consideration will be given to obtaining the most favorable prices and efficient
executions of transactions. In seeking to implement the Portfolio's policies,
the Investment Adviser effects transactions with those brokers and dealers who
the Investment Adviser believes provide the most favorable prices and are
capable of providing efficient executions. If the Investment Adviser believes
such prices and executions are obtainable from more than one broker or dealer,
it may give consideration to placing portfolio transactions with those brokers
and dealers who also furnish research and other services to the Portfolio and or
the Investment Adviser. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of securities
for purchase or sale; statistical or factual information or opinions pertaining
to investment; and appraisals or evaluations of portfolio securities.
BOND, NOTE AND COMMERCIAL PAPER RATINGS
There is no additional percentage limitation with respect to investments
in negotiable certificates of deposit, fixed time deposits and bankers'
acceptances of U.S. branches of U.S. banks and U.S. branches of non-U.S. banks
that are subject to the same regulation as U.S. banks. Since the Portfolio may
contain U.S. dollar-denominated certificates of deposit, fixed time deposits and
bankers' acceptances that are issued by non-U.S. banks and their non-U.S.
branches, the Portfolio may be subject to additional investment risks with
respect to those securities that are different in some respects from obligations
of U.S. issuers, such as currency exchange control regulations, the possibility
of expropriation, seizure or nationalization of non-U.S. deposits, less
liquidity and more volatility in non-U.S. securities markets and the impact of
political, social or diplomatic developments or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on securities held by the Portfolio. If it should become necessary,
greater difficulties might be encountered in invoking legal processes abroad
than would be the case in the United States. Issuers of non-U.S. bank
obligations may be subject to less stringent or different regulations than are
U.S. bank issuers, there may be less publicly available information about a
non-U.S. issuer, and non-U.S. issuers generally are not subject to uniform
accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. Income earned or received by the
Portfolio from sources within countries other than the United States may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may reduce
or eliminate such taxes. All such taxes paid by the Portfolio would reduce its
net income available for distribution to investors (i.e., the Fund and other
investors in the Portfolio); however, the Investment Adviser would consider
available yields, net of any required taxes, in selecting securities of non-U.S.
issuers. While early withdrawals are not contemplated, fixed time deposits are
not readily marketable and may be subject to early withdrawal penalties, which
may vary. Assets of the Portfolio are not invested in obligations of Brown
Brothers Harriman & Co., or the Distributor, or in the obligations of the
affiliates of any such organization. Assets of the Portfolio are also not
invested in fixed time deposits with a maturity of over seven calendar days, or
in fixed time deposits with a maturity of from two business days to seven
calendar days if more than 10% of the Portfolio's net assets would be invested
in such deposits.
Bond Ratings
Moody's Investors Service, Inc. ("Moody's")
Aaa - Bonds rated Aaa are judged to be of the "best quality". Issues
rated Aaa may be further modified by the numbers 1, 2 or 3 (3 being the highest)
to show relative strength within the rating category.
Standard & Poor's Corporation ("S&P")
AAA - The AAA rating is the highest rating assigned to debt obligations
and indicates an extremely strong capacity to pay principal and interest.
Note and Variable Rate Investment Ratings
Moody's - MIG-1. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow of funds for
their services or from established and broad-based access to the market for
refinancing or both.
S&P - SP-1. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+).
Corporate Commercial Paper Ratings
Moody's - Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Prime-1 indicates highest quality repayment
capacity of rated issue.
S&P - Commercial Paper ratings are a current assessment of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Issues rated A-1 have the greatest capacity for timely payment.
Issues rated "A-1+" are those with an "overwhelming degree of credit
protection."
Other Considerations
Among the factors considered by Moody's in assigning bond, note and
commercial paper ratings are the following: (i) evaluation of the management of
the issuer; (ii) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(iii) evaluation of the issuer's products in relation to competition and
customer acceptance; (iv) liquidity; (v) amount and quality of long-term debt;
(vi) trend of earnings over a period of 10 years; (vii) financial strength of a
parent company and the relationships which exist with the issuer; and (viii)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
Among the factors considered by S&P in assigning bond, note and
commercial paper ratings are the following: (i) trend of earnings and cash flow
with allowances made for unusual circumstances, (ii) stability of the issuer's
industry, (iii) the issuer's relative strength and position within the industry
and (iv) the reliability and quality of management.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" (as defined in the 1940
Act) currently means the vote of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
Other mutual funds or institutional investors may invest in the Portfolio
on the same terms and conditions as the Fund. However, these other investors may
have different operating expenses which may generate different aggregate
performance results. Information concerning other investors in the Portfolio is
available from Brown Brothers Harriman & Co.
The Trust may withdraw the Fund's investment in the Portfolio as a result
of certain changes in the Portfolio's investment objective, policies or
restrictions or if the Board of Trustees of the Trust determines that it is
otherwise in the best interests of the Fund to do so. Upon any such withdrawal,
the Board of Trustees of the Trust would consider what action might be taken,
including the investment of all of the assets of the Fund in another pooled
investment entity or the retaining of an investment adviser to manage the Fund's
assets in accordance with the investment policies described above with respect
to the Portfolio. In the event the Trustees of the Trust were unable to
accomplish either, the Trustees will determine the best course of action.
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. or by calling 1-202-942-8090. Additionally, this information is
available on the EDGAR database at the SEC's Internet site at
http://www.sec.gov. A copy may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected].
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, 2000 has been filed with
the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder and is hereby incorporated herein by reference. A
copy of the Annual Report will be provided without charge to each person
receiving this Statement of Additional Information.
