<PAGE>
As filed with the Securities and Exchange Commission on December 8, 1997
Registration Nos. 33-48605 and 811-06139
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 12
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 32
THE 59 WALL STREET FUND, INC.
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Philip W. Coolidge
6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[x] on (January 7, 1997) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
International Equity Portfolio and Emerging Markets Portfolio have also
executed this Registration Statement.
Registrant has registered an indefinite number of its shares of common
stock pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant will file the Notice required by Rule 24f-2 on or about December 31,
1997, for Registrant's fiscal year ended October 31, 1997.
===============================================================================
<PAGE>
EXPLANATORY NOTE
This Amendment (the "Amendment") to the Registrant's Registration
Statement is being filed with respect to The 59 Wall Street International Equity
Fund and The 59 Wall Street Emerging Markets Fund (the "Funds"), each a series
of shares of the Registrant, pursuant to the Registrant's undertaking to file a
post-effective amendment to the registration statement, using financials which
need not be certified, within four to six months following the date of the first
public investor in each of the Funds.
Three other series of shares of the Registrant, The 59 Wall Street
Small Company Fund, The 59 Wall Street European Equity Fund and The 59 Wall
Street Pacific Basin Equity Fund, are offered by the combined Prospectus that
is included in Part A of Amendment No. 27 to the Registrant's Registration
Statement.
Two other series of shares of the Registrant, The 59 Wall Street U.S.
Equity Fund and The 59 Wall Street Inflation-Indexed Securities Fund are
offered by the Prospectus that is included in Part A of Amendment No. 28 to the
Registrant's Registration Statement.
One other series of shares of the Registrant, The 59 Wall Street Mid-
Cap Fund is offered by the Prospectus that is included in Part A of Amendment
No. 31 to the Registrant's Registration Statement.
This Amendment does not relate to, amend or otherwise affect the
above-referenced Prospectuses, which are incorporated herein by reference.
<PAGE>
[LOGO]
International Equity Fund
Emerging Markets Fund
PROSPECTUS
January [] , 1998
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street International Equity Fund
The 59 Wall Street Emerging Markets Fund
6 St. James Avenue, Boston, Massachusetts 02116
================================================================================
The 59 Wall Street International Equity Fund (the "International Equity
Fund") and The 59 Wall Street Emerging Markets Fund (the "Emerging Markets
Fund") (each a "Fund" and collectively the "Funds") are separate non-diversified
portfolios of The 59 Wall Street Fund, Inc. Shares of each Fund are offered by
this Prospectus.
The International Equity Fund is designed to enable investors to
participate in the opportunities available in equity markets outside the United
States and Canada. The Emerging Markets Fund is designed to enable investors to
participate in the opportunities available in emerging markets. The investment
objective of each Fund is to provide investors with long-term maximization of
total return, primarily through capital appreciation. There can be no assurance
that a Fund's investment objective will be achieved.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government. Shares of the Funds are not deposits or obligations of, or
guaranteed by, Brown Brothers Harriman & Co. or any other bank, and the shares
are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other federal, state or other governmental agency.
The Corporation seeks to achieve the investment objective of each Fund by
investing all of each Fund's assets in a corresponding non-diversified open-end
investment company having the same investment objective as each Fund. The
Corporation invests all of the assets of the Emerging Markets Fund in the
Emerging Markets Portfolio and all of the assets of the International Equity
Fund in the International Equity Portfolio.
Brown Brothers Harriman & Co. is the investment adviser to the Portfolio
and the administrator and shareholder servicing agent for each Fund. Shares of
the Funds are offered at net asset value and without a sales charge.
This Prospectus, which investors are advised to read and retain for
future reference, sets forth concisely the information about each Fund that a
prospective investor ought to know before investing. Additional information
about each Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated January [], 1998. This information is
incorporated herein by reference and is available without charge upon request
from the Funds' distributor, 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, Massachusetts 02116.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is January [], 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Table............................................................ 3
Financial Highlights..................................................... 4
Investment Objective and Policies........................................ 5
Investment Restrictions ................................................. 9
Purchase of Shares ...................................................... 10
Redemption of Shares .................................................... 10
Management of the Corporation
and the Portfolios .................................................... 11
Net Asset Value ......................................................... 16
Dividends and Distributions ............................................. 17
Taxes ................................................................... 17
Description of Shares ................................................... 18
Additional Information .................................................. 20
Appendix A .............................................................. 22
Appendix B .............................................................. 24
TERMS USED IN THIS PROSPECTUS
Corporation......................... The 59 Wall Street Fund, Inc.
Funds............................... The 59 Wall Street International
Equity Fund (the "International
Equity Fund")
The 59 Wall Street Emerging Markets
Fund (the "Emerging Markets Fund")
Portfolios.......................... International Equity Portfolio
Emerging Markets Portfolio
Investment Adviser.................. Brown Brothers Harriman & Co.
Administrator of the
Corporation...................... Brown Brothers Harriman & Co.
Administrator of the
Portfolios ...................... Brown Brothers Harriman Trust Company
(Cayman) Limited
Subadministrator of the
Corporation...................... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Subadministrator of the
Portfolios....................... Signature Financial Group (Cayman)
Limited ("SFG-Cayman")
Distributor ........................ 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act ........................... The Investment Company Act of 1940,
as amended
2
<PAGE>
EXPENSE TABLE
================================================================================
The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of each Fund, and the aggregate annual
operating expenses of each Fund and its corresponding Portfolio, as a percentage
of average net assets of that Fund, and (ii) an example illustrating the dollar
cost of such estimated expenses on a $1,000 investment in each Fund. The
Directors of the Corporation believe that the aggregate per share expenses of
each Fund and its corresponding Portfolio will be less than or approximately
equal to the expenses which the Fund would incur if the Corporation retained the
services of an investment adviser on behalf of the Fund and the assets of the
Fund were invested directly in the type of securities being held by its
corresponding Portfolio.
SHAREHOLDER TRANSACTION EXPENSES
International Emerging
Equity Fund Markets Fund
----------- ------------
Sales Load Imposed on Purchases................. None None
Sales Load Imposed on Reinvested Dividends...... None None
Deferred Sales Load............................. None None
Redemption Fee.................................. None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
International Emerging
Equity Fund Markets Fund
-------------- -------------
Investment Advisory Fee.................. 0.65% 0.90%
12b-1 Fee................................ None None
Other Expenses
Administration Fee..................... 0.16% 0.16%
Shareholder Servicing/Eligible
Institution Fee...................... 0.25 0.25
Other Expenses......................... 0.30 0.71 0.40 0.81%
---- ---- ---- ----
Total Fund Operating Expenses ........... 1.36% 1.71%
==== ====
<TABLE>
<CAPTION>
Example 1 year 3 years
------- ------ ------
<S> <C> <C>
International Equity Fund: A shareholder of the
Fund would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and
(2) redemption at the end of each time period: ...... $14 $43
--- ---
Emerging Markets Fund: A shareholder of the Fund
would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and
(2) redemption at the end of each time period:....... $17 $54
--- ---
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than each Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of each Fund
bear directly or indirectly.
For more information with respect to the expenses of each Fund and its
corresponding Portfolio, see "Management of the Corporation and the Portfolios"
herein.
3
<PAGE>
FINANCIAL HIGHLIGHTS
This information should be read in conjunction with the financial
statements and notes thereto, which are included in the Statement of Additional
Information. The ratios of expenses and net investment income to average net
assets are not indicative of future ratios.
THE 59 WALL STREET EMERGING MARKETS FUND
For the period
from June 6, 1997
(commencement of
operations) to
October 31, 1997
-----------------
Net asset value, beginning of period ........................ $10.00
Income from investment operations:
Net investment loss ..................................... (0.01)
Net realized and unrealized loss ........................ (1.74)
------
Net asset value, end of period .......................... $ 8.25
======
Total return ................................................ (17.50)%(1)
Ratios/Supplemental data:
Net assets, end of period (000's omitted) ............... $6,269
Expenses as a percentage of average net assets ........ 1.71%(2),(3)
Ratio of net investment loss to average net assets ...... (0.25)%(2)
- -----------
(1) Not annualized
(2) Annualized
(3) Includes the Fund's share of Emerging Markets Portfolio expenses.
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
For the period
from June 6, 1997
(commencement of
operations) to
October 31, 1997
----------------
Net asset value, beginning of period ..................... $10.00
Income from investment operations:
Net investment loss .................................. 0.00(1)
Net realized and unrealized loss ..................... (0.58)
------
Net asset value, end of period ....................... $ 9.42
======
Total return ............................................. (5.80)%(2)
Ratios/Supplemental data:
Net assets, end of period (000's omitted) ............ $7,040
Expenses as a percentage of average net assets ...... 1.36%(3,4)
Ratio of net investment loss to average net assets ... (0.06)%(3)
- ----------
(1) Less than $0.01
(2) Not annualized
(3) Annualized
(4) Includes the Fund's share of International Equity Portfolio expenses.
Further information about performance of the Funds is contained in the
Funds' annual report to shareholders which may be obtained without charge.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The investment objective of each Fund and its corresponding Portfolio is to
provide investors with long-term maximization of total return, primarily through
capital appreciation.
The investment objective of each Fund and its corresponding Portfolio is a
fundamental policy and may be changed only with the approval of the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund or the Portfolio, as the case may be. (See "Additional Information" in
this Prospectus.) However, the investment policies of each Fund as described
below, will correspond directly to those of its corresponding Portfolio and are
not fundamental and may be changed without such approval.
International Equity Fund
The assets of the International Equity Portfolio under normal circumstances
are fully invested in equity securities of companies based outside the United
States and Canada in the developed markets of the world. These markets include
Japan, United Kingdom, Germany, France, Hong Kong, Netherlands, Switzerland,
Malaysia, Australia, Singapore, Italy, Sweden, Spain, Belgium, Denmark, Finland,
Norway, New Zealand, Austria and Ireland. The Portfolio may also invest in the
less developed markets although no more than 10% of the International Equity
Portfolio's assets will be invested in these markets. In addition, no more than
5% of the International Equity Portfolio will be invested in any one less
developed market. Appendix A provides a comparison of Market Capitalization,
Gross Domestic Product (GDP) and Population of the developed countries in which
the International Equity Portfolio invests.
Although the assets of the International Equity Portfolio are expected to
be invested primarily in common stocks, other securities with equity
characteristics may be purchased, including securities convertible into common
stock, rights and warrants. These equity securities may be purchased directly or
in the form of American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") or other similar securities representing securities of foreign-based
companies. Although the International Equity Portfolio invests primarily in
equity securities which are traded on foreign or domestic securities exchanges,
equity securities which are traded in foreign or domestic over-the-counter
markets may be purchased for the International Equity Portfolio. (See
"Investment Restrictions".) The Portfolio may invest in securities of
appropriate investment companies in order to obtain more favorable investment
terms for the Portfolio or to obtain participation in markets or market sectors.
The Investment Adviser allocates investment among various countries based
upon the economic environment, liquidity conditions, valuation levels, expected
earnings growth, government policies and political stability. In response to
changes or anticipated changes in these criteria, a particular country's
representation in the International Equity Portfolio is increased, decreased or
eliminated. As a result, the International Equity Portfolio's assets are
allocated among countries in a manner which does not reflect the relative size
or valuation of the country's capital market or a country's relative gross
domestic product or population.
In constructing the portfolio of securities of the International Equity
Portfolio, emphasis is placed on the equity securities of larger companies with
strong longer term fundamentals such as leading industry position, effective
management, competitive products and services, high or improving return on
investment and a sound financial structure. Selection of individual equities is
the product of a disciplined process which systematically evaluates growth
expectations relative to price levels.
Emerging Markets Fund
The assets of the Emerging Markets Portfolio under normal circumstances are
fully invested in equity securities of issuers domiciled in or with substantial
operations in emerging markets. For purposes of this prospectus, "emerging
markets" are defined as countries (i) which are included in the MSCI Emerging
Markets Index or the IFC Emerging
5
<PAGE>
Markets Investable Index (ii) which have a gross national product per capita of
$2,000 or less at the time of the Portfolio's investment, or (iii) which are
generally considered to be developing or emerging countries by the United
Nations development programme or by the World Bank and the International Finance
Corporation. These emerging markets currently include, but are not limited to,
markets such as China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan,
Venezuela, Czech Republic, Greece, Hungary, Israel, Jordan, Poland, Portugal,
Russia, South Africa and Turkey. Appendix A provides a comparison of Market
Capitalization, GDP and Population of the emerging countries in which the
Emerging Markets Portfolio may invest.
Emerging markets now comprise roughly 10% of the world's stock market
capitalization. Many emerging markets are expected to continue to experience
faster economic growth rates than those found in more developed markets such as
the U.S., Japan and Western Europe. While the Emerging Markets Fund offers the
opportunity for substantial long term investment return, it also involves above
average investment risk and volatility of investment return.
Although the assets of the Emerging Markets Portfolio are expected to be
invested primarily in common stocks, other securities with equity
characteristics may be purchased, including securities convertible into common
stock, rights and warrants. These equity securities may be purchased directly or
in the form of American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs") or other similar securities representing securities of foreign-based
companies. Although the Emerging Markets Portfolio invests primarily in equity
securities which are traded on foreign or domestic securities exchanges, equity
securities which are traded in foreign or domestic over-the-counter markets may
be purchased for Emerging Markets Portfolio. (See "Investment Restrictions".)
The Emerging Markets Portfolio may invest in securities of appropriate
investment companies in order to obtain participation in markets which restrict
foreign investment or to obtain more favorable investment terms for the Emerging
Markets Portfolio. The Emerging Markets Portfolio may invest in emerging market
debt securities if the Investment Adviser determines that the total return of
debt securities may equal or exceed the capital appreciation of equity
securities. Such debt instruments may take the form of bonds, notes, bills,
commercial paper and bank deposits which usually have no rating or a low rating
and which are not considered to be superior in investment quality to equity
securities of the same issuers.
For temporary defensive purposes, the Emerging Markets Portfolio may hold,
without limit, debt obligations of the U.S. government and U.S. dollar deposits
held at banks which are rated within the three highest rating categories for
debt obligations by at least two (unless only rated by one) nationally
recognized statistical rating organizations or, if unrated, are of comparable
quality as determined by or under the direction of the Board of Trustees of the
Emerging Markets Portfolio. It is impossible to predict for how long such a
defensive strategy will be utilized.
The Investment Adviser, during normal market conditions, intends to broadly
diversify the Emerging Markets Portfolio among emerging markets with no more
than 15% of the assets of the Emerging Markets Portfolio in any single market.
The Investment Adviser allocates investment among various countries based upon
the economic environment, liquidity conditions, valuation levels, expected
earnings growth, government policies and political stability. As a result, the
Emerging Markets Portfolio's assets are allocated among countries in a manner
which does not reflect the relative size or valuation of the country's capital
market or a country's relative gross domestic product or population.
In constructing the portfolio of securities of the Emerging Markets
Portfolio, emphasis is placed on the equity securities of larger companies with
strong longer term fundamentals such as leading industry position, effective
management, competitive products and services, high or improving return on
investment and a sound financial structure. Selection of individual equities is
the product of a disciplined process which systematically evaluates growth
expectations relative to price levels.
6
<PAGE>
Hedging Strategies
Subject to applicable laws and regulations and solely as a hedge against
changes in the market value of portfolio securities or securities intended to be
purchased, futures contracts on stock indexes may be entered into for each
Portfolio. (See Appendix B on page 24 for more detail.)
For the same purpose, put and call options on stocks, stock indexes and
currencies may also be purchased for each Portfolio, although the current
intention is not to do so in such a manner that each put and call option type
would put more than 5% of a Portfolio's net assets at risk. Over-the-counter
options ("OTC Options") purchased are treated as not readily marketable. (See
"Investment Restrictions".)
The Investment Adviser on behalf of each Portfolio may enter into forward
foreign exchange contracts in order to protect the dollar value of all
investments in securities denominated in foreign currencies. The precise
matching of the forward contract amounts and the value of the securities
involved is not always possible because the future value of such securities in
foreign currencies changes as a consequence of market movements in the value of
such securities between the date the forward contract is entered into and the
date it matures.
Risk Factors
Foreign Investments. Investing in equity securities of foreign-based
companies involves risks not typically associated with investing in equity
securities of companies organized and operated in the United States.
The value of the investments of each Portfolio may be adversely affected by
changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations.
Changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of
portfolio securities and could favorably or unfavorably affect a Fund's
operations. The economies of individual foreign nations differ from the U.S.
economy, whether favorably or unfavorably, in areas such as growth of GDP, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. It may be more difficult to obtain and enforce a judgment
against a foreign company. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
on foreign investments as compared to dividends and interest paid to each of the
Funds by domestic companies.
In general, less information is publicly available with respect to
foreign-based companies than is available with respect to U.S. companies. Most
foreign-based companies are also not subject to the uniform accounting and
financial reporting requirements applicable to companies based in the United
States.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the investments of each
Portfolio are less liquid and their prices are more volatile than comparable
investments in securities of U.S. companies. Moreover, the settlement periods
for foreign securities, which are often longer than those for securities of U.S.
companies, may affect portfolio liquidity. In buying and selling securities on
foreign exchanges, fixed commissions are often paid that are generally higher
than the negotiated commissions charged in the United States. In addition, there
is generally less government supervision and regulation of securities exchanges,
brokers and companies in foreign countries than in the United States.
The foreign investments made for each Portfolio are made in compliance with
the currency regulations and tax laws of the United States and foreign
governments. There may also be foreign government regulations and laws which
restrict the amounts and types of foreign investments.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and each Portfolio holds various foreign
7
<PAGE>
currencies from time to time, the value of the net assets of each Portfolio as
measured in U.S. dollars is affected favorably or unfavorably by changes in
exchange rates. Each Portfolio also incurs costs in connection with conversion
between various currencies.
Emerging Markets. Investments in securities of issuers in emerging markets
countries may involve a high degree of risk and many may be considered
speculative. Investments in developing and emerging markets may be subject to
potentially greater risks than those of other foreign issuers. These risks
include: (i) greater risks of expropriation, confiscatory taxation,
nationalization, and less social, political and economic stability; (ii) the
small current size of the markets for securities of emerging market issuers and
the currently low or non-existent volume of trading, which result in less
liquidity and in greater price volatility; (iii) certain national policies which
may restrict the Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; and
(iv) the absence of developed legal structures governing private or foreign
investments and private property.
Portfolio Brokerage
Each Portfolio is managed actively in pursuit of its investment
objective. Securities are not traded for short-term profits but, when
circumstances warrant, securities are sold without regard to the length of time
held. A 100% annual turnover rate would occur, for example, if all portfolio
securities (excluding short-term obligations) were replaced once in a period of
one year. For the period from April 1, 1995 (commencement of operations) to
October 31, 1995 and the fiscal year ended October 31, 1996, the portfolio
turnover rate of the International Equity Portfolio was 23% and 36%,
respectively. For the period June 6, 1997 (commencement of operations) to
October 31, 1997 the portfolio turnover rate of the Emerging Markets Portfolio
was 60%. The amount of brokerage commissions and taxes on realized capital
gains to be borne by the shareholders of the Funds tends to increase as the
level of portfolio activity increases.
In effecting securities transactions the Investment Adviser seeks to obtain
the best price and execution of orders. In selecting a broker, the Investment
Adviser considers a number of factors including: the broker's ability to execute
orders without disturbing the market price; the broker's reliability for prompt,
accurate confirmations and on-time delivery of securities; the broker's
financial condition and responsibility; the research and other information
provided by the broker; and the commissions charged. Accordingly, the
commissions charged by any such broker may be greater than the amount another
firm might charge if the Investment Adviser determines in good faith that the
amount of such commissions is reasonable in relation to the value of the
brokerage services and research information provided by such broker.
The Investment Adviser may direct a portion of each Portfolio's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from each Portfolio to pay other unaffiliated service
providers on behalf of the Portfolio for services provided for which the
Portfolio would otherwise be obligated to pay. Such commissions paid by each
Portfolio are at the same rate paid to other brokers for effecting similar
transactions in listed equity securities.
On those occasions when Brown Brothers Harriman & Co. deems the purchase or
sale of a security to be in the best interests of a Portfolio as well as other
customers, Brown Brothers Harriman & Co., to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including each
Portfolio. In some instances, this procedure might adversely affect a Portfolio.
Other Investment Techniques
Short-Term Instruments. The assets of each Portfolio may be invested in
non-U.S. dollar denominated and U.S. dollar denominated short-
8
<PAGE>
term instruments, including U.S. dollar denominated repurchase agreements. Cash
is held for each Portfolio in demand deposit accounts with the Portfolio's
custodian bank.
Government Securities. The assets of each Portfolio may be invested in
securities issued by the U.S. Government or sovereign foreign governments, their
agencies or instrumentalities. These securities include notes and bonds, zero
coupon bonds and stripped principal and interest securities.
Restricted Securities. Securities that have legal or contractual
restrictions on their resale may be acquired for a Portfolio. The price paid for
these securities, or received upon resale, may be lower than the price paid or
received for similar securities with a more liquid market. Accordingly, the
valuation of these securities reflects any limitation on their liquidity. (See
"Investment Restrictions".)
Loans of Portfolio Securities. Loans of portfolio securities up to 30% of
the total value of each Portfolio are permitted. These loans must be secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned plus accrued income. By lending
securities, the Portfolio's income can be increased by its continuing to receive
income on the loaned securities as well as by the opportunity to receive
interest on the collateral. Any appreciation or depreciation in the market price
of the borrowed securities which occurs during the term of the loan inures to
that Portfolio and its investors.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for a 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,
if any, are fixed on the transaction date. The securities so purchased are
subject to market fluctuation and no income accrues to a Portfolio until
delivery and payment take place. At the time the commitment to purchase
securities 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 that Portfolio's net asset value. Each Portfolio maintains with the
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. At the time of its acquisition, a
when-issued or delayed delivery security may be valued at less than the purchase
price. Commitments for such when-issued or delayed delivery securities are made
only when there is an intention of actually acquiring the securities. On
delivery dates for such transactions, such obligations are met from maturities
or sales of securities and/or from cash flow. If the right to acquire a
when-issued or delayed delivery security is disposed of prior to its
acquisition, a Portfolio could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-issued or
delayed delivery commitments for a Portfolio may not be entered into if such
commitments exceed in the aggregate 15% of the market value of its total assets,
less liabilities other than the obligations created by when-issued or delayed
delivery commitments.
Foreign Currency Exchange Transactions. Because securities denominated in
currencies other than the U.S. dollar are bought and sold for each Portfolio,
and interest, dividends and sale proceeds are received by each Portfolio in
currencies other than the U.S. dollar, foreign currency exchange transactions
from time to time are entered into for each Portfolio to convert to and from
different foreign currencies and to convert foreign currencies to and from the
U.S. dollar. Foreign currency exchange transactions are agreements to exchange
currencies at a specific rate either for settlement two days thereafter (i.e.,
spot market or spot contracts) or for settlement on a future date (i.e., forward
contracts).
Investment Company Securities. Subject to applicable statutory and
regulatory limitations, the assets of each Portfolio may be invested in shares
of other investment companies. Under the 1940 Act, the assets of each Portfolio
may be invested in shares of other investment companies in connection with a
merger, consolidation, acquisition or reorganization or if immediately after
such investment (i) 10% or less of the market value of the Portfolio's total
assets would be so invested, (ii) 5% or less of the market value of the
Portfolio's total assets would
9
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be invested in the shares of any one such company, and (iii) 3% or less of the
total outstanding voting stock of any other investment company would be owned by
the Portfolio. As a shareholder of another investment company, the Portfolio
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that a Portfolio bears directly
in connection with its own operations.
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Funds includes a listing of
the specific investment restrictions which govern the investment policies of
each Fund and each Portfolio. Certain of these investment restrictions are
deemed fundamental policies and may be changed only with the approval of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the Fund or the Portfolio, as the case may be (see "Additional
Information" in this Prospectus), including a restriction that, excluding the
investment of all of a Fund's assets in an open-end investment company with
substantially the same investment objective, policies and restrictions as the
Fund, not more than 10% of the net assets of a Fund or its corresponding
Portfolio, as the case may be, may be invested in securities that are subject to
legal or contractual restrictions on resale.
Since the investment restrictions of each Fund correspond directly to those
of its Portfolio, the following is a discussion of the various investment
restrictions of each Portfolio.
As a non-fundamental policy, money is not borrowed by a 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 a Portfolio at any time at
which the amount of its borrowings exceed 5% of its assets.
As a non-fundamental policy of the International Equity Portfolio, at least
65% of the value of the total assets of the International Equity Portfolio is
invested in equity securities of companies based in countries in which it
invests. As a non-fundamental policy of the Emerging Markets Portfolio, at least
65% of the value of the total assets of the Emerging Markets Portfolio is
invested in equity securities based in emerging markets. For these purposes,
equity securities are defined as common stock, securities convertible into
common stock, rights and warrants, and include securities purchased directly and
in the form of American Depository Receipts, Global Depository Receipts or other
similar securities representing common stock of foreign-based companies.
In accordance with applicable regulations, a Portfolio does not purchase
any restricted security, OTC option, repurchase agreement maturing in more than
seven days, security of a foreign issuer which is not listed on a recognized
domestic or foreign securities exchange, security of a company which, including
predecessors, has a record of less than three years of operations, or other
security that is not readily marketable, if after such purchase more than 10% of
the Portfolio's net assets would be represented by such investments.
Each Portfolio is classified as "non-diversified" under the 1940 Act, which
means that the Portfolio is not limited by the 1940 Act with respect to the
portion of its assets which may be invested in securities of a single company
(although certain diversification requirements are imposed by the Internal
Revenue Code of 1986, as amended). The possible assumption of large positions in
the securities of a small number of companies may cause the performance of a
Portfolio to fluctuate to a greater extent than that of a diversified investment
company as a result of changes in the financial condition or in the market's
assessment of the companies.
10
<PAGE>
PURCHASE OF SHARES
================================================================================
Shares of the Funds are offered on a continuous basis at their net asset
value without a sales charge. The Corporation reserves the right to determine
the purchase orders for Fund shares that it will accept. Shares of the Funds may
be purchased on any day the New York Stock Exchange is open for regular trading
if the Corporation receives the purchase order and acceptable payment for such
order prior to 4:00 P.M., New York time. Purchases of Fund shares are then
executed at the net asset value per share next determined on that same day.
Shares are entitled to dividends declared, if any, starting as of the first
business day following the day a purchase order is executed on the books of the
Corporation.
An investor who has an account with an Eligible Institution (see page 15)
or a Financial Intermediary (see page 15) may place purchase orders for Fund
shares with the Corporation through that Eligible Institution or Financial
Intermediary which holds such shares in its name on behalf of that customer
pursuant to arrangements made between that customer and that Eligible
Institution or Financial Intermediary. Each Eligible Institution and each
Financial Intermediary may establish and amend from time to time a minimum
initial and a minimum subsequent purchase requirement for its customers. Each
Eligible Institution or Financial Intermediary arranges payment for Fund shares
on behalf of its customers. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the purchase of Fund shares.
An investor who does not have an account with an Eligible Institution or a
Financial Intermediary must place purchase orders for Fund shares with the
Corporation through the Funds' Shareholder Servicing Agent. Such an investor has
such shares held directly in the investor's name on the books of the Corporation
and is responsible for arranging for the payment of the purchase price of Fund
shares. All purchase orders for initial and subsequent purchases are executed at
the net asset value per share next determined after the Corporation's custodian,
State Street Bank and Trust Company, has received payment in the form of a
cashier's check drawn on a U.S. bank, a check certified by a U.S. bank or a wire
transfer. Brown Brothers Harriman & Co., as the Funds' Shareholder Servicing
Agent, has established a minimum initial purchase requirement for each Fund of
$100,000 and a minimum subsequent purchase requirement for each Fund of $25,000.
These minimum purchase requirements may be amended from time to time.
Inquiries regarding the manner in which purchases of Fund shares may be
effected and other matters pertaining to the Funds should be directed to Brown
Brothers Harriman & Co., an Eligible Institution and the Funds' Shareholder
Servicing Agent. (See back cover for address and phone number.)
REDEMPTION OF SHARES
================================================================================
A redemption request must be received by the Corporation prior to 4:00
P.M., New York time on any day the New York Stock Exchange is open for regular
trading. Such a redemption is executed at the net asset value per share next
determined on that same day. Shares continue to earn dividends declared, if any,
through the business day a redemption request is executed on the books of the
Corporation.
Shares held by an Eligible Institution or a Financial Intermediary on
behalf of a shareholder must be redeemed through that Eligible Institution or
Financial Intermediary pursuant to arrangements made between that shareholder
and Eligible Institution or Financial Intermediary. Proceeds of a redemption are
paid to that shareholder's account at that Eligible Institution or Financial
Intermediary on a date established by the Eligible Institution or Financial
Intermediary. A transaction fee may be charged by an Eligible Institution or
Financial Intermediary on the redemption of Fund shares.
Shares held directly in the name of a shareholder on the books of the
Corporation may be redeemed by submitting a redemption request in good order to
the Corporation through the Funds' Shareholder Servicing
11
<PAGE>
Agent. (See back cover for address and phone number.) Proceeds resulting from
such redemption are paid by the Corporation directly to the shareholder in
"available" funds generally on the next business day after the redemption
request is executed, and in any event within seven days.
Redemptions By the Corporation
The Funds' Shareholder Servicing Agent (see page 14), each Eligible
Institution and each Financial Intermediary (see page 15) may establish and
amend from time to time for their respective customers a minimum account size.
If the value of a shareholder's holdings in a Fund falls below that amount
because of a redemption of shares, the shareholder's remaining shares may be
redeemed. If such remaining shares are to be redeemed, the shareholder is so
notified and is allowed 60 days to make an additional investment to enable the
shareholder to meet the minimum requirement before the redemption is processed.
Brown Brothers Harriman & Co., as the Funds' Shareholder Servicing Agent, has
established a minimum account size of $25,000.
Further Redemption Information
In the event a shareholder redeems all shares held in a Fund, future
purchases of shares of that Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares. Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
An investor should be aware that redemptions from a Fund may not be
processed if a completed account application with a certified taxpayer
identification number has not been received.
The Corporation has reserved the right to pay the amount of a redemption
from a Fund, either totally or partially, by a distribution in kind of
securities (instead of cash) from that Fund. (See "Net Asset Value; Redemption
in Kind" in the Statement of Additional Information.)
A shareholder's right to receive payment with respect to any redemption may
be suspended or the payment of the redemption proceeds postponed for up to seven
days and for such other periods as the 1940 Act may permit. (See "Additional
Information" in the Statement of Additional Information.)
MANAGEMENT OF THE CORPORATION AND THE PORTFOLIOS
================================================================================
Directors, Trustees and Officers
The Corporation's Directors, in addition to supervising the actions of the
Administrator of the Corporation and Distributor, as set forth below, decide
upon matters of general policy with respect to the Corporation. The Portfolios'
Trustees, in addition to supervising the actions of the Portfolios' Investment
Adviser and Administrator, as set forth below, decide upon matters of general
policy with respect to each Portfolio. The Corporation's Directors are not the
same individuals as the Portfolios' Trustees.
Because of the services rendered to each Portfolio by the Investment
Adviser and to the Corporation and the Portfolios by their respective
Administrators, the Corporation and the Portfolios require no employees, and
their respective officers, other than the Chairmen, receive no compensation from
the Funds or the Portfolios. (See "Directors, Trustees and Officers" in the
Statement of Additional Information.)
The Directors of the Corporation are:
J.V. Shields, Jr.
Chairman and Chief Executive Officer of
Shields & Company
Eugene P. Beard
Vice Chairman-Finance and Operations of
The Interpublic Group of Companies
David P. Feldman
Retired, Chairman and Chief Executive Officer-AT&T
Investment Management Corporation
Alan G. Lowy
Private Investor
12
<PAGE>
Arthur D. Miltenberger
Vice President and Chief Financial Officer of
Richard K. Mellon and Sons
The Trustees of each Portfolio are:
H.B. Alvord
Retired, Former Treasurer and Tax Collector
of Los Angeles County
Richard L. Carpenter
Retired, Director of Internal Investments of
the Public School Employees' Retirement System
Clifford A. Clark
Retired, Former Senior Manager of Brown
Brothers Harriman & Co.
David M. Seitzman
Retired, Physician with Seitzman, Shuman,
Kwart and Phillips
Investment Adviser
The Investment Adviser to each Portfolio is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to each Portfolio. Subject to the general supervision of the
Portfolios' Trustees, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions, places the purchase and sale orders for portfolio
transactions, and generally manages the investments of each Portfolio. Brown
Brothers Harriman & Co. provides a broad range of investment management services
for customers in the United States and abroad. At June 30, 1996, it managed
total assets of approximately $25 billion.
Each Portfolio is managed on a day-to-day basis by a team of individuals,
including Mr. John A. Nielsen, Ms. Camille M. Kelleher, Mr. A. Edward Allinson,
Mr. G. Scott Clemons, Mr. Paul J. Fraker and Mr. Ben Kottler. Mr. Nielsen holds
a B.A. from Bucknell University, a M.B.A. from Columbia University and is a
Chartered Financial Analyst. He joined Brown Brothers Harriman & Co. in 1968.
Ms. Kelleher holds a B.A. from Barnard College and a M.B.A. from Columbia
University. She joined Brown Brothers Harriman & Co. in 1984. Mr. Allinson holds
a B.A. and a M.B.A. from the University of Pennsylvania. He joined Brown
Brothers Harriman & Co. in 1991. Mr. Clemons holds a A.B. from Princeton
University. He joined Brown Brothers Harriman & Co. in 1990. Mr. Fraker holds a
B.A. from Carleton College and a M.A. from Johns Hopkins University. He joined
Brown Brothers Harriman & Co. in 1996. Mr. Kottler holds a B.A. from Durham
University. He joined Brown Brothers Harriman & Co. in 1996.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreement, Brown Brothers Harriman & Co. receives from the
International Equity Portfolio and the Emerging Markets Portfolio an annual fee,
computed daily and payable monthly, equal to 0.65% and 0.90%, respectively, of
the average daily net assets of that Portfolio. Brown Brothers Harriman & Co.
and its affiliates also receive annual administration fees from each Fund and
each Portfolio equal to 0.16% of the average daily net assets of that Fund or
that Portfolio, as the case may be. Brown Brothers Harriman & Co. also receives
an annual shareholder servicing/eligible institution fee from each Fund equal to
0.25% of the average daily net assets of that Fund represented by shares during
the period for whom Brown Brothers Harriman & Co. is the holder or agent of
record.
The investment advisory services of Brown Brothers Harriman & Co. to each
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 Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of
13
<PAGE>
December 15, 1993, the Corporation 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 Corporation upon the expiration or earlier termination of
any investment advisory agreement between a Fund or any investment company in
which a series of the Corporation invests all of its assets and Brown Brothers
Harriman & Co. Termination of the agreement would require the Corporation to
change its name and the name of each Fund to eliminate all reference to "59 Wall
Street".
Pursuant to license agreements between Brown Brothers Harriman & Co. and
each of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
"Licensee"), dated June 22, 1993 and June 8, 1990, respectively, each Licensee
may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co.
does not terminate the respective license agreement, which would require the
Licensee to change its name to eliminate all reference to "59 Wall Street".
Administrators
Brown Brothers Harriman & Co. acts as Administrator of the Corporation and
Brown Brothers Harriman Trust Company (Cayman) Limited acts as Administrator of
each Portfolio. (See "Administrators" in the Statement of Additional
Information.) Brown Brothers Harriman Trust Company (Cayman) Limited is a
wholly-owned subsidiary of Brown Brothers Harriman Trust Company of New York,
which is a wholly-owned subsidiary of Brown Brothers Harriman & Co.
In its capacity as Administrator of the Corporation, Brown Brothers
Harriman & Co. administers all aspects of the Corporation's operations subject
to the supervision of the Corporation's Directors 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
Corporation 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 Corporation, including the maintenance of
certain books and records; (ii) oversees the performance of administrative and
professional services to the Corporation by others, including the Funds'
Custodian, Transfer and Dividend Disbursing Agent; (iii) provides the
Corporation 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 Corporation's registration statement and each 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 each Fund and reports to each Fund's shareholders
and the Securities and Exchange Commission.
For the services rendered to the Corporation and related expenses borne
by Brown Brothers Harriman & Co., as Administrator of the Corporation, Brown
Brothers Harriman & Co. receives from each Fund an annual fee, computed daily
and payable monthly, equal to 0.125% of that Fund's average daily net assets.
Brown Brothers Harriman Trust Company (Cayman) Limited, in its capacity as
Administrator of each 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 each Portfolio and at its own expense, Brown Brothers
Harriman Trust Company (Cayman) Limited (i) provides each 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
14
<PAGE>
to investor inquiries; (ii) oversees the performance of administrative and
professional services to each Portfolio by others, including the Custodian;
(iii) provides each 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 each Portfolio's registration
statement for filing with the Securities and Exchange Commission, and the
preparation of tax returns for each Portfolio and reports to investors and the
Securities and Exchange Commission.
For the services rendered to each Portfolio and related expenses borne by
Brown Brothers Harriman Trust Company (Cayman) Limited as Administrator of each
Portfolio, Brown Brothers Harriman Trust Company (Cayman) Limited receives from
each Portfolio an annual fee, computed daily and payable monthly, equal to
0.035% of that Portfolio's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the Corporation as are from time to time agreed upon by the parties.
The offices of 59 Wall Street Administrators are located at 6 St. James Avenue,
Boston, Massachusetts 02116. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Corporation, participation in
the preparation of documents required for compliance by the Corporation with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Directors and shareholders of the Corporation, 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 Funds.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company (Cayman) Limited, SFG-Cayman performs such
subadministrative duties for each Portfolio as are from time to time agreed upon
by the parties. The offices of SFG-Cayman are located at Elizabethan Square,
George Town, Grand Cayman BWI. SFG-Cayman is a wholly-owned subsidiary of SFG.
SFG-Cayman's subadministrative duties may include providing equipment and
clerical personnel necessary for maintaining the organization of each Portfolio,
participation in the preparation of documents required for compliance by each
Portfolio with applicable laws and regulations, preparation of certain documents
in connection with meetings of Trustees of and investors in each Portfolio, and
other functions that would otherwise be performed by the Administrator of each
Portfolio as set forth above. For performing such subadministrative services,
SFG-Cayman receives such compensation as is from time to time agreed upon, but
not in excess of the amount paid to the Administrator from the Portfolios.
Shareholder Servicing Agent
The Corporation has entered into a shareholder servicing agreement with
Brown Brothers Harriman & Co. pursuant to which Brown Brothers Harriman & Co.,
as agent for the Corporation with respect to the Funds, among other things:
answers inquiries from shareholders of and prospective investors in the Funds
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 Funds; assists shareholders of and prospective investors in the Funds in
designating and changing dividend options, account designations and addresses;
and provides such other related services as the Corporation or a shareholder of
or prospective investor in the Funds may reasonably request. For these services,
Brown Brothers Harriman & Co. receives from each Fund an annual fee, computed
daily and payable monthly, equal to 0.25% of that Fund's average daily net
assets represented by shares owned during the period for which payment was being
made by shareholders who did not hold their account with an eligible
institution.
15
<PAGE>
Financial Intermediaries
From time to time, the Funds' 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 Funds 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 Corporation; 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 Funds; 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 Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Funds. 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 Corporation enters into eligible institution agreements with banks,
brokers and other financial institutions pursuant to which each financial
institution, as agent for the Corporation with respect to shareholders of and
prospective investors in the Funds who are customers with 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 customer's shares in its name or its nominee name on the
shareholder records of the Corporation; 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 Funds; 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 Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Funds. For these services, each financial institution
receives from each Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of that Fund's average daily net assets represented by shares owned
during the period for which payment was being made by customers for whom each
financial institution was the holder or agent of record.
Expense Payment Agreement
Under separate agreements dated August 23, 1994 and April 10, 1997,
respectively, Brown Brothers Harriman Trust Company (Cayman) Limited pays the
expenses of the International Equity Portfolio and the Emerging Markets
Portfolio, other than fees paid to Brown Brothers Harriman & Co. under the
Trust's Administration Agreement and other than expenses relating to the
organization of each Portfolio. In return, Brown Brothers Harriman Trust Company
(Cayman) Limited receives a fee from the International Equity Portfolio and the
Emerging Markets Portfolio such that after such payment the aggregate expenses
16
<PAGE>
of each Portfolio do not exceed an agreed upon annual rate, currently 0.90% and
1.25%, respectively, of the average daily net assets of that Portfolio. Such
fees are computed daily and paid monthly.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Funds. Its office is located at 6 St. James Avenue, Boston, Massachusetts 02116.
59 Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
each Fund's prospectus as required under federal and state securities laws. (See
"Distributor" in the Statement of Additional Information.)
59 Wall Street Distributors holds itself available to receive purchase
orders for Fund shares.
Custodian, Transfer and Dividend Disbursing Agent
State Street Bank and Trust Company ("State Street" or the "Custodian"),
225 Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian for
the Funds and the Portfolios and Transfer and Dividend Disbursing Agent for the
Funds.
As Custodian for each Fund, it is responsible for holding each Fund's
assets (i.e., cash and that Fund's interest in its respective Portfolio)
pursuant to a custodian agreement with the Corporation. Cash is held for each
Fund in demand deposit accounts at the Custodian. Subject to the supervision of
the Administrator of the Corporation, the Custodian maintains the accounting
records for each Fund and each day computes the net asset value per share of
each Fund. As Transfer and Dividend Disbursing Agent it is responsible for
maintaining the books and records detailing the ownership of each Fund's shares.
As Custodian for each Portfolio, it is responsible for maintaining books
and records of portfolio transactions and holding each Portfolio's securities
and cash pursuant to a custodian agreement with each Portfolio. Cash is held for
each Portfolio in demand deposit accounts at the Custodian. Subject to the
supervision of the Administrator of each Portfolio, the Custodian maintains the
accounting and portfolio transaction records for each Portfolio and each day
computes the net asset value and net income of each Portfolio.
Independent Auditors
Deloitte & Touche LLP, Boston, Massachusetts are the independent auditors
for the Funds. Deloitte & Touche, Grand Cayman are the independent auditors for
the Portfolios.
NET ASSET VALUE
================================================================================
Each Fund's net asset value per share is determined once daily at 4:00
P.M., New York time on each day the New York Stock Exchange is open for regular
trading.
The determination of each Fund's net asset value per share is made by
subtracting from the value of the total assets of a Fund (i.e., the value of its
investment in a Portfolio and other assets) the amount of its liabilities and
dividing the difference by the number of shares of that Fund outstanding at the
time the determination is made.
The value of each Fund's investment in its respective Portfolio is also
determined once daily at 4:00 P.M., New York time on each day the New York Stock
Exchange is open for regular trading.
The determination of the value of each Fund's investment in its respective
Portfolio is made by subtracting from the value of the total assets of a
Portfolio the amount of a Portfolio's liabilities and multiplying the difference
by the percentage, effective for that day, which represents that Fund's share of
the aggregate beneficial interests in its respective Portfolio.
Values of assets held by each Portfolio are determined on the basis of
their market or other fair value. (See "Determination of Net Asset Value;
Redemption in Kind" in the Statement of Additional Information.)
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DIVIDENDS AND DISTRIBUTIONS
================================================================================
Substantially all of each Fund's net investment income ("Net Income"),
including its pro rata share of its corresponding Portfolio's net income and
realized net short-term capital gains in excess of net long-term capital losses
is declared and paid to the Fund's shareholders at least annually as a dividend,
and substantially all of the Fund's pro rata share of its corresponding
Portfolio's realized net long-term capital gains in excess of net short-term
capital losses is declared and paid to the Fund's shareholders on an annual
basis as a capital gains distribution. An additional dividend and/or capital
gains distribution may be made in a given year to the extent necessary to avoid
the imposition of federal excise tax on each Fund. (See "Taxes" below.)
Dividends and capital gains distributions are payable to each Fund's
shareholders of record on the record date.
Unless a shareholder whose shares are held directly in the shareholder's
name on the books of the Corporation elects to have dividends and capital gains
distributions paid in cash, dividends and capital gains distributions are
automatically reinvested in additional Fund shares without reference to the
minimum subsequent purchase requirement. The Corporation reserves the right to
discontinue, alter or limit the automatic reinvestment privilege at any time,
but will provide shareholders prior written notice of any such discontinuance,
alteration or limitation.
Each Eligible Institution and each Financial Intermediary may establish its
own policy with respect to the reinvestment of dividends and capital gains
distributions in additional Fund shares.
TAXES
================================================================================
Each year, the Corporation intends to continue to qualify each Fund and
elect that each Fund be treated as a separate "regulated investment company"
under the Internal Revenue Code of 1986, as amended. Accordingly, the Funds are
not subject to federal income taxes on their Net Income and realized net
long-term capital gains in excess of net short-term capital losses that are
distributed to their shareholders. A 4% non-deductible excise tax is imposed on
a Fund to the extent that certain distribution requirements for that Fund for
each calendar year are not met. The Corporation intends to continue to meet such
requirements. The Portfolios are also not required to pay any federal income or
excise taxes.
Dividends are taxable to shareholders of a Fund as ordinary income, whether
such dividends are paid in cash or reinvested in additional shares. Dividends
paid from the Funds are not eligible for the dividends-received deduction
allowed to corporate shareholders because the Net Income of each Portfolio does
not consist of dividends paid by domestic corporations. Capital gains
distributions are taxable to shareholders as long-term capital gains, whether
paid in cash or reinvested in additional shares and regardless of the length of
time a particular shareholder has held Fund shares.
Any dividend or capital gains distribution has the effect of reducing the
net asset value of Fund shares held by a shareholder by the same amount as the
dividend or capital gains distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a dividend or capital
gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in a Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
18
<PAGE>
The Funds may be subject to foreign withholding taxes and if more than 50%
of the value of a Fund's share of a Portfolio's total assets at the close of any
fiscal year consists of stock or securities of foreign corporations, at the
election of the Corporation any such foreign income taxes paid by a Fund may be
treated as paid directly by its shareholders. The Corporation makes such an
election only if it deems it to be in the best interest of a Fund's shareholders
and notifies shareholders in writing each year if it makes the election and of
the amount of foreign income taxes, if any, to be treated as paid by the
shareholders. If the Corporation makes the election, each Fund shareholder would
be required in computing federal income tax liability to include in income that
shareholder's proportionate share of the amount of foreign income taxes paid by
that Fund and would be entitled to claim either a credit (which is subject to
certain limitations), or, if deductions are itemized, a deduction for that
shareholder's share of the foreign income taxes paid by that Fund. (No deduction
is permitted in computing alternative minimum tax liability.) Certain entities,
including corporations formed as part of corporate pension or profit-sharing
plans and certain charitable and other organizations described in Section 501
(c) of the Internal Revenue Code, as amended, that are generally exempt from
federal income taxes may not receive any benefit from the election by the
Corporation to "pass through" foreign income taxes to a Fund's shareholders.
Under U.S. Treasury regulations, the Corporation and each Eligible
Institution are required to withhold and remit to the U.S. Treasury a portion
(31%) of dividends and capital gains distributions on the accounts of those
shareholders who fail to provide a correct taxpayer identification number
(Social Security Number for individuals) or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
State and Local Taxes
The treatment of each Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
Each Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in a Fund
since alternative investments are available which would not be subject to United
States withholding tax.
Other Information
Annual notification as to the tax status of capital gains distributions, if
any, is provided to shareholders shortly after October 31, the end of each
Fund's fiscal year. Additional tax information is mailed to shareholders in
January.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
================================================================================
The Corporation is an open-end management investment company organized on
July 16, 1990, as a corporation under the laws of the State of Maryland. Its
offices are located at 6 St. James Avenue, Boston, Massachusetts 02116; its
telephone number is (617) 423-0800.
The Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par value $0.001 per share, of which
25,000,000 shares have been classified as shares of the International Equity
Fund and 25,000,000 shares have been classified as shares of the Emerging
19
<PAGE>
Markets Fund. The Board of Directors of the Corporation may increase the number
of shares the Corporation is authorized to issue without the approval of
shareholders. The Board of Directors of the Corporation also has the power to
designate one or more series of shares of common stock and to classify and
reclassify any unissued shares with respect to such series. Currently there are
five such series in addition to the Funds.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of each Fund are entitled to a full vote for each full share
held and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
The rights of redemption are described elsewhere herein. Shares are fully paid
and nonassessable by the Corporation. It is the intention of the Corporation not
to hold meetings of shareholders annually. The Directors of the Corporation may
call meetings of shareholders for action by shareholder vote as may be required
by the 1940 Act or as may be permitted by the Articles of Incorporation or
By-laws. Shareholders have under certain circumstances (e.g., upon application
and submission of certain specified documents to the Directors of the
Corporation 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 Directors of the Corporation. Shareholders
also have the right to remove one or more Directors of the Corporation without a
meeting by a declaration in writing by a specified number of shareholders.
The By-laws of the Corporation provide that the presence in person or by
proxy of the holders of record of one third of the shares of a Fund outstanding
and entitled to vote thereat shall constitute a quorum at all meetings of
shareholders of that Fund, 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 Corporation's Articles of Incorporation provide that, at any meeting of
shareholders of a Fund, each Eligible Institution may vote any shares as to
which that Eligible Institution is the agent of record and which are otherwise
not represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by holders of all shares otherwise represented at
the meeting in person or by proxy as to which that Eligible Institution is the
agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
Each Portfolio is organized as a trust under the law of the State of New
York. Each Portfolio's Declaration of Trust provides that each corresponding
Fund and other entities investing in the Portfolio (e.g., other investment
companies, insurance company separate accounts and common and commingled trust
funds) are liable for all obligations of the Portfolio. However, the risk of a
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 Directors of the
Corporation believe that neither Fund nor its shareholders will be adversely
affected by reason of the investment of all of the Fund's assets in its
corresponding Portfolio.
Each investor in a Portfolio, including each Fund, may add to or reduce its
investment in a Portfolio on each day the New York Stock Exchange is open for
regular trading. At 4:00 P.M., New York time on each such business day, the
value of each investor's beneficial interest in a 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
20
<PAGE>
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.
Whenever the Corporation is requested to vote on a matter pertaining to a
Portfolio, the Corporation will vote its shares without a meeting of
shareholders of the corresponding 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 Corporation
will hold a meeting of shareholders of the Fund and, at the meeting of investors
in the Portfolio, the Corporation 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 Corporation votes all its shares at a Portfolio
meeting, other investors with a greater pro rata ownership in the Portfolio
could have effective voting control of the operations of the Portfolio.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the outstanding voting
securities" (as defined in the 1940 Act) currently means the vote of (i) 67% or
more of the outstanding voting securities present at a meeting, if the holders
of more than 50% of the outstanding voting securities are present in person or
represented by proxy; or (ii) more than 50% of the outstanding voting
securities, whichever is less.
Each Fund's shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors. The annual report also contains performance information
and is made available to investors upon request and without charge.
Other mutual funds or institutional investors may invest in each Portfolio
on the same terms and conditions as each Fund. However, these other investors
may have different sales commissions and other operating expenses which may
generate different aggregate performance results. Information concerning other
investors in each Portfolio is available from Brown Brothers Harriman & Co. (See
the back cover for the address and phone number.)
The Corporation may withdraw a Fund's investment in its corresponding
Portfolio as a result of certain changes in the Portfolio's investment
objective, policies or restrictions or if the Board of Directors of the
Corporation determines that it is otherwise in the best interests of the Fund to
do so. Upon any such withdrawal, the Board of Directors of the Corporation 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 Fund's
investment policies. In the event the Directors of the Corporation were unable
to accomplish either, the Directors will determine the best course of action.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
Each Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include each Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the MSCI-EAFE Index, MSCI-Emerging Markets Index and
IFC Emerging Markets Investable Index) and to investments for which reliable
21
<PAGE>
performance data is available. Performance information may also include
comparisons to averages, performance rankings or other information prepared by
recognized mutual fund statistical services. To the extent that unmanaged
indexes are so included, the same indexes are used on a consistent basis. Each
Fund's investment results as used in such communications are calculated on a
total rate of return basis in the manner set forth below.
Period and average annualized "total rates of return" may be provided in
such communications. The "total rate of return" refers to the change in the
value of an investment in a Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
of return may be annualized. An annualized total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a one year period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return is slightly
higher than a period total rate of return if the period is shorter than one
year, because of the assumed reinvestment.
Historical performance information for any period or portion thereof prior
to the establishment of the International Equity Fund will be that of the
International Equity Portfolio, adjusted to assume that all charges, expenses
and fees of the Fund and the Portfolio which are presently in effect were
deducted during such periods, as permitted by applicable SEC staff
interpretations.
This Prospectus omits certain of the information contained in the Statement
of Additional Information and the Registration Statement filed with the
Securities and Exchange Commission. The Statement of Additional Information may
be obtained from 59 Wall Street Distributors without charge and the Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the Rules and Regulations of the Commission.
22
<PAGE>
APPENDIX A - INTERNATIONAL STATISTICS
================================================================================
<TABLE>
<CAPTION>
Market Gross Domestic
Capitalization Product Population
------------------- ------------------ -------------------
Dollars % of Dollars % of % of
MARKETS -- DEVELOPED (Billions) Total (Billions) Total (Millions) Total
- ---------------------- -------- ------ --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Japan........................ 2,663 25.5 4,149 23.2 125.2 3.0
United Kingdom............... 1,590 15.2 1,200 6.7 58.3 1.4
Germany...................... 667 6.4 2,241 12.5 81.6 1.9
France....................... 540 5.2 1,473 8.2 58.0 1.4
Hong Kong.................... 449 4.3 143 0.8 6.3 0.1
Netherlands.................. 426 4.1 365 2.0 15.4 0.4
Switzerland.................. 399 3.8 268 1.5 7.0 0.2
Malaysia..................... 282 2.7 84 0.5 20.1 0.5
Australia.................... 266 2.5 374 2.1 18.1 0.4
Singapore.................... 256 2.5 86 0.5 3.0 0.1
Italy........................ 254 2.4 1,072 6.0 57.2 1.4
Sweden....................... 222 2.1 237 1.3 8.8 0.2
Spain........................ 181 1.7 538 3.0 39.2 0.9
Belgium...................... 117 1.1 247 1.4 10.1 0.2
Denmark...................... 66 0.6 164 0.9 5.2 0.1
Finland...................... 62 0.6 118 0.7 5.1 0.1
Norway....................... 53 0.5 144 0.8 4.4 0.1
New Zealand.................. 36 0.3 64 0.4 3.5 0.1
Austria...................... 35 0.3 216 1.2 8.5 0.2
Ireland...................... 31 0.3 64 0.4 3.6 0.1
----- ----- ------ ---- ----- ----
SUBTOTAL - DEVELOPED...... 8,595 82.4 34,247 74.0 538.6 12.7
----- ----- ------ ---- ----- ----
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Market Gross Domestic
Capitalization Product Population
------------------- ------------------ -------------------
Dollars % of Dollars % of % of
MARKETS -- EMERGING (Billions) Total (Billions) Total (Millions) Total
- ------------------ -------- ------ --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Taiwan....................... 312 3.0 261 1.5 21.3 0.5
South Africa................. 230 2.2 90 0.5 41.2 1.0
Brazil....................... 219 2.1 721 4.0 155.8 3.7
Korea........................ 139 1.3 416 2.3 44.9 1.1
India........................ 125 1.2 264 1.5 935.7 22.1
Mexico....................... 110 1.1 279 1.6 90.5 2.1
Thailand..................... 96 0.9 162 0.9 59.4 1.4
Indonesia.................... 91 0.9 192 1.1 193.8 4.6
Pakistan..................... 85 0.8 47 0.3 129.8 3.1
Chile........................ 72 0.7 67 0.4 14.2 0.3
Philippines.................. 57 0.5 73 0.4 70.3 1.7
Argentina.................... 44 0.4 286 1.6 34.8 0.8
Israel....................... 36 0.3 87 0.5 57.2 1.4
Turkey....................... 35 0.3 165 0.9 61.6 1.5
Portugal..................... 31 0.3 89 0.5 9.9 0.2
Greece....................... 24 0.2 108 0.6 10.5 0.2
Czech Republic............... 20 0.2 46 0.3 10.3 0.2
Venezuela.................... 18 0.2 51 0.3 21.6 0.5
Colombia..................... 17 0.2 79 0.4 35.1 0.8
Peru......................... 14 0.1 59 0.3 23.5 0.6
Egypt........................ 12 0.1 57 0.3 59.0 1.4
Poland....................... 8 0.1 121 0.7 38.6 0.9
Morocco...................... 8 0.1 33 0.2 27.1 0.6
Luxembourg................... 6 0.1 17 0.1 0.4 0.0
Hungary...................... 5 0.0 45 0.2 10.2 0.2
China........................ 5 0.0 702 3.9 1,211.5 28.6
Jordan....................... 5 0.0 6 0.0 5.4 0.1
Zimbabwe..................... 4 0.0 6 0.0 11.5 0.3
Tunisia...................... 4 0.0 18 0.1 8.9 0.2
Bangladesh................... 2 0.0 28 0.2 120.4 2.8
Sri Lanka.................... 2 0.0 12 0.1 18.4 0.4
Kenya........................ 2 0.0 8 0.0 30.5 0.7
Nigeria...................... 2 0.0 42 0.2 111.7 2.6
Ghana........................ 1 0.0 6 0.0 17.5 0.4
Slovenia..................... 0.5 0.0 14 0.1 2.0 0.0
Botswana..................... 0.3 0.0 4 0.0 1.5 0.0
-------- ----- ------ ---- ------ ----
SUBTOTAL - EMERGING....... 1,841.8 17.6 4,661 26.0 3,696 87.3
-------- ----- ------ ---- ------ ----
TOTAL - WORLD................ 10,436.8 100 17,908 100 4,234.6 100
======== ===== ====== ==== ====== ====
</TABLE>
Sources:
Market Capitalization: Datastream (as of December 1996)
GDP/Population: International Monetary Fund:
International Financial Statistics (February 1997).
International Finance Corporation: Emerging Stock Markets Factbook (1996).
24
<PAGE>
APPENDIX B - HEDGING STRATEGIES
================================================================================
Futures Contracts on Stock Indexes. Subject to applicable laws and
regulations and solely as a hedge against changes in the market value of
portfolio securities or securities intended to be purchased, futures contracts
on stock indexes ("Futures Contracts") may be entered into for the Portfolios.
In order to assure that a Portfolio is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that each Portfolio enter into transactions
in Futures Contracts and options on Futures Contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of a
Portfolio's assets.
Futures Contracts provide for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for a
Portfolio or adversely affect the prices of securities which are intended to be
purchased at a later date. A Futures Contract may also be entered into to close
out or offset an existing futures position.
In general, each transaction in Futures Contracts involves the
establishment of a position which is expected to move in a direction opposite to
that of the investment being hedged. If these hedging transactions are
successful, the futures positions taken would rise in value by an amount which
approximately offsets the decline in value of the portion of a Portfolio's
investments that is being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized. There is also the risk of a potential lack
of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of a Futures Contract depends upon future movements in
the level of the overall stock market measured by the underlying index before
the closing out of the Futures Contract. Accordingly, the successful use of
Futures Contracts is subject to the Investment Adviser's ability both to select
an appropriate index and to predict future price movements over the short term
in the overall stock market. The incorrect choice of an index or an incorrect
assessment of future price movements over the short term in the overall stock
market may result in poorer overall performance than if a Futures Contract had
not been purchased. Brokerage costs are incurred in entering into and
maintaining Futures Contracts.
When each Portfolio enters into a Futures Contract, it is initially
required to deposit, in a segregated account in the name of the broker
performing the transaction, an "initial margin" of cash, U.S. Government
securities or other high grade short-term obligations equal to approximately 3%
of the contract amount. Initial margin requirements are established by the
exchanges on which Futures Contracts trade and may, from time to time, change.
In addition, brokers may establish margin deposit requirements in excess of
those required by the exchanges. Initial margin in futures transactions is
different from margin in securities transactions in that initial margin does not
involve the borrowing of funds by a broker's client but is, rather, a good faith
deposit on the Futures Contract which will be returned upon the proper
termination of the Futures Contract. The margin deposits made are marked to
market daily and a Portfolio may be required to make subsequent deposits of cash
or eligible securities called "variation margin", with its futures contract
clearing broker, which are reflective of price fluctuations in the Futures
Contract.
25
<PAGE>
Currently, investments in Futures Contracts on non-U.S. stock indexes by
U.S. investors, such as the Portfolios, can be purchased on such non-U.S. stock
indexes as the Osaka Stock Exchange (OSE), Tokyo Stock Exchange (TSE), Hong Kong
Futures Exchange (HKFE), Singapore International Monetary Exchange (SIMEX),
London International Financial Futures and Options Exchange (LIFFE), Marche
Terme International de France (MATIF), Sydney Futures Exchange Ltd. (SFE), Meff
Sociedad Rectora de Productos Financieros Derivados de Renta Variable, S.A.
(MEFF RENTA VARIABLE), Deutsche Terminborse (DTB), Italian Stock Exchange (ISE),
Financiele Termijnmarkt Amsterdam (FTA), and London Securities and Derivatives
Exchange, Ltd. (OMLX).
Exchanges may limit the amount by which the price of a Futures Contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
Another risk which may arise in employing Futures Contracts to protect
against the price volatility of portfolio securities is that the prices of an
index subject to Futures Contracts (and thereby the Futures Contract prices) may
correlate imperfectly with the behavior of the cash prices of portfolio
securities. Another such risk is that the price of the Futures Contract may not
move in tandem with the change in overall stock market prices against which a
Portfolio seeks a hedge.
26
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator of the Corporation
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus and the Statement of Additional Information, in connection with the
offer contained in this Prospectus, and if given or made, such other information
or representations must not be relied upon as having been authorized by the
Corporation or the Distributor. This Prospectus does not constitute an offer by
the Corporation or by the Distributor to sell or the solicitation of any offer
to buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful for the Corporation or the Distributor to make such offer in
such jurisdiction.
<PAGE>
===============================================================================
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
THE 59 WALL STREET EMERGING MARKETS FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
================================================================================
The 59 Wall Street International Equity Fund (the "International Equity
Fund") and The 59 Wall Street Emerging Markets Fund (the "Emerging Markets
Fund") (each a "Fund" and collectively the "Funds") are separate portfolios of
The 59 Wall Street Fund, Inc. (the "Corporation"), a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The International Equity Fund is designed to enable investors to
participate in the opportunities available in equity markets outside the United
States and Canada.
The Emerging Markets Fund is designed to enable investors to
participate in the opportunities available in emerging markets. The investment
objective of each Fund is to provide investors with long-term maximization of
total return, primarily through capital appreciation.
The Corporation seeks to achieve the investment objective of the
International Equity Fund by investing all of that Fund's assets in the
International Equity Portfolio, an open-end investment company having the same
investment objective as that Fund. The Corporation seeks to achieve the
investment objective of the Emerging Markets Fund by investing all of that
Fund's assets in the Emerging Markets Portfolio, an open-end investment company
having the same investment objective as that Fund. There can be no assurance
that the investment objective of each Fund will be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the
"Investment Adviser") for each Portfolio. This Statement of Additional
Information is not a prospectus and should be read in conjunction with the
Prospectus dated January [ ], 1998, a copy of which may be obtained from the
Corporation at the address noted above.
TABLE OF CONTENTS
CROSS-REFERENCE TO
PAGE PAGE IN
PROSPECTUS
Investment Objective and Policies . . . . . 2 5
Investment Restrictions . . . . . . . . 6 9
Directors, Trustees and Officers . . . . . 9 11
Investment Adviser . . . . . . . . . . 12 11
Administrators. . . . . . . . . . . . 13 12
Distributor . . . . . . . . . . . . 14 15
<PAGE>
Net Asset Value; Redemption in Kind . . . . 15 15
Computation of Performance . . . . . . . 16 18
Federal Taxes . . . . . . . . . . . . 17 16
Description of Shares . . . . . . . . . 20
Portfolio Transactions . . . . . . . . . 21 7
Additional Information . . . . . . . . . 22 18
Financial Statements . . . . . . . . . 23 4
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS
January [ ], 1998.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of each Portfolio.
EQUITY INVESTMENTS
Equity investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of convertible preferred stock, the holder's claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
DOMESTIC INVESTMENTS
The assets of the Portfolios are not invested in domestic securities
(other than short-term instruments), except temporarily when extraordinary
circumstances prevailing at the same time in a significant number of foreign
countries render investments in such countries inadvisable.
OPTIONS
OPTIONS ON STOCK. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for a Portfolio, although the current
intention is not to do so in such a manner that more than 5% of a Portfolio's
net assets would be at risk. A call option on a stock gives the purchaser of the
option the right to buy the underlying stock at a fixed price at any time during
the option period. Similarly, a put option gives the purchaser of the option the
right to sell the underlying stock at a fixed price at any time during the
option period. To liquidate a put or call option position, a "closing sale
transaction" may be made at any time prior to the expiration of the option which
involves selling the option previously purchased.
Covered call options may also be sold (written) on stocks, although in
each case the current intention is not to do so. A call option is "covered" if
the writer owns the underlying security.
4
<PAGE>
OPTIONS ON STOCK INDEXES. A stock index fluctuates with
changes in the market values of the stocks included in the index.
Examples of stock indexes are the Standard & Poor's 500 Stock Index (Chicago
Board of Options Exchange), the New York Stock Exchange Composite Index (New
York Stock Exchange), The Financial Times-Stock Exchange 100 (London Traded
Options Market), the Nikkei 225 Stock Average (Osaka Securities Exchange) and
Tokyo Stock Price Index (Tokyo Stock Exchange).
Options on stock indexes are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a fixed price ("strike price"), an option on a stock
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (a) the amount, if any, by which the strike price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of exercise, multiplied by (b) a fixed
"index multiplier". Receipt of this cash amount depends upon the closing level
of the stock index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the price of the option. The
amount of cash received is equal to such difference between the closing price of
the index and the strike price of the option expressed in U.S. dollars or a
foreign currency, as the case may be, times a specified multiple.
The effectiveness of purchasing stock index options as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of an index option depends upon future movements in
the level of the overall stock market measured by the underlying index before
the expiration of the option. Accordingly, the successful use of options on
stock indexes is subject to the Investment Adviser's ability both to select an
appropriate index and to predict future price movements over the short term in
the overall stock market. Brokerage costs are incurred in the purchase of stock
index options and the incorrect choice of an index or an incorrect assessment of
future price movements may result in poorer overall performance than if a stock
index option had not been purchased.
OPTIONS ON CURRENCIES. A call option on a currency gives the purchaser of the
option the right to buy the underlying currency at a fixed price, either at any
time during the option period (American style) or on the expiration date
(European style). Similarly, a put option gives the purchaser of the option the
right to sell the underlying currency at a fixed price, either at any time
during the option period or on the expiration date. To liquidate a put or call
option position, a "closing sale transaction" may be made for a Portfolio at any
time prior to the expiration of the option, such a transaction involves selling
the option previously purchased. Options on currencies are traded both on
recognized exchanges (such as the Philadelphia Options
5
<PAGE>
Exchange) and over-the-counter.
The value of a currency option purchased depends upon future changes in the
value of that currency before the expiration of the option. Accordingly, the
successful use of options on currencies is subject to the Investment Adviser's
ability to predict future changes in the value of currencies over the short
term. Brokerage costs are incurred in the purchase of currency options and an
incorrect assessment of future changes in the value of currencies may result in
a poorer overall performance than if such a currency had not been purchased.
6
<PAGE>
FOREIGN EXCHANGE CONTRACTS
Foreign exchange contracts are made with currency dealers, usually
large commercial banks and financial institutions. Although foreign exchange
rates are volatile, foreign exchange markets are generally liquid with the
equivalent of approximately $500 billion traded worldwide on a typical day.
While each Portfolio may enter into foreign currency exchange
transactions to reduce the risk of loss due to a decline in the value of the
hedged currency, these transactions also tend to limit the potential for gain.
Forward foreign exchange contracts do not eliminate fluctuations in the prices
of a Portfolio's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline. The precise matching of the forward
contract amounts and the value of the securities involved is not generally
possible because the future value of such securities in foreign currencies
changes as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly unlikely.
LOANS OF PORTFOLIO SECURITIES
Securities of each Portfolio may be loaned if such loans are secured
continuously by cash or equivalent short-term liquid securities as collateral or
by an irrevocable letter of credit in favor of that 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 that 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 a 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
7
<PAGE>
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 a Portfolio. Securities are not loaned to Brown Brothers
Harriman & Co. or to any affiliate of the Corporation, the Portfolios or Brown
Brothers Harriman & Co.
SHORT-TERM INVESTMENTS
Although it is intended that the assets of each Portfolio stay invested
in the securities described above and in the Prospectus to the extent practical
in light of that Portfolio's investment objective and long-term investment
perspective, each Portfolio's assets may be invested in short-term instruments
to meet anticipated expenses or for day-to-day operating purposes and when, in
the Investment Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when a Portfolio experiences large cash inflows through additional
investments by its investors or the sale of portfolio securities, and desirable
equity securities that are consistent with its investment objective are
unavailable in sufficient quantities, assets may be held in short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("Standard & Poor's"), or if unrated are of comparable
quality in the opinion of the Investment Adviser; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, fixed time
deposits and bankers' acceptances; and (v) repurchase agreements. Time deposits
with a maturity of more than seven days are treated as not readily marketable
(see clause (vi) under the caption "State and Federal Restrictions"). At the
time a Portfolio's assets are invested in commercial paper, bank obligations or
repurchase agreements, the issuer must have outstanding debt rated A or higher
by Moody's or Standard & Poor's; the issuer's parent corporation, if any, must
have outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Investment Adviser. The assets of each
Portfolio may be invested in non-U.S. dollar denominated and U.S. dollar
denominated short-term instruments, including U.S.
dollar denominated repurchase agreements.
REPURCHASE AGREEMENTS. Repurchase agreements may be entered
into for each Portfolio only with a "primary dealer" (as
designated by the Federal Reserve Bank of New York) in U.S.
Government securities. This is an agreement in which the seller
(the "Lender") of a security agrees to repurchase from a
8
<PAGE>
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. The securities which are subject to repurchase agreements, however,
may have maturity dates in excess of one week from the effective date of the
repurchase agreement. A Portfolio always receives as collateral securities which
are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Collateral is marked to the market daily and has a market
value including accrued interest at least equal to 100% of the dollar amount
invested by that Portfolio in each agreement along with accrued interest.
Payment for such securities is made for a Portfolio only upon physical delivery
or evidence of book entry transfer to the account of State Street Bank and Trust
Company (the "Custodian"). If the Lender defaults, a 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 of a Portfolio may be delayed or limited in
certain circumstances. A repurchase agreement with more than seven days to
maturity are treated as not readily marketable (see clause (vi) under the
caption "State and Federal Restrictions").
INVESTMENT RESTRICTIONS
===============================================================================
Each Fund and each 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 each Fund or each Portfolio, as the
case may be (see "Additional Information").
Except that the Corporation may invest all of each Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as that Fund, each of the Portfolios and the
Corporation, with respect to each Fund, may not:
(1) borrow money or mortgage or hypothecate its assets, except that in
an amount not to exceed 1/3 of the current value of its net assets, it may
borrow money as a temporary measure for extraordinary or emergency purposes, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money will be borrowed
only from banks and only either to accommodate requests
9
<PAGE>
for the redemption of Fund shares or the withdrawal of part or all of each
Fund's interest in its respective Portfolio, as the case may be, while effecting
an orderly liquidation of portfolio securities or to maintain liquidity in the
event of an unanticipated failure to complete a portfolio security transaction
or other similar situations), provided that collateral arrangements with respect
to options and futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of this restriction
and except that assets may be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions (see clause
(i) under the caption "State and Federal Restrictions");
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the purchase, ownership,
holding or sale of warrants where the grantor of the warrants is the issuer of
the underlying securities, or (ii) the purchase, ownership, holding or sale of
futures and options, other than the writing of put options;
(4) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(5) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its net
assets (taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations and provided that not more than 10% of
its net assets is invested in repurchase agreements maturing in more than seven
days, or (c) by purchasing, subject to the limitation in paragraph (6) below, a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan;
(6) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
10
<PAGE>
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities is reserved);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of its net
assets (taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (it is the
present intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes; such
sales would not be made of securities subject to outstanding options);
(9) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective, up to 25%
of its assets, at market value at the time of each investment, may be invested
in any one industry, except that positions in futures or option contracts shall
not be subject to this restriction;
(10) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies each Portfolio or the Corporation, on behalf
of each Fund, may not as a matter of operating policy (except that the
Corporation may invest all of a Fund's assets in an open-end investment company
with substantially the same investment objective, policies and restrictions as
that Fund): (i) borrow money for any purpose in excess of 10% of its total
assets (taken at cost) (moreover, securities are not purchased at any time at
which the amount of its borrowings exceed 5% of its total assets (taken at
market value)), (ii) pledge, mortgage or hypothecate for any purpose in excess
of 10% of its net assets (taken at market value), provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction, (iii) sell any security which it does not own unless by
virtue of its ownership of other securities it has at the time
11
<PAGE>
of sale a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale would be made upon the same conditions, (iv)
invest for the purpose of exercising control or management, (v) purchase
securities issued by any investment company except by purchase in the open
market where no commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of merger or
consolidation; provided, however, that securities of any investment company are
not purchased if such purchase at the time thereof would cause more than 10% of
its total assets (taken at the greater of cost or market value) to be invested
in the securities of such issuers or would cause more than 3% of the outstanding
voting securities of any such issuer to be held for it, (vi) invest more than
10% of its net assets (taken at the greater of cost or market value) in
restricted securities, securities of companies which, including predecessors,
have a record of less than three years of operation, invest more than 15% of its
net assets in over-the-counter options, time deposits with a maturity of more
than seven days, repurchase agreements maturing in more than seven days,
securities of foreign issuers which are not listed on a recognized domestic or
foreign securities exchange and other securities that are illiquid or otherwise
not readily marketable, (vii) purchase securities of any issuer if such purchase
at the time thereof would cause it to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of an issuer is
deemed a single class and all preferred stock of an issuer is deemed a single
class, except that futures and option contracts are not subject to this
restriction, (viii) invest more than 5% of its assets in companies which,
including predecessors, have a record of less than three years of continuous
operation, or (ix) purchase or retain in its portfolio any securities issued by
an issuer any of whose officers, directors, trustees or security holders is an
officer or Director of the Corporation or Trustee of each Portfolio, or is an
officer or partner of the Investment Adviser, if after the purchase of the
securities of such issuer, one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities, or both, all taken at market value,
of such issuer, and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities,
or both, all taken at market value. These policies are not fundamental and may
be changed without shareholder or investor approval in response to changes in
the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a
12
<PAGE>
portfolio security is not considered a violation of policy. If a Fund's and its
corresponding Portfolio's respective investment restrictions relating to any
particular investment practice or policy are not consistent, that Portfolio has
agreed with the Corporation that it will adhere to the more restrictive
limitation.
DIRECTORS, TRUSTEES AND OFFICERS
===============================================================================
The Directors of the Corporation, Trustees of each Portfolio and
executive officers of the Corporation and each Portfolio, their principal
occupation during the past five years (although their titles may have varied
during the period) and business addresses are:
DIRECTORS OF THE CORPORATION
J.V. SHIELDS, JR.* -- Chairman of the Board and Director; Trustee of
The 59 Wall Street Trust; Managing Director, Chairman and Chief Executive
Officer of Shields & Company; Chairman and Chief Executive Officer of Capital
Management Associates, Inc.; Director of Flowers Industries, Inc.(1) His
business address is Shields & Company, 71 Broadway, New York, NY 10006.
EUGENE P. BEARD** -- Director; Trustee of The 59 Wall Street Trust
(since April 1993); Vice Chairman - Finance and Operations of The Interpublic
Group of Companies. His business address is The Interpublic Group of Companies,
Inc., 1271 Avenue of the Americas, New York, NY 10020.
DAVID P. FELDMAN** -- Director; Trustee of The 59 Wall Street Trust;
Retired; Chairman and Chief Executive Officer - AT&T Investment Management
Corporation (prior to October 1997); Director of Dreyfus Mutual Funds, Equity
Fund of Latin America, New World Balanced Fund, India Magnum Fund, and U.S.
Prime Properties Inc.; Trustee of Corporate Property Investors. His business
address is 3 Tall Oaks Drive, Warren, NJ 07059.
ALAN G. LOWY** -- Director; Trustee of The 59 Wall Street Trust (since
April 1993); 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** -- Director; Trustee of The 59 Wall Street
Trust; Vice President and Chief Financial Officer of Richard K. Mellon and Sons;
Treasurer of Richard King Mellon Foundation; Vought Aircraft Corporation (prior
to September 1994), Caterair International (prior to April 1994); Advisory
Committee of Carlyle Group and Pittsburgh Seed Fund and Valuation Committee of
Morgenthaler Venture Funds(2). His business address is Richard K. Mellon and
Sons, P.O. Box RKM, Ligonier, PA 15658.
13
<PAGE>
TRUSTEES OF THE PORTFOLIO
H.B. ALVORD** -- Chairman of the Board and Trustee; Retired; Trustee of
the Trust (from September 1990 to October 1994); Director of The 59 Wall Street
Fund, Inc. (from September 1990 to October 1994); Trustee of Landmark Funds III,
Landmark Tax Free Reserves, Landmark Multi-State Tax Free Funds, Landmark Tax
Free Income Funds, Landmark Fixed Income Funds, Landmark Funds I, Landmark Funds
II, and Landmark International Equity Fund (from August 1990 to May 1997). His
business address is P.O. Box 5203, Carmel, CA 93921.
RICHARD L. CARPENTER** -- Trustee; Retired; Director of Internal
Investments, Public School Employees' Retirement System (prior to December
1995). His business address is 61 Cliff Street, Burlington, VT 05401.
CLIFFORD A. CLARK** -- Trustee; Retired; Director of Schmid, Inc.
(prior to July 1993); Managing Director of the Smith-Denison Foundation. His
business address is 42 Clowes Drive, Falmouth, MA 02540.
DAVID M. SEITZMAN** -- Trustee; Retired; Physician with Seitzman,
Shuman, Kwart and Phillips (prior to October 1997); Director of the National
Capital Underwriting Company, Commonwealth Medical Liability Insurance Co. and
National Capital Insurance Brokerage, Limited. His business address is 7117
Nevis Road, Bethesda, MD 20817.
OFFICERS OF THE CORPORATION AND THE PORTFOLIOS
PHILIP W. COOLIDGE -- President; Chief Executive Officer and President
of Signature Financial Group, Inc. ("SFG"), 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors") and 59 Wall Street Administrators, Inc. ("59
Wall Street Administrators") (since June 1993).
JAMES E. HOOLAHAN -- Vice President; Senior Vice President
of SFG.
JOHN R. ELDER -- Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON -- Secretary; Vice President and Assistant Secretary,
SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall Street
Administrators (since June, 1993); graduate student, Boston University School of
Law (prior to May, 1992).
SUSAN JAKUBOSKI*** -- Assistant Treasurer and Assistant Secretary of
the Portfolio; Assistant Secretary, Assistant Treasurer and Vice President of
Signature Financial Group (Cayman) Limited (since August 1994); Fund Compliance
Administrator of Concord Financial Group, Inc. (from November
14
<PAGE>
1990 to August 1994). Her business address is Signature Financial Group
(Cayman) Limited, Suite #193, 12 Church Street, Hamilton HM 11, Bermuda.
MOLLY S. MUGLER -- Assistant Secretary; Vice President and Assistant
Secretary of SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall
Street Administrators (since June 1993).
- -------------------------
* Mr. Shields is an "interested person" of the Corporation and
each Portfolio because of his affiliation with a registered
broker-dealer.
** These Directors and Trustees are members of the Audit
Committee of the Corporation or each Portfolio, as the case
may be.
*** Ms. Jakuboski is an officer of each Portfolio but is not an
officer of the Corporation.
(1) Shields & Company, Capital Management Associates, Inc. and
Flowers Industries, Inc., with which Mr. Shields is
associated, are a registered broker-dealer and a member of
the New York Stock Exchange, a registered investment
adviser, and a diversified food company, respectively.
(2) Richard K. Mellon and Sons, Richard King Mellon Foundation, Vought
Aircraft Corporation, Caterair International, The Carlyle Group and
Morgenthaler Venture Funds, with which Mr. Miltenberger is or has been
associated, are a private foundation, a private foundation, an aircraft
manufacturer, an airline food services company, a merchant bank, and a
venture capital partnership, respectively.
Each Director and officer of the Corporation listed above holds the
equivalent position with The 59 Wall Street Trust. The address of each officer
of the Corporation and the Portfolios is 6 St. James Avenue, Boston,
Massachusetts 02116. Messrs. Coolidge, Hoolahan and Elder and Mss. Gibson,
Jakuboski and Mugler also hold similar positions with other investment companies
for which affiliates of 59 Wall Street Distributors serves as the principal
underwriter.
Except for Mr. Shields, no Director or Trustee is an
"interested person" of the Corporation or the Portfolios,
respectively, as that term is defined in the 1940 Act.
DIRECTORS OF THE CORPORATION
The Directors of the Corporation receive a base annual fee of $15,000
(except the Chairman who receives a base annual fee of $20,000) which is paid
jointly by all series of the Corporation and The 59 Wall Street Trust and
allocated among the series based
16
<PAGE>
upon their respective net assets. In addition, each series which has commenced
operations pays an annual fee to each Director of $1,000.
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the Trust
Name of Person, Compensation as Part of Benefits upon and Fund Complex*
POSITION FROM THE CORP. FUND EXPENSES RETIREMENT PAID TO TRUSTEES
- --------------- -------------- ---------------- ---------------- ----------------
J.V. Shields, Jr., $17,646 none none $30,000
Director
Eugene P. Beard, $13,985 none none 25,000
Director
David P. Feldman, $13,985 none none 25,000
Director
Alan G. Lowy, $13,985 none none 25,000
Director
Arthur D. Miltenberger, $13,985 none none 25,000
Director
<FN>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series.
</FN>
</TABLE>
PORTFOLIO TRUSTEES
The Trustees of each Portfolio receive a base annual fee of $12,000
(except the Chairman who receives a base annual fee of $17,000) which is paid
jointly by the U.S. Money Market Portfolio, U.S. Small Company Portfolio , and
U.S Mid-Cap Portfolio together with each Portfolio (the "Portfolios") and
allocated among the Portfolios based upon their respective net assets. In
addition, each Portfolio which has commenced operations pays an annual fee to
each Trustee of $1,000.
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the
Name of Person, Compensation as Part of Benefits upon Portfolio Complex*
POSITION FROM THE PORTFOLIO PORTFOLIO EXPENSES RETIREMENT PAID TO TRUSTEES
- --------------- ------------------ --------------------- ---------------- ----------------
H.B. Alvord, $ 16,195 none none 21,000
Trustee
Richard L. Carpenter, 11,726 none none 16,000
Trustee
Clifford A. Clark, 11,726 none none 16,000
Trustee
David M. Seitzman, 11,726 none none 16,000
Trustee
<FN>
*The Portfolio Complex consists of the U.S. Money Market Portfolio, U.S. Small
Company Portfolio and U.S. Mid-Cap Portfolio together with each Portfolio.
</FN>
</TABLE>
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with each Portfolio and the
Administration Agreement with the Corporation, and by Brown Brothers Harriman
Trust Company (Cayman) Limited under the Administration Agreement with each
Portfolio (see "Investment Adviser" and "Administrators"), none of the
Corporation and each Portfolio requires employees other than its officers, and
none of its officers devote full time to the affairs of the Corporation or a
Portfolio, as the case may be, or, other than the Chairmen, receive any
compensation from the Corporation or a Portfolio.
As of January [], 1998, the Directors of the Corporation, Trustees of
each Portfolio and officers of the Corporation and each Portfolio as a group
beneficially owned less than 1% of the outstanding shares of the Corporation and
less than 1% of the aggregate beneficial interests in each Portfolio. At the
close of business on that date, no person, to the knowledge of the management,
owned beneficially more than 5% of the outstanding shares of either Fund nor
more than 5% of the aggregate beneficial interests in the International Equity
either Portfolio except that United Food & Commercial Workers' Pension Plan
owned [ ]%, Brown Brothers Harriman Employees' Pension Plan owned [ ]%, Union
Pacific
19
<PAGE>
Resources owned [ ]% and Brown Brothers Harriman Trust Company (Cayman)
Limited onwed less than 1% of the outstanding beneficial interests in the
International Equity Portfolio and [] owned [] of the Emerging Markets
Portfolio. A holder who controls more than 25% of the outstanding beneficial
interests in the International Equity Portfolio may take actions without the
approval of any other holder of beneficial interest in the Portfolio.
Brown Brothers Harriman Trust Company (Cayman) Limited has informed the
Portfolio that whenever it is requested to vote on matters pertaining to the
Portfolio (other than a vote by the Portfolio to continue the operation of the
Portfolio upon the withdrawal of another investor in the Portfolio), it will
hold a meeting of its shareholders and will cast its vote as instructed by those
shareholders.
INVESTMENT ADVISER
===============================================================================
Under its Investment Advisory Agreement with each of the Portfolios,
subject to the general supervision of that Portfolio's Trustees and in
conformance with the stated policies of that Portfolio, Brown Brothers Harriman
& Co. provides investment advice and portfolio management services to that
Portfolio. In this regard, it is the responsibility of Brown Brothers Harriman &
Co. to make the day-to-day investment decisions for each Portfolio, to place the
purchase and sale orders for portfolio transactions and to manage, generally,
each Portfolio's investments.
The Investment Advisory Agreements between Brown Brothers Harriman &
Co. and the International Equity Portfolio and the Emerging Markets Portfolio
are dated August 23, 1994 and April 10, 1997, respectively, and remain in effect
for two years from each such date and thereafter, but only so long as each
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 each Portfolio, or by that Portfolio's Trustees, and (ii) by a vote
of a majority of the Trustees of each Portfolio who are not parties to each
Investment Advisory Agreement or "interested persons" (as defined in the 1940
Act) of each Portfolio ("Independent Trustees"), cast in person at a meeting
called for the purpose of voting on such approval. Each Investment Advisory
Agreement was most recently approved by the Independent Trustees of the
International Equity Portfolio and the Emerging Markets Portfolio on December
4, 1997, respectively. Each 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 relevant Portfolio or by
a vote of the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of each Portfolio on 60 days' written notice to Brown
Brothers Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written
notice to that Portfolio (see "Additional Information").
The investment advisory fee paid to the Investment Adviser from each
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<PAGE>
Portfolio is calculated daily and paid monthly at an annual rate equal
to 0.65% and 0.90% of the average daily net assets of the International Equity
Portfolio and Emerging Markets Portfolio, respectively. For the fiscal years
ended October 31, 1997 and October 31, 1996, International Equity Portfolio
incurred $293,880 and $226,127, respectively, for advisory fees. For the
period June 6, 1997 through October 31, 1997, Emerging Markets Portfolio
incurred $28,028 for advisory fees.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the
Corporation. There is presently no controlling precedent prohibiting financial
institutions such as Brown Brothers Harriman & Co. from performing the
investment advisory, administrative or shareholder servicing/eligible
institution functions described above. If Brown Brothers Harriman & Co. were to
terminate its Investment Advisory Agreements with the Portfolios, or were
prohibited from acting in such capacity, it is expected that the Trustees of
each Portfolio would recommend to the investors that they approve a new
investment advisory agreement for that Portfolio with another qualified adviser.
If Brown Brothers Harriman & Co. were to terminate its Shareholder Servicing
Agreement, Eligible Institution Agreement or Administration Agreement with the
Corporation or were prohibited from acting in any such capacity, its customers
would be permitted to remain shareholders of each Fund and alternative means for
providing shareholder services or administrative services, as the case may be,
would be sought. In such event, although the operation of the Corporation might
change, it is not expected that any shareholders would suffer any adverse
financial consequences. However, an alternative means of providing shareholder
services might afford less convenience to shareholders.
ADMINISTRATORS
===============================================================================
The Administration Agreements between the Corporation and Brown
Brothers Harriman & Co. (dated November 1, 1993) and between the International
Equity Portfolio and Brown Brothers Harriman Trust Company (Cayman) Limited
(dated August 23, 1994) and between Emerging Markets Portfolio and Brown
Brothers Harriman Trust Company (Cayman) Limited (dated April 10, 1997) 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 each Portfolio's Investment Advisory Agreement (see
"Investment Adviser"). The Independent Directors most recently approved the
Corporation's Administration Agreement on December 17, 1997. The Portfolios'
Administration Agreements were most recently approved by the Independent
Trustees of the International Equity Portfolio and the Emerging Markets
Portfolio on December 4, 1997, respectively. Each agreement
will terminate automatically if assigned by either party thereto and is
terminable by the Corporation or a Portfolio at any time without
21
<PAGE>
penalty by a vote of a majority of the Directors of the Corporation or the
Trustees of each 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 Corporation or a Portfolio, as the case may be (see "Additional
Information"). The Corporation's Administration Agreement is terminable by the
Directors of the Corporation or shareholders of the Corporation on 60 days'
written notice to Brown Brothers Harriman & Co. Each Portfolio's Administration
Agreement is terminable by the Trustees of that Portfolio or by that Portfolio's
corresponding Fund and other investors in that Portfolio on 60 days' written
notice to Brown Brothers Harriman Trust Company (Cayman) Limited. Each agreement
is terminable by the contracting Administrator on 90 days' written notice to the
Corporation or a Portfolio, as the case may be.
The administrative fee payable to Brown Brothers Harriman & Co. from
each Fund is calculated daily and payable monthly at an annual rate equal to
0.125% of that Fund's average daily net assets. For the period June 6, 1997
through October 31, 1997, each of International Equity Fund and Emerging Markets
Fund incurred $2,739 and $2,750, respectively, for administrative services.
The administrative fee paid to Brown Brothers Harriman Trust Company
(Cayman) Limited by each Portfolio is calculated and paid monthly at an annual
rate equal to 0.035% of that Portfolio's average daily net assets. Brown
Brothers Harriman Trust Company (Cayman) Limited is a wholly-owned subsidiary of
Brown Brothers Harriman Trust Company of New York, which is a wholly-owned
subsidiary of Brown Brothers Harriman & Co. For the fiscal years ended October
31, 1997 and October 31, 1996, International Equity Portfolio incurred $15,824
and $12,176, respectively, for administrative services. For the period June 6,
1997 through October 31, 1997, Emerging Markets Portfolio incurred $1,090 for
administrative services.
DISTRIBUTOR
===============================================================================
The Distribution Agreement (dated September 5, 1990, as amended and
restated February 12, 1991) between the Corporation and 59 Wall Street
Distributors remains in effect indefinitely, but only so long as such agreement
is specifically approved at least annually in the same manner as each
Portfolio's Investment Advisory Agreement (see "Investment Adviser"). The
Distribution Agreement was approved by the Independent Directors of the
Corporation on December 17, 1997. The agreement terminates automatically if
assigned by either party thereto and is terminable with respect to each Fund at
any time without penalty by a vote of a majority of the Directors of the
Corporation or by a vote of the holders of a "majority of that Fund's
outstanding voting securities" (as defined in the 1940 Act). (See "Additional
22
<PAGE>
Information"). The Distribution Agreement is terminable with respect to each
Fund by the Corporation's Directors or shareholders of that 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 Corporation.
NET ASSET VALUE; REDEMPTION IN KIND
===============================================================================
Each Fund's net asset value per share is determined once daily at 4:00
p.m., New York time on each day the New York Stock Exchange is open for regular
trading. (As of the date of this Statement of Additional Information, such
Exchange is so open every weekday except for the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) The determination of each Fund's net asset
value of per share is made by subtracting from the value of a Fund's total
assets (I.E., the value of its investment in its corresponding Portfolio and
other assets) the amount of its liabilities, including expenses payable or
accrued, and dividing the difference by the number of shares of that Fund
outstanding at the time the determination is made.
The value of each 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 its corresponding Fund is determined. The value of each
Fund's investment in its corresponding Portfolio is determined by multiplying
the value of that Portfolio's net assets by the percentage, effective for that
day, which represents that Fund's share of the aggregate beneficial interests in
that Portfolio.
The value of investments listed on a domestic securities exchange is
based on the last sale prices as of the regular close of the New York Stock
Exchange (which is currently 4:00 P.M., New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange. Securities listed on a foreign exchange are valued at the last
quoted sale price available before the time at which net assets are valued.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security. For purposes of
calculating net asset value per share, all assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the
prevailing market rates available at the time of valuation.
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<PAGE>
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of each Portfolio's
Trustees. Such procedures include the use of independent pricing services, which
use prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Short-term investments which mature in 60 days or less are
valued at amortized cost if their original maturity was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if their original
maturity when acquired was more than 60 days, unless this is determined not to
represent fair value by the Trustees of the relevant Portfolio.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when a Portfolio's net
asset value is calculated, such securities would be valued at fair value in
accordance with procedures established by and under the general supervision of
that Portfolio's Trustees.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
each Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Corporation is obligated with
respect to any one investor during any 90 day period to redeem shares of a Fund
solely in cash up to the lesser of $250,000 or 1% of that Fund's net assets at
the beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
===============================================================================
The average annual total return of each Fund is calculated for any
period by (a) dividing (i) the sum of the aggregate net asset value per share on
the last day of the period of shares purchased with a $1,000 payment on the
first day of the period and the aggregate net asset value per share on the last
day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to
24
<PAGE>
shares purchased with such dividends and capital gains distributions, by (ii)
$1,000, (b) raising the quotient to a power equal to 1 divided by the number of
years in the period, and (c) subtracting 1 from the result.
The total rate of return of each Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
Historical total return information for any period or portion thereof
prior to the establishment of the International Equity Fund will be that of the
International Equity Portfolio, adjusted to assume that all charges, expenses
and fees of the International Equity Fund and the International Equity Portfolio
which are presently in effect were deducted during such periods, as permitted by
applicable SEC staff interpretations. The table that follows sets forth average
annual total return information for the periods indicated:
25
<PAGE>
10/31/97
1 Year: (0.73)%
Commencement of
Operations* to
date: 4.64%
* International Equity Portfolio commenced operations on April
1, 1995.
[The annualized average rate of return for the Emerging Markets Fund
for the period June 6, 1997 (commencement of operations) through October 31,
1997 was (17.50).
Performance calculations should not be considered a representation of
the average annual or total rate of return of a Fund in the future since the
rates of return are not fixed. Actual total rates of return and average annual
rates of return depend on changes in the market value of, and dividends and
interest received from, the investments held by a Fund's corresponding Portfolio
and a Fund's and its corresponding Portfolio's expenses during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of each Fund and for providing a basis for comparison
with other investment alternatives. However, unlike bank deposits or other
investments
26
<PAGE>
which pay a fixed yield for a stated period of time, each Fund's total rate of
return fluctuates, and this should be considered when reviewing performance or
making comparisons.
FEDERAL TAXES
===============================================================================
Each year, the Corporation intends to continue to qualify each Fund and
elect that each 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, each Fund is not subject to federal
income taxes on amounts distributed to shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of a 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, foreign
currencies or other income derived with respect to its business of investing in
such securities; (b) less than 30% of each Fund's annual gross income be derived
from gains (without offset for losses) from the sale or other disposition of
securities held for less than three months; and (c) the holdings of each Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of each 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 that Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of each Fund's assets be represented by investments in the securities of
any one issuer (other than U.S. Government securities and securities of other
investment companies). Foreign currency gains that are not directly related to a
Portfolio's business of investing in stock or securities is included in the
income that counts toward the 30% gross income requirement described above but
may be excluded by Treasury Regulations from income that counts toward the 90%
of gross income requirement described above. In addition, in order not to be
subject to federal income tax, at least 90% of each Fund's net investment income
and net short-term capital gains earned in each year must be distributed to that
Fund's shareholders.
Under the Code, gains or losses attributable to foreign currency
contracts, or to fluctuations in exchange rates between the time a Portfolio
accrues income or receivables or expenses or other liabilities denominated in a
foreign currency and the time it actually collects such income or pays such
liabilities, are treated as ordinary income or ordinary loss. Similarly, a
Fund's share of gains or losses on the disposition of debt securities held by
its corresponding Portfolio, if any, denominated in foreign currency, to the
extent attributable to fluctuations in
27
<PAGE>
exchange rates between the acquisition and disposition dates are also treated as
ordinary income or loss.
Gains or losses on sales of securities are treated as long-term capital
gains or losses if the securities have been held for more than one year except
in certain cases where a put has been acquired or a call has been written
thereon. Other gains or losses on the sale of securities are treated as
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities are generally treated as gains and losses
from the sale of securities. If an option written for a Portfolio lapses or is
terminated through a closing transaction, such as a repurchase of the option
from its holder, that Portfolio may realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than the amount paid
in the closing transaction. If securities are sold pursuant to the exercise of a
call option written for them, the premium received would be added to the sale
price of the securities delivered in determining the amount of gain or loss on
the sale. The requirement that less than 30% of a Fund's gross income be derived
from gains from the sale of securities held for less than three months may limit
a Portfolio's ability to write options and engage in transactions involving
stock index futures.
Certain options contracts held for a Portfolio at the end of each
fiscal year are required to be "marked to market" for federal income tax
purposes; that is, treated as having been sold at market value. Sixty percent of
any gain or loss recognized on these deemed sales and on actual dispositions are
treated as long-term capital gain or loss, and the remainder are treated as
short-term capital gain or loss regardless of how long that Portfolio has held
such options. A Portfolio may be required to defer the recognition of losses on
stock or securities to the extent of any unrecognized gain on offsetting
positions held for it.
If shares are purchased by a Portfolio in certain foreign investment
entities, referred to as "passive foreign investment companies", its
corresponding Fund may be subject to U.S. federal income tax, and an additional
charge in the nature of interest, on that Fund's portion of any "excess
distribution" from such company or gain from the disposition of such shares,
even if the distribution or gain is paid by that Fund as a dividend to its
shareholders. If the Fund were able and elected to treat a passive foreign
investment company as a "qualified electing fund", in lieu of the treatment
described above, that Fund would be required each year to include in income, and
distribute to shareholders, in accordance with the distribution requirements set
forth above, that Fund's pro rata share of the ordinary earnings and net capital
gains of the company, whether or not distributed to that Fund.
RETURN OF CAPITAL. If the net asset value of shares is
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<PAGE>
reduced below a shareholder's cost as a result of a dividend or capital gains
distribution by a Fund, such dividend or capital gains distribution would be
taxable even though it represents a return of invested capital.
REDEMPTION OF SHARES. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities is treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
FOREIGN TAXES. If the Corporation elects to treat foreign income taxes
paid from each Fund as paid directly by that Fund's shareholders, each Fund's
shareholders would be required to include in income such shareholder's
proportionate share of the amount of foreign income taxes paid by that Fund and
would be entitled to claim either a credit or deduction in such amount.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes are subject to the limitation that the credit may not exceed the
shareholder's U.S. tax (determined without regard to the availability of the
credit) attributable to that shareholder's total foreign source taxable income.
For this purpose, the portion of dividends and capital gains distributions paid
from a Fund from its foreign source income is treated as foreign source income.
A Fund's gains and losses from the sale of securities are generally treated as
derived from U.S. sources, however, and certain foreign currency gains and
losses likewise are treated as derived from U.S. sources. The limitation of the
foreign tax credit is applied separately to foreign source "passive income",
such as the portion of dividends received from a Fund which qualifies as foreign
source income. In addition, the foreign tax credit is allowed to offset only 90%
of the alternative minimum tax imposed on corporations and individuals. Because
of these limitations, a shareholder may be unable to claim a credit for the full
amount of such shareholder's proportionate share of the foreign income taxes
paid from a Fund.
In certain circumstances foreign taxes imposed with respect to a Fund's
income may not be treated as income taxes imposed on that Fund. Any such taxes
would not be included in a Fund's income, would not be eligible to be "passed
through" to Fund shareholders, and would not be eligible to be claimed as a
foreign tax credit or deduction by Fund shareholders. In particular, in certain
circumstances it may not be clear whether certain amounts of taxes deducted from
gross dividends paid to a
29
<PAGE>
Fund would, for U.S. federal income tax purposes, be treated as imposed on the
issuing corporation rather than that Fund.
OTHER TAXES. Each Fund is subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of each Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
DESCRIPTION OF SHARES
===============================================================================
The Corporation is an open-end management investment company organized
as a Maryland corporation on July 16, 1990. The Articles of Incorporation
currently permit the Corporation to issue 2,500,000,000 shares of common stock,
par value $0.001 per share, of which 25,000,000 shares have been classified as
shares of The 59 Wall Street International Equity Fund and 25,000,000 shares
have been classified as shares of The 59 Wall Street Emerging Markets Fund. The
Corporation currently consists of seven portfolios.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Corporation do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Corporation may elect all of the Directors of the
Corporation if they choose to do so and in such event the other shareholders in
the Corporation would not be able to elect any Director. The Corporation is not
required and has no current intention to hold meetings of shareholders annually
but the Corporation will hold special meetings of shareholders when in the
judgment of the Corporation's Directors 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
Directors 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 Directors. Shareholders also have the right
to remove one or more Directors without a meeting by a declaration in writing by
a specified number of shareholders. Shares have no preference, pre-emptive,
conversion or similar rights. Shares, when issued, are fully paid and
non-assessable.
Stock certificates are not issued by the Corporation.
The Articles of Incorporation of the Corporation contain a provision
permitted under Maryland Corporation Law which under certain circumstances
eliminates the personal liability of the Corporation's Directors to the
Corporation or its shareholders.
30
<PAGE>
The Articles of Incorporation and the By-Laws of the Corporation
provide that the Corporation indemnify the Directors and officers of the
Corporation to the full extent permitted by the Maryland Corporation Law, which
permits indemnification of such persons against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Corporation. However, nothing in the Articles of
Incorporation or the By-Laws of the Corporation protects or indemnifies a
Director or officer of the Corporation against any liability to the Corporation
or its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Interests in each Portfolio have no preference, preemptive, conversion
or similar rights, and are fully paid and non-assessable. Neither Portfolio is
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 that Portfolio.
PORTFOLIO TRANSACTIONS
===============================================================================
In effecting securities transactions the Investment Adviser seeks to
obtain the best price and execution of orders. All of the transactions for the
Portfolios are executed through qualified brokers other than Brown Brothers
Harriman & Co. In selecting such brokers, the Investment Adviser considers a
number of factors including: the broker's ability to execute orders without
disturbing the market price; the broker's reliability for prompt, accurate
confirmations and on-time delivery of securities; the broker's financial
condition and responsibility; the research and other information provided by the
broker; and the commissions charged. Accordingly, the commissions charged by any
such broker may be greater than the amount another firm might charge if the
Investment Adviser determines in good faith that the amount of such commissions
is reasonable in relation to the value of the brokerage services and research
information provided by such broker.
Research services provided by brokers to which Brown Brothers Harriman
& Co. has allocated brokerage business in the past include economic statistics
and forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Investment Adviser's clients and not solely or necessarily
for the benefit of each Portfolio. The Investment Adviser believes that the
value of research services
31
<PAGE>
received is not determinable nor does such research significantly reduce its
expenses. Each Portfolio does not reduce the fee paid to the Investment Adviser
by any amount that might be attributable to the value of such services.
Portfolio securities are not purchased from or sold to the
Administrator, Distributor or Investment Adviser or any "affiliated person" (as
defined in the 1940 Act) of the Administrator, Distributor or Investment Adviser
when such entities are acting as principals, except to the extent permitted
by law.
A committee, comprised of officers and partners of Brown Brothers
Harriman & Co. who are portfolio managers of some of Brown Brothers Harriman &
Co.'s managed accounts (the "Managed Accounts"), evaluates semi-annually the
nature and quality of the brokerage and research services provided by brokers,
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative amounts of brokerage commissions paid to
the brokers on the list may vary substantially from the projected rankings.
The Trustees of each Portfolio review regularly the reasonableness of
commissions and other transaction costs incurred for each Portfolio in light of
facts and circumstances deemed relevant from time to time and, in that
connection, receive reports from the Investment Adviser and published data
concerning transaction costs incurred by institutional investors generally.
Over-the-counter purchases and sales are transacted directly with
principal market makers, except in those circumstances in which, in the judgment
of the Investment Adviser, better prices and execution of orders can otherwise
be obtained. If a Portfolio effects a closing transaction with respect to a
futures or option contract, such transaction normally would be executed by the
same broker-dealer who executed the opening transaction. The writing of options
by each Portfolio may be subject to limitations established by each of the
exchanges governing the maximum number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are written on the same or different exchanges or are
held or written in one or more accounts or through one or more brokers. The
number of options which a Portfolio may write may be affected by options written
by the Investment Adviser for other investment advisory clients. An exchange may
order the liquidation of positions found to be in excess of these limits, and it
may impose certain other sanctions.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of a Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations,
32
<PAGE>
may, but is not obligated to, aggregate the securities to be sold or purchased
for that Portfolio with those to be sold or purchased for other customers in
order to obtain best execution, including lower brokerage commissions, if
appropriate. In such event, allocation of the securities so purchased or sold as
well as any expenses incurred in the transaction are made by Brown Brothers
Harriman & Co. in the manner it considers to be most equitable and consistent
with its fiduciary obligations to its customers, including that Portfolio. In
some instances, this procedure might adversely affect a Portfolio.
ADDITIONAL INFORMATION
===============================================================================
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" (as defined in the 1940
Act) currently means the vote of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
With respect to the securities offered by the Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or
33
<PAGE>
other document filed as an exhibit to the Registration Statement. Each
such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
===============================================================================
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
ASSETS:
Investment in International Equity Portfolio
(the "Portfolio"), at value (Note 1) ................ $ 7,033,862
Receivable for fund shares sold ........................ 10,000
-----------
Total Assets ................................. 7,043,862
-----------
LIABILITIES:
Payables for:
Shareholder servicing/Eligible institution
fees (Note 2) ................................... 1,540
Administrative fee (Note 2) ....................... 770
Accrued expenses and other liabilities ............ 1,589
-----------
Total Liabilities .......................... 3,899
-----------
NET ASSETS ................................................... $ 7,039,963
===========
Net Assets Consist of:
Paid-in capital ........................................ $ 7,516,598
Accumulated net investment loss ........................ (1,284)
Accumulated net realized gain .......................... 96,050
Net unrealized depreciation ............................ (571,401)
-----------
Net Assets ................................................... $ 7,039,963
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($7,039,963 / 747,583 shares) .......................... $9.42
=====
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
For the period from June 6, 1997 (commencement of
operations) to October 31, 1997
INVESTMENT INCOME:
Dividend income allocated from Portfolio
(net of Foreign withholding taxes of $6,831) ........... $ 28,608
Expenses allocated from Portfolio ......................... (19,780)
---------
Total Income .......................................... 8,828
---------
Expenses:
Shareholder servicing/Eligible institution fees (Note 2) .. 5,478
Administrative fee (Note 2) ............................... 2,739
Direcyors' fees and expenses ............................... 316
Miscellaneous ............................................. 1,579
---------
Total Expenses ........................................ 10,112
---------
Net Investment Loss ................................... (1,284)
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS FROM
INTERNATIONAL EQUITY PORTFOLIO (Notes 1 and 3):
Net realized gain on securities transactions .............. 218,084
Net realized loss on foreign exchange transactions ........ (122,034)
Net change in unrealized depreciation of investments and
foreign currency translations ............................ (571,401)
---------
Net Realized and Unrealized Gain (Loss) ............... (475,351)
---------
Net Decrease in Net Assets Resulting from Operations ...... $(476,635)
=========
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from June 6, 1997 (commencement of
operations) to October 31, 1997
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ...................................... $ (1,284)
Net realized gain on securities and foreign
exchange transactions ................................. 96,050
Net change in unrealized depreciation on investments
and foreign currency translations ...................... (571,401)
-----------
Net decrease in net assets resulting
from operations ................................. (476,635)
-----------
Capital stock transactions (Note 4):
Increase in net assets resulting from sales
of capital stock ...................................... 7,516,598
-----------
Total increase in net assets ....................... 7,039,963
-----------
NET ASSETS:
Beginning of period ........................................ 0
-----------
End of period (including accumulated net
investment loss of $1,284) .............................. $ 7,039,963
===========
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share
outstanding throughout each period
For the period
from June 6, 1997
(commencement of
operations) to
October 31, 1997
----------------
Net asset value, beginning of period ..................... $10.00
Income from investment operations:
Net investment loss .................................. 0.00(1)
Net realized and unrealized loss ..................... (0.58)
------
Net asset value, end of period ....................... $ 9.42
======
Total return ............................................. (5.80)%(2)
Ratios/Supplemental data:
Net assets, end of period (000's omitted) ............ $7,040
Expenses as a percentage of average net assets ...... 1.36%(3,4)
Ratio of net investment loss to average net assets ... (0.06)%(3)
- ----------
(1) Less than $0.01
(2) Not annualized
(3) Annualized
(4) Includes the Fund's share of International Equity Portfolio expenses.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
International Equity Fund (the "Fund") is a separate series of The 59 Wall
Street Fund, Inc. (the "Corporation") which is registered under the Investment
Company Act of 1940, as amended. The Fund is a separate diversified portfolio of
the Corporation. The Corporation is an open-end management investment company
organized under the laws of the State of Maryland on July 16, 1990. The Fund
commenced operations on June 6, 1997.
The Fund invests all of its investable assets in the International Equity
Portfolio (the "Portfolio"), a diversified, open-end management investment
company having the same investment objectives as the Fund. The value of such
investment reflects the Fund's proportionate interest in the net assets of the
Portfolio (approximately 15% at October 31, 1997). The performance of the Fund
is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the schedule of investments, are included
elsewhere in this report and should be read in connection with the Fund's
financial statements.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require management to make certain
estimates and assumptions at the date of the financial statements and are based,
in part, on the following accounting policies. Actual results could differ from
those estimates.
A. Valuation of Investments. Valuation of investments by the
Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report.
B. Accounting for Investments. The Fund records its share of net
investment income, realized and unrealized gain and loss and adjusts its
investment in the portfolio each day. All the net investment income and
realized and unrealized gain and loss of the Portfolio is allocated pro
rata among the Fund and other investors in the portfolio at the time of
such determination.
C. Federal Income Taxes. It is the Corporation's policy to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
The Fund files a tax return annually using tax accounting methods required
under provisions of the Internal Revenue Code which may differ from
generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return due to
certain book-to-tax timing differences such as losses deferred due to
"wash sale" transactions and utilization of capital loss carryforwards
These timing differences result in temporary over-distributions for
financial statement purposes and are classified as distributions in excess
of accumulated net realized gains. As such, the character of distributions
to shareholders reported in the Financial Highlights table may differ from
that reported to shareholders on Form 1099-DIV. These distributions do not
constitute a return of capital.
D. Dividends and Distributions to Shareholders. Dividends and
distributions to shareholders are recorded on the ex-dividend date.
2. Transactions with Affiliates.
Administrative Fee. The Corporation has an administrative agreement with
Brown Brothers Harriman & Co. (the "Administrator") for which the Administrator
receives a fee from the Fund calculated daily and paid monthly at an annual rate
equivalent to 0.125% of the Fund's average daily net assets. The Administrator
has a subadministration services agreement with 59 Wall Street Administrators,
Inc. for which 59 Wall Street Administrators, Inc. receives such compensation as
is from time to time agreed upon, but not in excess of the amount paid to the
Administrator. For the period ended October 31, 1997, the Fund incurred $2,739
for administrative services.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
Shareholder Servicing/Eligible Institution Agreement. The Corporation has
a shareholder servicing agreement and an eligible institution agreement with
Brown Brothers Harriman & Co. for which Brown Brothers Harriman & Co. receives a
fee from the Fund calculated daily and paid monthly at an annual rate equivalent
to 0.25% of the Fund's average daily net assets. For the period ended October
31, 1997, the Fund incurred $5,478 for Shareholder Servicing/Eligible
Institution fees.
Board of Directors' Fees. Each Director receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
period ended October 31, 1997, the Fund incurred $316 for these fees.
3. Investment Transactions. Investment transactions of the portfolio are
discussed in Note 3 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
4. Capital Stock. The Corporation is permitted to issue 2,500,000,000
shares of capital stock, par value $.001 per share, of which 25,000,000 shares
have been classified as shares of the Fund. Transactions in shares of capital
stock were as follows:
For the
Period ended
October 31, 1997
----------------
Capital stock sold ................................... 747,583
Capital stock issued in connection with
reinvestment of dividends and distributions........ -0-
Capital stock repurchased............................. -0-
-------
Net increase.......................................... 747,583
=======
<PAGE>
Managements Discussion of fund performance
The following investment management strategies and techniques have
materially affected the Funds performance for the fiscal year ended October 31,
1997.
International Equity Fund
International equity markets, as measured by the MSCI-EAFE Index, rose
4.6% on a dollar-adjusted basis over the twelve-month period ending October 31,
1997. This return, however, masks a wide divergence of returns between the
markets of Europe and those of Asia. Against a backdrop of stable interest rates
and moderately weaker currencies, European equity markets advanced strongly over
the period, encouraged by continued signs of economic recovery and by a
significant improvement in corporate earnings. Asian markets, on the other hand,
lost considerable ground over the year. In Japan, the Governments efforts to
improve their fiscal budget at the expense of the consumer brought to a halt the
fragile economic recovery experienced earlier in the year. Only those large
export-oriented companies whose sales and profits benefited from continued yen
weakness against the US dollar managed to post reasonable gains this year.
Elsewhere in Asia, growing current account deficits and concerns about overbuilt
property markets and overextended banking systems culminated in currency
devaluations which in turn depressed equity market in the region.
The Portfolios strategy this year was to move back to a market weight in
Continental Europe where growth was accelerating, but to remain underweight in
the UK in anticipation of higher interest rates and downward revisions in
earnings expectations to reflect the negative effect of Sterling strength. Once
the UK market had adjusted to these factors the Portfolios weighting in the UK
was rebuilt, funded by a reduction in Asia. The Portfolios exposure to Asia was
reduced in several stages throughout the year, in response to expectations of
decelerating earnings growth and vulnerability of property markets, particularly
in Hong Kong. Exposure to the Japanese equity market was fairly stable
throughout the period, but holdings of Japanese equities were restructured to
reflect the poorer domestic economic outlook. The Portfolios employment of a
defensive currency hedging policy to protect the Japanese assets against yen
depreciation contributed positively to the overall return of 2.9% achieved by
the Portfolio this year for its investors.
[The following table was represented as a line chart in the printed material]
----------------------------------
Total Return
----------------------------------
One Year Inception to
Ended 10/31/97 10/31/97
(Annualized)
----------------------------------
(0.73)% 4.64%
International Equity Fund Growth of $10,000
International
DATE MSCI-EAFE Equity Portfolio*
---- --------- -----------------
4/1/95 $10,000 $10,000
4/28/95 $9,947 $10,376
5/31/95 $10,373 $10,252
6/30/95 $10,313 $10,073
7/31/95 $10,646 $10,700
8/31/95 $10,508 $10,292
9/29/95 $10,449 $10,493
10/31/95 $10,274 $10,210
11/30/95 $10,197 $10,495
12/29/95 $10,674 $10,917
1/31/96 $10,980 $10,962
2/29/96 $10,937 $10,999
3/29/96 $11,375 $11,233
4/30/96 $11,808 $11,559
5/31/96 $11,761 $11,347
6/28/96 $11,769 $11,411
7/31/96 $11,289 $11,077
8/30/96 $11,232 $11,101
9/30/96 $11,473 $11,396
10/31/96 $11,326 $11,280
11/29/96 $11,622 $11,728
12/31/96 $11,533 $11,578
1/31/97 $11,052 $11,172
2/28/97 $11,177 $11,355
3/31/97 $11,157 $11,396
4/30/97 $11,103 $11,457
5/30/97 $11,935 $12,202
6/30/97 $12,126 $12,875
7/31/97 $12,413 $13,084
8/31/97 $11,291 $12,106
9/30/97 $12,019 $12,785
10/31/97 $11,243 $11,802
*net of fees and expenses
Past performance is not predictive of future performance.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
(expressed in U.S. dollars)
Shares Value
------ -----
COMMON STOCKS & WARRANTS (96.40%)
AUSTRALIA (1.4%)
ENERGY
23,350 Woodside Petroleum, Ltd. .... $ 197,215
-----------
MATERIALS
7,935 Rio Tinto, Ltd............... 96,539
26,715 WMC, Ltd..................... 94,876
-----------
191,415
-----------
MULTI-INDUSTRY
73,000 Pacific Dunlop, Ltd. ........ 155,911
-----------
SERVICES
83,571 Pasminco, Ltd................ 106,572
-----------
TOTAL AUSTRALIA ............ 651,113
-----------
FINLAND (1.1%)
MULTI-INDUSTRY
6,000 Nokia AB .................... 524,235
-----------
TOTAL FINLAND ............... 524,235
-----------
FRANCE (6.7%)
BANKING
14,000 Banque National de Paris C.I.. 618,905
5,000 Societe Generale SA.......... 684,783
-----------
1,303,688
-----------
CAPITAL EQUIPMENT
4,150 Alcatel Alsthom SA .......... 500,741
-----------
CONSUMER NON-DURABLES
1,640 LVMH ........................ 278,629
-----------
MEDIA & ADVERTISING
2,190 Canal Plus .................. 380,803
-----------
SERVICES
3,395 Accor SA .................... 632,121
-----------
TOTAL FRANCE ................ 3,095,982
-----------
GERMANY (8.9%)
BANKING
22,550 Commerzbank AG............... 765,271
9,410 Depfa Bank AG................ 531,148
-----------
1,296,419
-----------
CAPITAL EQUIPMENT
850 Linde AG..................... 512,820
8,320 Siemens AG................... 512,097
-----------
1,024,917
-----------
ENERGY
8,330 VEBA AG ..................... 464,389
-----------
INSURANCE
3,200 Allianz AG................... 712,844
-----------
MULTI-INDUSTRY
20,000 Metallgesellshaft AG......... 397,958
-----------
RETAIL
4,224 Metro AG* ................... 185,740
-----------
TOTAL GERMANY ............... 4,082,267
-----------
HONG KONG (1.3%)
BANKING
17,000 Dao Heng Bank Group, Ltd. ... 39,139
-----------
CONSUMER GOODS
81,000 Dairy Farm Intl.............. 63,990
-----------
INSURANCE
73,000 National Mutual Asia, Ltd. .. 66,093
-----------
MATERIALS
174,000 C.P. Pokphand Co............. 41,635
-----------
MULTI-INDUSTRY
14,000 Guoco Group, Ltd............. 30,602
11,000 Hutchison Whampoa, Ltd....... 76,117
9,000 Jardine Matheson Holdings.... 57,600
8,000 Swire Pacific, Ltd........... 42,734
-----------
207,053
-----------
REAL ESTATE
10,000 Cheung Kong Hldgs., Ltd. .... 69,521
15,000 New World Development Co., Ltd. 52,771
-----------
122,292
-----------
TELECOMMUNICATIONS
23,800 Hong Kong
Telecommunications, Ltd. . 45,559
-----------
TOTAL HONG KONG ............. 585,761
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
INDIA (2.9%)
CONSUMER DURABLES
23,325 Ashok Leyland, Ltd. ......... $ 99,131
13,500 Bajaj Auto, Ltd. ............ 214,827
-----------
313,958
-----------
FINANCE
92,100 Industrial Credit & Investment
Corp. of India, Ltd....... 300,505
-----------
MATERIALS
9,815 Grasim Industries, Ltd....... 85,881
63,135 Indo Gulf Fertilisers and
Chemicals Corp., Ltd....... 58,400
84,600 Reliance Industries, Ltd..... 438,475
5,525 Southern Petrochemicals
Industries Corp., Ltd..... 16,022
-----------
598,778
-----------
PHARMACEUTICALS
5,500 Ranbaxy Laboratories, Ltd.... 107,068
-----------
TOTAL INDIA ............... 1,320,309
-----------
INDONESIA (0.1%)
PHARMACEUTICALS
90,000 Kalbe Farma.................. 54,924
-----------
TOTAL INDONESIA ............. 54,924
-----------
IRELAND (1.4%)
CONSUMER NON-DURABLES
240,000 Waterford Wedgewood, Plc. .. 277,921
-----------
PHARMACEUTICALS
7,678 Elan Corp., Plc., ADR* ...... 382,940
-----------
TOTAL IRELAND ............... 660,861
-----------
ITALY (3.7%)
BANKING
47,030 Istituto Mobiliare
Italiano SpA (IMI)......... 425,687
-----------
ENERGY
81,600 Ente Nazionale
Idrocarbun SpA (ENI)*...... 461,211
-----------
TELECOMMUNICATIONS
219,100 Telecom Italia Mobile SpA ... 808,845
-----------
TOTAL ITALY ................ 1,695,743
-----------
JAPAN (25.6%)
BANKING
53,000 Asahi Bank, Ltd.............. 274,798
84,000 Daiwa Bank, Ltd.............. 312,688
56,000 Mitsui Trust and
Banking Co., Ltd........... 194,499
55,000 Sakura Bank, Ltd............. 224,387
42,000 Sumitomo Trust and
Banking Co., Ltd. ......... 320,017
-----------
1,326,389
-----------
CONSUMER ELECTRONICS
15,000 Canon Inc. .................. 363,939
12,000 Canon Sales Co., Inc. ....... 218,363
300 Canon Sales Co., Inc.
(Warrants) ................ 19,282
4,300 Sony Corp. .................. 356,934
-----------
958,518
-----------
CONSUMER GOODS
46,000 Kirin Brewery Co. ........... 386,041
35,000 Suzuki Motor Corp. .......... 372,248
13,000 Toyota Motor Corp. .......... 361,861
-----------
1,120,150
-----------
CONSUMER NON-DURABLES
12,000 Fuji Photo Film Co. ......... 434,732
5,900 Nintendo Co., Ltd. .......... 509,846
-----------
944,578
-----------
ELECTRIC COMPONENTS
4,500 Kyocera Corp. ............... 257,624
9,000 Matsushita Communications
Industrial Co., Ltd. ...... 317,823
35,000 Minebea Co., Ltd. ........... 348,982
11,000 Murata Mfg. Co., Ltd. ....... 446,032
4,000 Rohm Company Ltd. ........... 382,219
5,000 TDK Corp. ................... 414,624
-----------
2,167,304
-----------
FINANCE
8,200 Acom Co., Ltd. .............. 449,688
7,500 Orix Corp. .................. 512,256
-----------
961,944
-----------
INDUSTRIAL ELECTRONICS
37,000 Hitachi, Ltd. ............... 284,379
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
JAPAN (continued)
MATERIALS
16,000 Bridgestone Corp. .......... $ 345,658
27,000 Sumitomo Electric
Industries, Ltd. .......... 356,710
20 Sumitomo Electric
Industries, Ltd. (Warrants) 30,744
-----------
733,112
-----------
MULTI-INDUSTRY
43,000 Sumitomo Corp. .............. 307,270
-----------
PHARMACEUTICALS
14,000 Taisho Pharmaceutical ....... 358,288
17,000 Yamanouchi Pharmaceutical
Co., Ltd. ................. 418,114
-----------
776,402
-----------
RETAIL
7,000 Ito-Yokado Co., Ltd. ........ 347,819
-----------
SERVICES
7,000 Benesse Corp. ............... 208,808
16,000 Credit Saison ............... 429,414
20 Credit Saison (Warrants) .... 47,500
120,000 Kawasaki Kisen Kaisha, Ltd. . 172,497
4,000 Nichiei Co. , Ltd. .......... 438,720
101,274 Prospect Japan Fund ......... 361,042
-----------
1,657,981
-----------
TELECOMMUNICATIONS
13 Japan Telecom Co., Ltd....... 181,471
-----------
TOTAL JAPAN ................ 11,767,317
-----------
MALAYSIA (1.1%)
FINANCE
181,000 Public Finance, Bhd. ........ 89,048
-----------
MULTI-INDUSTRY
158,000 Renong, Bhd. ................ 145,037
-----------
REAL ESTATE
238,000 Bolton Properties, Bhd. ..... 99,241
94,000 IOI Properties, Bhd. ........ 74,444
-----------
173,685
-----------
TELECOMMUNICATIONS
47,000 Telekom Malaysia ............ 121,959
-----------
TOTAL MALAYSIA ............. 529,729
-----------
NETHERLANDS (5.6%)
CONSUMER GOODS
4,600 Heineken NV ................. 748,226
-----------
FINANCE
10,500 Fortis Amev NV .............. 412,645
-----------
MATERIALS
4,995 Akzo Nobel NV ............... 880,139
-----------
TELECOMMUNICATIONS
14,300 Koninklijke PTT Nederland ... 546,515
-----------
TOTAL NETHERLANDS .......... 2,587,525
-----------
SPAIN (3.4%)
ENERGY
11,000 Repsol SA ................... 461,264
-----------
FINANCE
7,640 Argentaria SA................ 424,357
-----------
UTILITIES
24,430 Telefonica de Espana ........ 666,715
-----------
TOTAL SPAIN ................. 1,552,336
-----------
SWEDEN (3.0%)
CAPITAL EQUIPMENT
10,000 Ericsson (LM)
Telephone Co., Class `B' .. 440,593
-----------
CONSUMER DURABLES
5,070 Electrolux AB (B free) ...... 419,685
-----------
FINANCE
11,400 Skandia Forsakrings AB ...... 532,718
-----------
TOTAL SWEDEN ................ 1,392,996
-----------
SWITZERLAND (8.3%)
BANKING
4,234 Credit Suisse AG Registered.. 596,434
670 Union Bank of Switzerland
Bearer..................... 771,319
-----------
1,367,753
-----------
CONSUMER GOODS
85 Roche Holdings AG DRC ....... 746,956
-----------
CONSUMER NON-DURABLES
645 Nestle AG Registered ........ 908,827
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
SWITZERLAND (Continued)
PHARMACEUTICALS
502 Novartis AG Bearer .......... $ 791,584
-----------
TOTAL SWITZERLAND .......... 3,815,120
-----------
UNITED KINGDOM (21.9%)
BANKING
31,500 Barclays, Plc. .............. 789,038
42,000 Commercial Union, Plc. ...... 591,911
-----------
1,380,949
-----------
CONSUMER GOODS
57,000 Guiness, Plc. ............... 509,717
83,900 Safeway, Plc. ............... 546,513
57,000 Smithkline Beecham, Plc. .... 540,320
76,000 Unilever, Plc. .............. 566,140
-----------
2,162,690
-----------
ENERGY
48,000 British Petroleum Co., Plc. . 705,461
45,000 PowerGen, Plc. .............. 500,557
-----------
1,206,018
-----------
FINANCE
23,000 HSBC Holdings, Plc. ......... 540,236
32,000 Land Securities, Plc. ....... 536,880
63,500 LLoyds TSB Group, Plc. ...... 793,702
-----------
1,870,818
-----------
MULTI-INDUSTRY
115,000 Inchcape, Plc. .............. 418,683
-----------
PHARMACEUTICALS
36,000 Glaxo Wellcome, Plc. ........ 771,900
-----------
SERVICES
55,000 BAA, Plc. ................... 507,520
36,000 Granada Group, Plc. ......... 496,480
44,000 Railtrack Group, Plc. ....... 703,514
52,000 Reuters Holdings, Plc. ...... 564,462
-----------
2,271,976
-----------
TOTAL UNITED KINGDOM ........ 10,083,034
-----------
TOTAL INVESTMENTS (identified
cost $44,330,137) (a) .... 96.4% $44,399,252
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ...... 3.6 1,638,555
----- -----------
NET ASSETS .................... 100.0% $46,037,807
===== ===========
- ----------
* non-income producing security
(a) The aggregate cost for federal income tax purposes is $44,330,137, the
aggregate gross unrealized appreciation is $5,619,648, and the aggregate
gross unrealized depreciation is $5,550,533, resulting in net unrealized
appreciation of $69,115.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified
cost $44,330,137) (Note 1) ............................. $44,399,252
Cash (including $14,578 in foreign currency) .............. 1,537,279
Receivables for:
Forward foreign exchange contracts sold ................ 335,621
Dividends .............................................. 78,280
Foreign tax reclaim .................................... 6,353
Deferred organizational expense ........................... 2,149
-----------
Total Assets ...................................... 46,358,934
-----------
LIABILITIES:
Payables for:
Investments purchased .................................. 256,376
Investment advisory fee (Note 2) ....................... 51,069
Foreign withholding taxes .............................. 10,415
Administrative fee (Note 2) ............................ 1,441
Expense reimbursement fee .............................. 1,826
-----------
Total Liabilities ................................. 321,127
-----------
NET ASSETS ................................................... $46,037,807
===========
Net Assets Consist of:
Paid-in capital ......................................... 45,629,380
Net unrealized appreciation ............................. 408,427
-----------
Net Assets ................................................... $46,037,807
===========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
(expressed in U.S. dollars)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding taxes of $166,607) $ 694,409
-----------
Expenses:
Investment advisory fee (Note 2) ....................... 293,880
Expense reimbursement fee (Note 2) ..................... 96,740
Administrative fee (Note 2) ............................ 15,824
Amortization of organization expenses (Note 1) ......... 887
-----------
Total Expenses ......................................... 407,331
-----------
Net Investment Income .............................. 287,078
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3):
Net realized gain (loss) on:
Investments ............................................ 2,973,296
Foreign exchange transactions ......................... (1,831,375)
-----------
1,141,921
-----------
Net change in unrealized depreciation on:
Investments ............................................ (615,011)
Foreign currency translations ......................... (4,588)
-----------
(619,599)
-----------
Net Realized and Unrealized Gain ..................... 522,322
-----------
Net Increase in Net Assets Resulting from Operations ...... $ 809,400
===========
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the For the
year ended year ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................ $ 287,078 $ 237,627
Net realized gain on investments and foreign
exchange transactions ............................. 1,141,921 1,907,166
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations .. (619,599) 1,134,561
------------ ------------
Net increase in net assets resulting from operations 809,400 3,279,354
------------ ------------
Capital transactions:
Proceeds from contributions .......................... 10,305,094 9,914,234
Value of withdrawals ................................. (4,561,135) (1,900,000)
------------ ------------
Net increase in net assets resulting from
capital transactions ............................ 5,743,959 8,014,234
------------ ------------
Total increase in net assets ..................... 6,553,359 11,293,588
NET ASSETS:
Beginning of period ...................................... 39,484,448 28,190,860
------------ ------------
End of period ............................................ $ 46,037,807 $ 39,484,448
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share
outstanding throughout each period
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
April 1, 1995
For the For the (commencement of
year ended year ended operations) to
October 31, 1997 October 31, 1996 October 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Ratios/Supplemental Data:
Portfolio turnover rate..................... 85% 56% 23%
Average commission rate paid per share...... $0.0223 $0.0191 $0.0200
</TABLE>
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
1. Organization and Significant Accounting Policies. International Equity
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company which was
organized as a trust under the laws of the State of New York on August 15, 1994.
The Portfolio commenced operations on April 1, 1995. The Declaration of Trust
permits the Trustees to create an unlimited number of beneficial interests in
the Portfolio.
The Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
A. Valuation of Investments. (1) The value of investments listed on
either a domestic or foreign securities exchange is based on the last sale
price on that exchange prior to the time when assets are valued, or in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchange; (2) unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter
market; (3) securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by and under the general supervision and responsibility of the
Portfolio's Trustees. Such procedures include the use of independent
pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications
as to the value from dealers; and general market conditions; (4) all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the prevailing rates of exchange available
at the time of valuation; and (5) trading in securities on most foreign
exchanges and over-the-counter markets is normally completed before the
close of the New York Stock Exchange and may also take place on days on
which the New York Stock Exchange is closed. If events materially
affecting the value of foreign securities occur between the time when the
exchange on which they are traded closes and the time when the Portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the Portfolio's Trustees.
B. Foreign Currency Translations. The accounting records of the
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such
currency against the U.S. dollar to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Upon the purchase or sale of a
security denominated in foreign currency, the Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale, for
a fixed amount of U.S. dollars of the amount of foreign currency involved
in the underlying security transaction. The Portfolio isolates that
portion of realized gain or loss on investments resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of such investments. Reported net realized and
unrealized gains and losses arise from the sales of portfolio securities,
sales of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Portfolio's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized appreciation or
depreciation on foreign currency translations arise from changes in the
value of the assets and liabilities, excluding investments in securities,
at fiscal year end, arising from changes in the exchange rate.
C. Forward Foreign Currency Exchange Contracts. The Portfolio may
enter into forward foreign currency exchange contracts ("contracts") in
connection with planned purchases or sales of securities, to hedge the
U.S. dollar value of portfolio securities denominated in a particular
currency, or to increase or
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
shift its exposure to a currency other than U.S. dollars. The Portfolio
has no specific limitation on the percentage of assets which may be
committed to these types of contracts. The Portfolio could be exposed to
risks if the counterparties to the contracts are unable to meet the terms
of their contracts or if the value of the foreign currency changes
unfavorably. The U.S. dollar values of foreign currency underlying all
contractual commitments held by the Portfolio are determined using forward
currency exchange rates supplied by a quotation service.
D. Accounting for Investments. Security transactions are accounted
for on the trade date. Realized gains and losses on security transactions
are determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date. Dividend income is recorded net of foreign taxes withheld where
recovery of such taxes is not assured. Interest income is accrued daily.
E. Federal Income Taxes. The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of the Portfolio's
ordinary income and capital gains.
F. Deferred Organization Expenses. Expenses incurred by the
Portfolio in connection with its organization are being amortized on a
straight-line basis over a five-year period.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which it pays
the Adviser a fee calculated daily and paid monthly at an annual rate equivalent
to 0.65% of the Portfolio's average daily net assets. For the year ended October
31, 1997, the Portfolio incurred $293,880 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (Cayman) Limited (the "Administrator") for
which it pays the Administrator a fee calculated daily and paid monthly at an
annual rate equivalent to 0.035% of the Portfolio's average daily net assets.
The Administrator has a subadministration agreement with Signature Financial
Group (Cayman) Ltd. for which Signature Financial Group (Cayman) Ltd. receives
such compensation as is from time to time agreed upon. For the year ended
October 31, 1997, the Portfolio incurred $15,824 for administrative services.
Expense Reimbursement Fee. Brown Brothers Harriman Trust Company (Cayman)
Limited pays certain expenses of the Portfolio and receives a fee from the
Portfolio, computed and paid monthly, such that after such fee the aggregate
expenses will not exceed 0.90% of the Portfolio's average daily net assets. For
the year ended October 31, 1997, Brown Brothers Harriman Trust Company (Cayman)
Limited incurred $159,939 in expenses on behalf of the Portfolio. The expense
reimbursement agreement will terminate when the aggregate amount of fees
received by Brown Brothers Harriman Trust Co. (Cayman) Limited thereunder equals
the aggregate amount of expenses paid by Brown Brother Harriman Trust Company
(Cayman) Limited thereunder.
3. Investment Transactions. For the year ended October 31, 1997, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $41,795,992 and $37,127,477, respectively. There
were no purchases or sales of U.S. government obligations during the period.
4. Financial Instruments with Off-Balance Sheet Risk. At October 31, 1997
the International Equity Fund had outstanding forward foreign currency exchange
contracts as a hedge to protect against possible changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
portfolio position. Forward contracts involve elements of market
risk in excess of the amount reflected in the Statement of Assets and
Liabilities. The Funds bear the risk of an unfavorable change in the foreign
exchange rate underlying the forward contracts.
Forward foreign currency exchange contracts open at October 31, 1997:
Contracts In Exchage Deliver Unrealized
to deliver For Date Appreciation
--------- ---------- ------- -------------
JPY 925,000,000 $7,983,774 11/18/97 $278,054
JPY 925,000,000 $7,778,862 12/02/97 57,567
--------
$335,621
========
<PAGE>
THE 59 WALL STREET EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
ASSETS:
Investment in Emerging Markets Portfolio
(the "Portfolio"), at value (Note 1) .................... $ 6,167,990
Receivable for fund shares sold ........................... 105,000
-----------
Total Assets ........................................ 6,272,990
-----------
LIABILITIES:
Payables for:
Shareholder servicing/Eligible institution
fees (Note 2) ........................................ 2,415
Administrative fee (Note 2) ............................. 1,207
Accrued expenses and other liabilities .................. 178
-----------
Total Liabilities ................................... 3,800
-----------
NET ASSETS ...................................................... $ 6,269,190
===========
Net Assets Consist of:
Paid-in capital ............................................ $ 7,546,170
Accumulated net investment loss ............................ (5,573)
Accumulated net realized loss .............................. (61,340)
Net unrealized depreciation ................................ (1,210,067)
-----------
Net Assets ...................................................... $ 6,269,190
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($6,269,190 / 759,446 shares) .............................. $8.25
=====
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
For the period from June 6, 1997 (commencement of operations)
to October 31, 1997
INVESTMENT INCOME:
Income:
Dividend income allocated from Portfolio (net of foreign
withholding taxes of $3,710).............................. $ 31,515
-----------
Expenses allocated from Portfolio.......................... (26,934)
-----------
Total Income .......................................... 4,581
-----------
Expenses:
Shareholder servicing/Eligible institution fees (Note 2)... 5,500
Administrative fee (Note 2)................................ 2,750
Directors' fees and expenses............................... 314
Miscellaneous.............................................. 1,904
-----------
Total Expenses ........................................ 10,154
-----------
Net Investment Loss .................................. (5,573)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
EMERGING MARKETS PORTFOLIO (Notes 1 and 3):
Net realized gain on securities transactions............... 1,180
Net realized loss on foreign exchange transactions......... (62,520)
Net change in unrealized depreciation of investments
and foreign currency translations........................ (1,210,067)
-----------
Net Realized and Unrealized Loss ...................... (1,271,407)
-----------
Net Decrease in Net Assets Resulting from Operations ...... $(1,276,980)
===========
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from June 6, 1997 (commencement of operations)
to October 31, 1997
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ......................................... $ (5,573)
Net realized loss on securities and foreign exchange
transactions .............................................. (61,340)
Net change in unrealized depreciation on investments and
foreign currency translations ........................ (1,210,067)
-----------
Net decrease in net assets resulting from
operations ........................................... (1,276,980)
-----------
Capital stock transactions (Note 4):
Net proceeds from sales of capital stock .................... 7,569,495
Net cost of capital stock redeemed .......................... (23,325)
-----------
Net increase in net assets resulting from capital
stock transactions .................................... 7,546,170
-----------
Total increase in net assets ........................ 6,269,190
NET ASSETS:
Beginning of period ......................................... 0
-----------
End of period (including accumulated net investment
loss of $5,573) ........................................... $ 6,269,190
===========
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding
throughout each period
For the period
from June 6, 1997
(commencement of
operations) to
October 31, 1997
-----------------
Net asset value, beginning of period ........................ $10.00
Income from investment operations:
Net investment loss ..................................... (0.01)
Net realized and unrealized loss ........................ (1.74)
------
Net asset value, end of period .......................... $ 8.25
======
Total return ................................................ (17.50)%(1)
Ratios/Supplemental data:
Net assets, end of period (000's omitted) ............... $6,269
Expenses as a percentage of average net assets ........ 1.71%(2),(3)
Ratio of net investment loss to average net assets ...... (0.25)%(2)
- -----------
(1) Not annualized
(2) Annualized
(3) Includes the Fund's share of Emerging Markets Portfolio expenses.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
Emerging Markets Fund (the "Fund") is a separate series of The 59 Wall Street
Fund, Inc. (the "Corporation") which is registered under the Investment Company
Act of 1940, as amended. The Fund is a separate diversified portfolio of the
Corporation. The Corporation is an open-end management investment company
organized under the laws of the State of Maryland on July 16, 1990. The Fund
commenced operations on June 6, 1997.
The Fund invests all of its investable assets in the Emerging Markets
Portfolio (the "Portfolio"), a diversified, open-end management investment
company having the same investment objectives as the Fund. The value of such
investment reflects the Fund's porportionate interest in the net assets of the
Portfolio (approximately 64% at October 31, 1997). The performance of the Fund
is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the schedule of investments, are included
elsewhere in this report and should be read in connection with the Fund's
financial statements.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require management to make certain
estimates and assumptions at the date of the financial statements and are based,
in part, on the following accounting policies. Actual results could differ from
those estimates.
A. Valuation of Investments. Valuation of investments by the
Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report.
B. Accounting for Investments. The Fund records its share of net
investment income, realized and unrealized gain and loss and adjusts its
investment in the Portfolio each day. All the net investment income and
realized and unrealized gain and loss of the Portfolio is allocated pro
rata among the Fund and other investors in the Portfolio at the time of
such determination.
C. Federal Income Taxes. It is the Corporation's policy to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
The Fund files a tax return annually using tax accounting methods required
under provisions of the Internal Revenue Code which may differ from
generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return due to
certain book-to-tax timing differences. As such, the character of
distributions to shareholders reported in the Financial Highlights table
may differ from that reported to shareholders on Form 1099-DIV.
D. Dividends and Distributions to Shareholders. Dividends and
distributions to shareholders are recorded on the ex-dividend date.
2. Transactions with Affiliates.
Administrative Fee. The Corporation has an administrative agreement with
Brown Brothers Harriman & Co. (the "Administrator") for which the Administrator
receives a fee from the Fund calculated daily and paid monthly at an annual rate
equivalent to 0.125% of the Fund's average daily net assets. The Administrator
has a subadministration services agreement with 59 Wall Street Administrators,
Inc. for which 59 Wall Street Administrators, Inc. receives such compensation as
is from time to time agreed upon, but not in excess of the amount paid to the
Administrator. For the period ended October 31, 1997, the Fund incurred $2,750
for administrative services.
<PAGE>
Shareholder Servicing/Eligible Institution Agreement. The Corporation has
a shareholder servicing agreement and an eligible institution agreement with
Brown Brothers Harriman & Co. for which Brown Brothers Harriman & Co. receives a
fee from the Fund calculated daily and paid monthly at an annual rate equivalent
to 0.25% of the Fund's average daily net assets. For the period ended October
31, 1997, the Fund incurred $5,500 for Shareholder Servicing/Eligible
Institution fees.
Board of Directors' Fees. Each Director receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
period ended October 31, 1997, the Fund incurred $314 for these fees.
3. Investment Transactions. Investment transactions of the portfolio are
discussed in Note 3 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
4. Capital Stock. The Corporation is permitted to issue 2,500,000,000
shares of capital stock, par value $.001 per share, of which 25,000,000 shares
have been classified as shares of the Fund. Transactions in shares of capital
stock were as follows:
For the Period ended
October 31, 1997
---------------
Capital stock sold ............................. 761,946
Capital stock repurchased ...................... 2,500
-------
Net increase ................................... 759,446
=======
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The following investment management strategies and techniques have
materially affected the Fund's performance for the period ended October 31,
1997.
Emerging Market Fund
The Emerging Markets Fund was launched in June of this year, just ahead of
an extremely turbulent period for emerging markets in general. Currency turmoil
which erupted in Southeast Asia in late June created nervousness in emerging
equity markets globally and as measured by the MSCI - Emerging Markets (Free)
Index, emerging markets have declined 20.7% since the Fund was launched. In Asia
concerns over rising current account deficits, overextended banking systems, and
overbuilt property markets created instability and forced the devaluation of a
number of managed currencies. Latin America and Eastern Europe continued to
trade on improving economic fundamentals, lacking most of the symptoms existing
in Asia. Convinced that Latin America and Eastern Europe continue to offer
better prospects than Asia in the coming months, the Portfolio has weathered
this market turbulence reasonably well and outperformed the Index, declining
only 17.5%.
The Portfolio's strategy thus far reflects concerns about market weakness
and continued currency instability throughout Southeast Asia. In the wake of the
devaluation of the Thai baht, overall exposure to the region was reduced. A
portion of these proceeds has been used to strengthen the Portfolio's exposure
to Latin America and Eastern Europe, regions which offer improving economic
fundamentals and reasonable equity valuations. The balance of funds has been
retained in reserve for recommitment to Asia once stability returns to the
currency markets. Asian markets now offer extremely attractive values,
particularly those segments of the market where profits growth has remained
intact, or been enhanced by recent currency devaluations.
Emerging Markets Fund
Growth of $10,000
[The following table was represented as a line chart in the printed material]
--------------------------------------------------------------------
Total Return
--------------------------------------------------------------------
One Year Ended Five Years Inception
10/31/96 Ended 10/31/96 6/06/97
(Annualized)
--------------------------------------------------------------------
N/A N/A (17.50)%
--------------------------------------------------------------------
Emerging Markets
Date Portfolio* MSCI-Emerging Markets
---- ---------------- ---------------------
6/6/97 $10,000 $10,000
6/30/97 $10,160 $10,424
7/31/97 $10,140 $10,579
8/31/97 $8,810 $9,233
9/30/97 $9,460 $9,489
10/31/97 $8,250 $7,932
* net of fees and expenses.
Past performance is not predictive of future performance.
<PAGE>
EMERGING MARKETS EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
(expressed in U.S. dollars)
Shares Value
------ -----
COMMON STOCKS & WARRANTS (74.0%)
ARGENTINA (7.9%)
ENERGY
8,060 YPF Sociedad Anonima........ $ 256,463
-----------
FINANCE
19,300 Banco Frances Del Rio De
La Plata SA............... 159,321
30,600 Banco De Galicia BA......... 185,854
-----------
345,17
-----------
SERVICES
6,300 Telecom Argentina SA ADR*... 159,469
-----------
TOTAL ARGENTINA ............ 761,107
-----------
BRAZIL (11.8%)
CONSUMER GOODS
15,500 Compania Cervejaria
Brahma ADR................ 199,562
-----------
ENERGY
10,000 Centrais Electricas
Brasileiras ADR*.......... 217,696
5,900 Companhia Energetica
De Minas ADR*............. 235,529
-----------
453,225
-----------
FINANCE
450,000 Itaubanco SA................ 181,641
-----------
SERVICES
3,000 Telecomunicacoes
Brasileiras SA ADR*....... 304,500
-----------
TOTAL BRAZIL ............... 1,138,928
-----------
CHILE (1.7%)
6,000 Chilgener SA ADR............ 163,500
-----------
TOTAL CHILE ................ 163,500
-----------
INDIA (9.0%)
CAPITAL EQUIPMENT
10,500 Reliance GDS*............... 219,188
-----------
CONSUMER GOODS
43,000 Ashok Leyland GDR........... 182,750
10,000 Ranbaxy Laboratories GDS.... 227,500
-----------
410,250
-----------
FINANCE
16,585 Industrial Credit &
Investment Corp........... 246,287
-----------
TOTAL INDIA ................ 875,725
-----------
INDONESIA (3.2%)
BANKING
315,000 Bank Dagang Nasional
Indonesia................. 43,689
-----------
CONSUMER GOODS
25,500 PT HM Sampoerna............. 44,386
120,000 PT Kalbe Farma.............. 73,232
-----------
117,618
-----------
MULTI-INDUSTRY
61,000 PT Astra International, Inc. 45,263
-----------
SERVICES
210,000 Citra Marga Nusaphale
Persada................... 59,709
43,500 PT Telekomunikasi Ser B..... 40,423
-----------
100,132
-----------
TOTAL INDONESIA ............ 306,702
-----------
MALAYSIA (5.7%)
FINANCE
125,000 Public Finance, Bhd*........ 61,497
-----------
MULTI-INDUSTRY
23,500 Genting Berhad.............. 66,267
27,000 Perusahaan Otomobil
Nasional*................. 64,797
104,000 Renong Berhad............... 95,467
73,000 Sime Darby Berhad. ......... 105,115
-----------
331,646
-----------
REAL ESTATE
39,000 Bolton Properties........... 16,262
31,500 IOI Properties Berhad....... 24,947
-----------
41,209
-----------
<PAGE>
EMERGING MARKETS EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997 (continued)
(expressed in U.S. dollars)
Shares Value
------ -----
MALAYSIA (Continued)
SERVICES
46,000 Telekom Malaysia............ $ 119,364
-----------
TOTAL MALAYSIA ............. 553,716
-----------
MEXICO (9.0%)
CAPITAL EQUIPMENT
25,900 Fomento Economico
Mexicano SA DE CV......... 182,242
-----------
CONSUMER GOODS
42,000 Kimberly-Clark De Mexico.... 184,329
-----------
MULTI-INDUSTRY
40,000 Cemex SA .................. 175,552
70,700 Empresas ICA Sociedad
Contrladora SA* .......... 158,685
27,800 Grupo Carso ................ 176,050
-----------
510,287
-----------
TOTAL MEXICO ............... 876,858
-----------
POLAND (4.3%)
BANKING
24,000 Bank Handlowy W Warsza
Wie SA GDR*............... 328,800
-----------
MATERIALS
9,000 KGHM Polska SA GDR*......... 91,575
-----------
TOTAL POLAND ............... 420,375
-----------
ROMANIA (3.9%)
MULTI-INDUSTRY
51,200 Romania Growth Fund PLC..... 377,856
-----------
TOTAL ROMANIA .............. 377,856
-----------
RUSSIA (3.9%)
ENERGY
2,340 Lukoil Holding ADR*......... 195,390
5,850 Unified Energy
Systems GDR*.............. 185,737
-----------
TOTAL RUSSIA ............... 381,127
-----------
SOUTH AFRICA (5.1%)
CONSUMER GOODS
6,500 South African Breweries* ... 172,883
-----------
INSURANCE
7,000 Liberty Life Association
of Africa................. 174,545
-----------
MULTI-INDUSTRY
3,300 Anglo American Corp.
of South Africa*......... 142,629
-----------
TOTAL SOUTH AFRICA ......... 490,057
-----------
TURKEY (8.5%)
BANKING
3,890,000 Akbank T.A.S. .............. 264,871
-----------
CONSUMER GOODS
2,780,000 Arcelik AS.................. 310,437
149,000 Otomobil Sanayii AS*........ 129,862
-----------
440,299
-----------
MATERIALS
1,440,000 Turk Sise Ve Cam
Fabrikalari*.............. 123,543
-----------
TOTAL TURKEY ............... 828,713
-----------
TOTAL INVESTMENTS (identified
$8,940,252) (a) ......... 74.0% $7,174,664
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ... 26.0 2,519,484
----- ----------
NET ASSETS ................ 100.0% $9,694,148
===== ==========
- ---------------
* non-income producing security
(a) The aggregate cost for federal income tax purposes is $8,940,252, the
aggregate gross unrealized appreciation is $182,097 and the aggregate gross
unrealized depreciation is $1,947,685 resulting in net unrealized
depreciation of $1,765,588.
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified
cost $8,940,252) (Note 1) ............................ $ 7,174,664
Cash (including $14,374 in foreign currency) ........... 1,428,510
Receivables for:
Investments sold ..................................... 985,313
Contributions ........................................ 100,000
Forward foreign currency exchange contracts sold ..... 11,101
Dividends ............................................ 6,868
------------
Total Assets ...................................... 9,706,456
------------
LIABILITIES:
Payables for:
Investment advisory fee (Note 2) ..................... 8,222
Administrative fee (Note 2) .......................... 320
Expense reimbursement fee ............................ 2,897
Foreign withholding taxes ............................ 869
------------
Total Liabilities ................................. 12,308
------------
NET ASSETS ................................................... $ 9,694,148
============
Net Assets Consist of:
Paid-in capital ......................................... $ 11,454,506
Net unrealized depreciation ............................. (1,760,358)
------------
Net Assets ................................................... $ 9,694,148
============
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS PORTFOLIO
STATEMENT OF OPERATIONS
For the period from June 6, 1997 (commencement of operations)
to October 31, 1997 (expressed in U.S. dollars)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $4,503) ... $ 38,204
-----------
Expenses:
Investment advisory fee (Note 2) ....................... 28,028
Expense reimbursement fee (Note 2) ..................... 10,861
Administrative fee (Note 2) ............................ 1,090
-----------
Total Expenses ......................................... 39,979
Net Investment Loss ................................ (1,775)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3):
Net realized gain (loss) on:
Investments ............................................ 2,604
Foreign exchange transactions .......................... (278,881)
-----------
(276,277)
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ (1,765,588)
Foreign currency translations .......................... 5,230
-----------
(1,760,358)
-----------
Net Realized and Unrealized Loss ..................... (2,036,635)
-----------
Net Decrease in Net Assets Resulting from Operations ...... $(2,038,410)
===========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
For the period from
June 6, 1997
(commencement of
operations) to
October 31, 1997
-------------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ......................................... $ (1,775)
Net realized loss on investments and foreign exchange
transactions .............................................. (276,277)
Net change in unrealized depreciation on
investments and foreign currency translations ............. (1,760,358)
-----------
Net decrease in net assets resulting from operations .... (2,038,410)
-----------
Capital transactions:
Proceeds from contributions ................................. 11,739,217
Value of withdrawals ........................................ (6,659)
-----------
Net increase in net assets resulting from capital stock
transactions .......................................... 11,732,558
-----------
Total increase in net assets ............................ 9,694,148
NET ASSETS:
Beginning of period ......................................... 0
-----------
End of period ............................................... $ 9,694,148
===========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout the period
(expressed in U.S. dollars)
For the period
June 6, 1997
(commencement of
operations) to
October 31, 1997
----------------
Ratio/Supplemental Data:
Portfolio turnover rate..................................... 60%
Average commission rate paid per share...................... $0.0036
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
1. Organization and Significant Accounting Policies. Emerging Markets
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company which was
organized as a trust under the laws of the State of New York on August 15, 1994.
The Portfolio commenced operations on June 6, 1997. The Declaration of Trust
permits the Trustees to create an unlimited number of beneficial interests in
the Portfolio.
The Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
A. Valuation of Investments. (1) The value of investments listed on
either a domestic or foreign securities exchange is based on the last sale
price on that exchange prior to the time when assets are valued, or in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchange; (2) unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter
market; (3) securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by and under the general supervision and responsibility of the
Portfolio's Trustees. Such procedures include the use of independent
pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications
as to the value from dealers; and general market conditions; (4) all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the prevailing rates of exchange available
at the time of valuation; and (5) trading in securities on most foreign
exchanges and over-the-counter markets is normally completed before the
close of the New York Stock Exchange and may also take place on days on
which the New York Stock Exchange is closed. If events materially
affecting the value of foreign securities occur between the time when the
exchange on which they are traded closes and the time when the Portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the Portfolio's Trustees.
B. Foreign Currency Translations. The accounting records of the
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such
currency against the U.S. dollar to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Upon the purchase or sale of a
security denominated in foreign currency, the Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale, for
a fixed amount of U.S. dollars of the amount of foreign currency involved
in the underlying security transaction. The Portfolio isolates that
portion of realized gain or loss on investments resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of such investments. Reported net realized and
unrealized gains and losses arise from the sales of portfolio securities,
sales of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Portfolio's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized appreciation or
depreciation on foreign currency translations arise from changes in the
value of the assets and liabilities, excluding investments in securities,
at fiscal year end, arising from changes in the exchange rate.
C. Forward Foreign Currency Exchange Contracts. The Portfolio may
enter into forward foreign currency exchange contracts ("contracts") in
connection with planned purchases or sales of securities, to
<PAGE>
EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
hedge the U.S. dollar value of portfolio securities denominated in a
particular currency, or to increase or shift its exposure to a currency
other than U.S. dollars. The Portfolio has no specific limitation on the
percentage of assets which may be committed to these types of contracts.
The Portfolio could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably. The U.S. dollar values of
foreign currency underlying all contractual commitments held by the
Portfolio are determined using forward currency exchange rates supplied by
a quotation service.
D. Accounting for Investments. Security transactions are accounted
for on the trade date. Realized gains and losses on security transactions
are determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date. Dividend income is recorded net of foreign taxes withheld where
recovery of such taxes is not assured. Interest income is accrued daily.
E. Federal Income Taxes. The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of the Portfolio's
ordinary income and capital gains. It is intended that the Portfolio's
assets will be managed in such a way that an investor in the Portfolio
will be able to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision
for federal income taxes is necessary.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which it pays
the Adviser a fee calculated daily and paid monthly at an annual rate equivalent
to 0.90% of the Portfolio's average daily net assets. For the period ended
October 31, 1997, the Portfolio incurred $28,028 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (Cayman) Limited (the "Administrator") for
which it pays the Administrator a fee calculated daily and paid monthly at an
annual rate equivalent to 0.035% of the Portfolio's average daily net assets.
The Administrator has a subadministration agreement with Signature Financial
Group (Cayman) Ltd. for which Signature Financial Group (Cayman) Ltd. receives
such compensation as is from time to time agreed upon. For the year ended
October 31, 1997, the Portfolio incurred $1,090 for administrative services.
Expense Reimbursement Fee. Brown Brothers Harriman Trust Company (Cayman)
Limited pays certain expenses of the Portfolio and receives a fee from the
Portfolio, computed and paid monthly, such that after such fee the aggregate
expenses will not exceed 1.25% of the Portfolio's average daily net assets. For
the period ended October 31, 1997, Brown Brothers Harriman Trust Company
(Cayman) Limited incurred $30,241 in expenses on behalf of the Portfolio. The
expense reimbursement agreement will terminate when the aggregate amount of fees
received by Brown Brothers Harriman Trust Co. (Cayman) Limited thereunder equals
the aggregate amount of expenses paid by Brown Brother Harriman Trust Company
(Cayman) Limited thereunder.
3. Investment Transactions. For the year ended October 31, 1997, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $12,815,951 and $3,686,538, respectively. There were
no purchases or sales of U.S. government obligations during the period.
<PAGE>
EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
4. Financial Instruments with Off-Balance Sheet Risk. At October 31, 1997
the Emerging Markets Fund had outstanding forward foreign currency exchange
contracts as a hedge to protect against possible changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Forward contracts involve elements of market
risk in excess of the amount reflected in the Statement of Assets and
Liabilities. The Funds bear the risk of an unfavorable change in the foreign
exchange rate underlying the forward contracts.
Forward foreign currency exchange contracts open at October 31, 1997:
Contracts In Exchage Deliver Unrealized
to deliver For Date Appreciation
---------- ---------- ------- ------------
JPY 178,368,000 $1,500,000 12/02/97 11,101
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in Part A:
Financial Highlights: The 59 Wall Street International Equity Fund and The
59 Wall Street Emerging Markets Fund for the period June 6, 1997 to October
31, 1997
The following financial statements are included in Part B:
The 59 Wall Street International Equity Fund
Statement of Assets and Liabilities for the period
June 6, 1997 to October 31, 1997 (unaudited)
Statement of Operations for the period June 6, 1997 to
October 31, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements
International Equity Portfolio
Schedule of Investments for the fiscal year ended October 31, 1997 (unaudited)
Statement of Assets and Liabilities for the fiscal year
ended October 31, 1997 (unaudited)
Statement of Operations for the fiscal year ended October 31, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Notes to Financial Statements
The 59 Wall Street Emerging Markets Fund
Statement of Assets and Liabilities for the period June 6, 1997 to
October 31, 1997 (unaudited)
Statement of Operations for the period June 6, 1997 to
October 31, 1997 (unaudited)
Statement of Changes in Net Assets (unaudited)
Financial Highlights (unaudited)
Notes to Financial Statements
Emerging Markets Portfolio
Schedule of Investments for the period June 6, 1997 to
October 31, 1997 (unaudited)
Statement of Assets and Liabilities for the period June 6, 1997
to October 31, 1997 (unaudited)
Statement of Operations for the period June 6, 1997 to October 31, 1997
Statement of Changes in Net Assets
Notes to Financial Statements
C-1
<PAGE>
(b) Exhibits:
1 -- (a) Restated Articles of Incorporation of the Registrant.(7)
-- (b) Establishment and Designation of Series of The 59 Wall
Street U.S. Equity Fund and The 59 Wall Street Short/
Intermediate Fixed Fund.(7)
-- (c) Establishment and Designation of Series of The 59 Wall
Street Small Company Fund.(7)
-- (d) Establishment and Designation of Series of The 59 Wall
Street International Equity Fund.(7)
-- (e) Establishment and Designation of Series of The 59 Wall
Street Short Term Fund. (7)
-- (f) Redesignation of series of The 59 Wall Street Inflation-
Indexed Securities Fund (formerly, The 59 Wall Street
Short/Intermediate Fixed Income Fund). (9)
-- (g) Redesignation of series of The 59 Wall Street Emerging
Markets Fund (formerly, The 59 Wall Street Short Term
Fund).(10)
-- (h) Establishment and Designation of Series of The 59 Wall
Street Mid-Cap Fund.(11)
2 -- Amended and Restated By-Laws of the Registrant.(7)
3 -- Not Applicable.
4 -- Not Applicable.
5 -- (a) Advisory Agreement with respect to The 59 Wall Street
U.S. Equity Fund.(7)
(b) Advisory Agreement with respect to The 59 Wall Street
Short/Intermediate Fixed Income Fund.(7)
6 -- Form of Amended and Restated Distribution Agreement.(3)
7 -- Not Applicable.
8 -- (a) Form of Custody Agreement.(2)
(b) Form of Transfer Agency Agreement.(2)
9 -- (a) Amended and Restated Administration Agreement.(6)
(1) Appendix A to Amended and Restated Administration
Agreement. (12)
(b) Subadministrative Services Agreement.(6)
(c) Form of License Agreement.(1)
(d) Amended and Restated Shareholder Servicing Agreement.(6)
(1) Appendix A to Amended and Restated Shareholder
Servicing Agreement. (10)
(2) Appendix A to Amended and Restated Shareholder
Servicing Agreement. (11)
(e) Amended and Restated Eligible Institution Agreement.(6)
(1) Appendix A to Amended and Restated Eligible
Institution Agreement. (10)
(2) Appendix A to Amended and Restated Eligible
Institution Agreement. (11)
(f) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street U.S. Equity Fund.(6)
(g) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street Short/Intermediate Fixed
Fund.(6)
10 -- Opinion of Counsel (including consent).(2)
C-2
<PAGE>
11 -- Independent auditors' consent.(12)
12 -- Not Applicable.
13 -- Copies of investment representation letters from initial
shareholders.(2)
14 -- Not Applicable.
15 -- Not Applicable.
16 -- Schedule for Computation of Performance Quotations.(12)
17 -- Financial Data Schedule.(13)
19 -- Powers of Attorney of Trustees and officers. (8)
- ---------------------
(1)Filed with the initial Registration Statement on July 16, 1990.
(2)Filed with Amendment No. 1 to this Registration Statement on October 9, 1990.
(3)Filed with Amendment No.2 to this Registration Statement on February 14,
1991.
(4)Filed with Amendment No. 5 to this Registration Statement on June 15, 1992.
(5)Filed with Amendment No. 7 to this Registration Statement on March 1, 1993.
(6)Filed with Amendment No.9 to this Registration Statement on
December 30, 1993.
(7)Filed with Amendment No. 24 to this Registration Statement on
February 28, 1996.
(8)Filed with Amendment No. 26 to this Registration Statement on
February 21, 1997.
(9)Filed with Amendment No. 28 to this Registration Statement on
February 28, 1997.
(10)Filed with Amendment No. 29 to this Registration Statement on
May 20, 1997.
(11)Filed with Amendment No. 30 to this Registration Statement on
August 20, 1997.
(12)Filed with Amendment No. 31 to this Registration Statement on
November 3, 1997.
(13)Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant.
See "Directors and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
Common Stock (as of September 30, 1997)
The 59 Wall Street Small Company Fund 447
The 59 Wall Street European Equity Fund 1,343
The 59 Wall Street Pacific Basin Equity Fund 1,203
The 59 Wall Street Inflation-Indexed
Securities Fund 86
The 59 Wall Street U.S. Equity Fund 495
The 59 Wall Street International Equity Fund 69
The 59 Wall Street Emerging Markets Fund 108
The 59 Wall Street Mid-Cap Fund 0
C-3
<PAGE>
Item 27. Indemnification
Reference is made to Article VII of Registrant's By-Laws and to Section
5 of the Distribution Agreement between the Registrant and 59 Wall Street
Distributors, Inc.
Registrant, its Directors and officers, and persons affiliated with
them are insured against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
The Registrant's investment adviser, Brown Brothers Harriman & Co.
("BBH & Co."), is a New York limited partnership. BBH & Co. conducts a general
banking business and is a member of the New York Stock Exchange, Inc.
To the knowledge of the Registrant, none of the general partners or
officers of BBH & Co. is engaged in any other business, profession, vocation or
employment of a substantial nature.
C-4
<PAGE>
Item 29. Principal Underwriters.
1. (a) 59 Wall Street Distributors, Inc. ("59 Wall Street
Distributors") and its affiliates, also serves as
administrator and/or distributor to other
registered investment companies.
(b) Set forth below are the names, principal business
addresses and positions of each Director and
officer of 59 Wall Street Distributors. The
principal business address of these individuals is
c/o 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, MA 02116. Unless otherwise
specified, no officer or Director of 59 Wall
Street Distributors serves as an officer or
Director of the Registrant.
Position and Offices with Position and Offices
Name 59 Wall Street Distributors with the Registrant
- ------------- --------------------------- --------------------
Philip W. Coolidge Chief Executive President
Officer, President
and Director
John R. Elder Assistant Treasurer Treasurer
Linda T. Gibson Assistant Secretary Secretary
Molly S. Mugler Assistant Secretary Assistant Secretary
Christine A. Drapeau -- Assistant Secretary
Linwood C. Downs Treasurer --
Robert Davidoff Director --
CMNY Capital, L.P.
135 East 57th Street
New York, NY 10022
Donald Chadwick Director --
Scarborough & Company
110 East 42nd Street
New York, NY 10017
C-5
<PAGE>
Leeds Hackett Director --
National Credit
Management Corporation
10155 York Road
Cockeysville, MD 21030
Laurence E. Levine Director --
First International
Capital Ltd.
130 Sunrise Avenue
Palm Beach, FL 33480
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of:
The 59 Wall Street Fund, Inc.
6 St. James Avenue
Boston, MA 02116
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
(investment adviser, eligible institution
and shareholder servicing agent)
59 Wall Street Distributors, Inc.
6 St. James Avenue
Boston, MA 02116
(distributor)
59 Wall Street Administrators, Inc.
6 St. James Avenue
Boston, MA 02116
(subadministrator)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
(custodian and transfer agent)
Item 31. Management Services.
Other than as set forth under the caption "Management of the
Corporation" in the Prospectus constituting Part A of the Registration
Statement, Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
(a) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
(b) The Registrant undertakes to file a post-effective amendment,
including financials, which need not be certified, within four to six months
following the commencement of operations of each of its series. The financial
statements included in such amendment will be as of and for the time period
ended on a date reasonably close or as soon as practicable to the date of the
amendment.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all the requirements for effectiveness of this Post-Effective
Amendment to its Registration Statement on Form N-1A ("Registration Statement")
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York and State of New
York on the 8th day of December, 1997.
THE 59 WALL STREET FUND, INC.
By /s/ PHILIP W. COOLIDGE
(Philip W. Coolidge, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
/s/ J.V. SHIELDS, JR. Director and Chairman of
(J.V. Shields, Jr.) the Board
/s/ PHILIP W. COOLIDGE President (Principal
(Philip W. Coolidge) Executive Officer)
/s/ EUGENE P. BEARD Director
(Eugene P. Beard)
/s/ DAVID P. FELDMAN Director
(David P. Feldman)
/s/ ARTHUR D. MILTENBERGER Director
(Arthur D. Miltenberger)
/s/ ALAN D. LOWY Director
(Alan D. Lowy)
/S/ JOHN R. ELDER Treasurer
(John R. Elder)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in the Paget, Bermuda on the 8th day of December, 1997.
INTERNATIONAL EQUITY PORTFOLIO
By /s/SUSAN JAKUBOSKI
(Susan Jakuboski, Assistant Treasurer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
PHILIP W. COOLIDGE* President of the Portfolio
(Philip W. Coolidge)
H.B. ALVORD* Trustee and Chairman of the Board
(H.B. Alvord)
RICHARD L. CARPENTER* Trustee
(Richard L. Carpenter)
CLIFFORD A. CLARK* Trustee
(Clifford A. Clark)
DAVID M. SEITZMAN* Trustee
(David M. Seitzman)
JOHN R. ELDER* Treasurer of the Portfolio
(John R. Elder)
*By: /s/SUSAN JAKUBOSKI
Susan Jakuboski as Attorney-in-Fact pursuant to
Powers of Attorney filed previously.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in the Paget, Bermuda on the 8th day of December, 1997.
EMERGING MARKETS PORTFOLIO
By /s/SUSAN JAKUBOSKI
(Susan Jakuboski, Assistant Treasurer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
PHILIP W. COOLIDGE* President of the Portfolio
(Philip W. Coolidge)
H.B. ALVORD* Trustee and Chairman of the Board
(H.B. Alvord)
RICHARD L. CARPENTER* Trustee
(Richard L. Carpenter)
CLIFFORD A. CLARK* Trustee
(Clifford A. Clark)
DAVID M. SEITZMAN* Trustee
(David M. Seitzman)
JOHN R. ELDER* Treasurer of the Portfolio
(John R. Elder)
*By: /s/SUSAN JAKUBOSKI
Susan Jakuboski as Attorney-in-Fact pursuant to
Powers of Attorney filed previously.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
EX-27.1 to
EX-27.2 Financial Data Schedules.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the 59 Wall
Street International Equity Fund Annual Report dated October 31, 1997 and is
qualified in its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 07
<NAME> THE 59 WALL STREET INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> JUN-06-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 7,605,263
<INVESTMENTS-AT-VALUE> 7,033,862
<RECEIVABLES> 10,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,043,862
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,899
<TOTAL-LIABILITIES> 3,899
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,516,598
<SHARES-COMMON-STOCK> 747,583
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,284)
<ACCUMULATED-NET-GAINS> 96,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (571,401)
<NET-ASSETS> 7,039,963
<DIVIDEND-INCOME> 28,608
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 29,892
<NET-INVESTMENT-INCOME> (1,284)
<REALIZED-GAINS-CURRENT> 96,050
<APPREC-INCREASE-CURRENT> (571,401)
<NET-CHANGE-FROM-OPS> (476,635)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 747,583
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,039,963
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,892
<AVERAGE-NET-ASSETS> 5,632,161
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (0.58)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.42
<EXPENSE-RATIO> 1.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the 59 Wall
Street Emerging Markets Fund Annual Report dated October 31, 1997 and is
qualified in its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 08
<NAME> THE 59 WALL STREET EMERGING MARKETS FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> JUN-06-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 7,378,057
<INVESTMENTS-AT-VALUE> 6,167,990
<RECEIVABLES> 105,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,272,990
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,800
<TOTAL-LIABILITIES> 3,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,546,170
<SHARES-COMMON-STOCK> 759,446
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (5,573)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (61,340)
<ACCUM-APPREC-OR-DEPREC> (1,210,067)
<NET-ASSETS> 6,269,190
<DIVIDEND-INCOME> 31,515
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 37,088
<NET-INVESTMENT-INCOME> (5,573)
<REALIZED-GAINS-CURRENT> (61,340)
<APPREC-INCREASE-CURRENT> (1,210,067)
<NET-CHANGE-FROM-OPS> (1,271,407)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 761,946
<NUMBER-OF-SHARES-REDEEMED> 2,500
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,269,190
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 37,088
<AVERAGE-NET-ASSETS> 5,655,124
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> (1.74)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.25
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
