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STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET MID-CAP FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
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The 59 Wall Street Mid-Cap Fund (the "Fund") is a separate portfolio 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 Fund is designed to enable investors to participate in the
opportunities available in the middle capitalization segment of the U.S. equity
market. The investment objective of the Fund is to provide investors with
long-term maximization of total return, primarily through capital appreciation
from investments in equity securities of middle-sized companies. The Corporation
seeks to achieve the investment objective of the Fund by investing all of the
Fund's assets in the U.S. Mid-Cap Portfolio (the "Portfolio"), a diversified
open-end investment company having the same investment objective as the Fund.
There can be no assurance that the Fund's investment objective will be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the
"Investment Adviser") of the Portfolio. This Statement of Additional Information
is not a prospectus and should be read in conjunction with the Prospectus dated
November 3, 1997, a copy of which may be obtained from the Corporation at the
address noted above.
TABLE OF CONTENTS
CROSS-REFERENCE
PAGE TO PAGE IN
PROSPECTUS
Investment Objective and Policies . . . . . 2 4
Investment Restrictions . . . . . . . . 4 7
Directors, Trustees and Officers . . . . . 6 9
Investment Adviser . . . . . . . . . . 9 9
Administrators. . . . . . . . . . . . 11 11
Distributor . . . . . . . . . . . . 11 13
Net Asset Value; Redemption in Kind . . . . 12 14
Computation of Performance . . . . . . . 13 18
Federal Taxes . . . . . . . . . . . . 13 15
Description of Shares . . . . . . . . . 15 16
Portfolio Transactions . . . . . . . . . 16 5
Additional Information . . . . . . . . . 17 20
Financial Statements . . . . . . . . .
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS NOVEMBER 3, 1997.
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INVESTMENT OBJECTIVE AND POLICIES
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The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the 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.
OPTIONS ON STOCK. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for the Portfolio, although the current
intention is not to do so in such a manner that more than 5% of the 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. Over-the-counter options ("OTC
Options") purchased are treated as not readily marketable. (See "Investment
Restrictions").
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.
OPTIONS ON STOCK INDEXES. The Corporation may terminate an option that it
has written prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms as the option
written. It is possible, however, that illiquidity in the options markets may
make it difficult from time to time for the Corporation to close out its written
option positions. Also, the securities exchanges have established limitations on
the number of options which may be written by an investor or group of investors
acting in concert. It is not contemplated that these position limits will have
any adverse impact on the Corporation's portfolio strategies.
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LOANS OF PORTFOLIO SECURITIES
Securities of the Portfolio may be loaned if such loans are secured
continuously by cash or equivalent liquid securities as collateral or by an
irrevocable letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned plus accrued income.
While such securities are on loan, the borrower pays the Portfolio any income
accruing thereon, and cash collateral may be invested for the Portfolio, thereby
earning additional income. All or any portion of interest earned on invested
collateral may be paid to the borrower. Loans are subject to termination by the
Portfolio in the normal settlement time, currently three business days after
notice, or by the borrower on one day's notice. Borrowed securities are returned
when the loan is terminated. Any appreciation or depreciation in the market
price of the borrowed securities which occurs during the term of the loan inures
to the Portfolio and its investors. Reasonable finders' and custodial fees may
be paid in connection with a loan. In addition, all facts and circumstances,
including the creditworthiness of the borrowing financial institution, are
considered before a loan is made and no loan is made in excess of one year.
There is the risk that a borrowed security may not be returned to the Portfolio.
Securities are not loaned to Brown Brothers Harriman & Co. or to any affiliate
of the Corporation, the Portfolio or Brown Brothers Harriman & Co.
SHORT-TERM INVESTMENTS
Although it is intended that the assets of the Portfolio stay invested in
the securities described above and in the Prospectus to the extent practical in
light of the Portfolio's investment objective and long-term investment
perspective, assets of the Portfolio 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 the 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 U.S. dollar denominated: (i) securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities; (ii)
commercial paper; (iii) bank obligations, including negotiable certificates of
deposit, fixed time deposits and bankers' acceptances; and (iv) 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 the 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 Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("Standard & Poor's"); or 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.
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REPURCHASE AGREEMENTS. Repurchase agreements may be entered into for
the Portfolio only with a "primary dealer" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities. This is an agreement in which
the seller (the "Lender") of a security agrees to repurchase from the Portfolio
the security sold at a mutually agreed upon time and price. As such, it is
viewed as the lending of money to the Lender. The resale price normally is in
excess of the purchase price, reflecting an agreed upon interest rate. The rate
is effective for the period of time assets of the Portfolio are invested in the
agreement and is not related to the coupon rate on the underlying security. The
period of these 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. The Portfolio always receives as collateral securities
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Collateral is marked to the market daily and has a market
value including accrued interest at least equal to 100% of the dollar amount
invested on behalf of the Portfolio in each agreement along with accrued
interest. Payment for such securities is made for the Portfolio only upon
physical delivery or evidence of book entry transfer to the account of State
Street Bank and Trust Company (the "Custodian"). If the Lender defaults, the
Portfolio might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the Lender, realization upon the collateral on behalf
of the Portfolio may be delayed or limited in certain circumstances. A
repurchase agreement with more than seven days to maturity may not be entered
into for the Portfolio if, as a result, more than 10% of the Portfolio's net
assets would be invested in such repurchase agreement together with any other
instrument which is not readily marketable (see clause (vi) under the caption
"State and Federal Restrictions").
INVESTMENT RESTRICTIONS
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The Fund and the Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Fund or the Portfolio, as the case may be
(see "Additional Information").
Except that the Corporation may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither the Portfolio nor the
Corporation, with respect to the Fund, may:
(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
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banks and only either to accommodate requests for the redemption of Fund
shares or the withdrawal of part or all of an interest in the 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;
(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);
(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);
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(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; or
(11) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than U.S. Government obligations) or more
than 10% of its total assets in the outstanding voting securities of any one
issuer; provided, however, that up to 25% of its total assets may be invested
without regard to this restriction.
STATE AND FEDERAL RESTRICTION. In order to comply with certain state
and federal statutes and policies neither the Portfolio nor the Corporation, on
behalf of the Fund, may as a matter of operating policy (except that the
Corporation may invest all of the Fund's assets in an open-end investment
company with substantially the same investment objective, policies and
restrictions as the Fund) : purchase securities of any investment company if (i)
such purchase at the time thereof would cause more than 10% of the total assets
(taken at the greater of cost or market value) of the Fund or the Portfolio, as
the case may be, to be invested in the securities of investment companies; (ii)
such purchase at the time thereof would cause the Fund or the Portfolio, as the
case may be, to own securities of the acquired investment company which are
valued at more than 5% of the assets of the Fund or Portfolio, as the case may
be; or (iii) such purchase would cause more than 3% of the outstanding voting
securities of any such issuer to be held by the Fund or the Portfolio, as the
case may be. 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
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portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy. If the Fund's and the
Portfolio's respective investment restrictions relating to any particular
investment practice or policy are not consistent, the Portfolio has agreed with
the Corporation, on behalf of the Fund, that the Portfolio will adhere to the
more restrictive limitation.
DIRECTORS, TRUSTEES AND OFFICERS
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The Directors of the Corporation, Trustees of the Portfolio and executive
officers of the Corporation and the Portfolio, their principal occupations
during the past five years (although their titles may have varied during the
period) and business addresses are:
7
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, 140 Broadway, New York, NY 10005.
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 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; Director of Vought Aircraft
Corporation (prior to September 1994), Caterair International (prior to April
1994); Member of 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.
<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 September 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.
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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 PORTFOLIO
PHILIP W. COOLIDGE -- President; Chief Executive Officer and President of
Signature Financial Group, Inc. ("SFG"), 59 Wall Street Distributors, Inc. ("59
Wall Street Distributors") and 59 Wall Street Administrators, Inc. ("59 Wall
Street Administrators") (since June 1993).
JAMES E. HOOLAHAN -- Vice President; Senior Vice President of SFG.
JOHN R. ELDER -- Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON -- Secretary, Vice President and Assistant Secretary of SFG
(since June 1991); Assistant Secretary of 59 Wall Street Distributors and 59
Wall Street Administrators (since June 1993).
SUSAN JAKUBOSKI*** -- Assistant Treasurer and Assistant Secretary of
the Portfolio; Assistant Secretary, Assistant Treasurer and Vice President of
Signature Financial Group (Cayman) Limited (since August 1994); Fund Compliance
Administrator of Concord Financial Group, Inc. (from November 1990 to August
1994). Her business address is Signature Financial Group (Grand Cayman) Ltd.,
Suite 193, 12 Church Street, Hamilton, Bermuda HM-11.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall
Street Administrators (since June 1993).
CHRISTINE A. DRAPEAU -- Assistant Secretary; Assistant Vice President,
Signature Financial Group, Inc. (since January 1996); Paralegal and Compliance
Officer, various financial companies (July 1992 to January 1996); Graduate
Student, Bentley College (prior to December 1994).
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* Mr. Shields is an "interested person" of the Corporation and the
Portfolio because of his affiliation with a registered broker-dealer.
** These Directors and Trustees are members of the Audit Committee of the
Corporation or the Portfolio, as the case may be.
*** Ms. Jakuboski is an officer of the 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.
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(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, a business development firm, 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 is 6 St. James Avenue, Boston, Massachusetts 02116. Messrs.
Coolidge, Hoolahan and Elder and Mss. Gibson, Jakuboski, Mugler and Drapeau 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 is an "interested person" of the
Corporation or the Portfolio 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 upon their respective net assets. In addition,
each series which has commenced operations pays an annual fee to each Director
of $1,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the Corporation
Name of Person, Compensation as Part of Benefits upon and Fund Complex*
POSITION FROM THE CORPORATION FUND EXPENSES RETIREMENT PAID TO DIRECTORS
J.V. Shields, Jr., $17,646 none none $30,000
Trustee
Eugene P. Beard, $13,985 none none 25,000
Trustee
David P. Feldman, $13,985 none none 25,000
Trustee
Alan G. Lowy, $13,985 none none 25,000
Trustee
Arthur D. Miltenberger, $13,985 none none 25,000
Trustee
</TABLE>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series.
PORTFOLIO TRUSTEES
The Trustees of the Portfolio receive a base annual fee of $12,000
(except the Chairman who receives a base annual fee of $17,000) which is paid
jointly by the U.S. Money Market Portfolio, U.S. Small Company Portfolio,
International Equity Portfolio and Emerging Markets Portfolio together with the
Portfolio (the "Portfolios") and allocated among the Portfolios based upon their
respective net assets. In addition, each Portfolio which has commenced
operations pays an annual fee to each Trustee of $1,000. The aggregate
compensation to each Trustee from the Portfolios was less than $60,000.
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<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, $16,196 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
</TABLE>
*The Portfolio Complex consists of the Portfolio and U.S. Money Market
Portfolio, U.S. Small Company Portfolio, International Equity Portfolio and
Emerging Markets Portfolio.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with the Portfolio and the
Administration Agreement with the Corporation, and by Brown Brothers Harriman
Trust Company (Cayman) Limited under the Administration Agreement with the
Portfolio (see "Investment Adviser" and "Administrators"), neither the
Corporation nor the Portfolio requires employees other than its officers, and
none of its officers devote full time to the affairs of the Corporation or the
Portfolio, as the case may be, or, other than the Chairmen, receive any
compensation from the Fund or the Portfolio.
As of October 31, 1997, the Directors of the Corporation, Trustees of
the Portfolio and officers of the Corporation and the 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 the 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 the Fund nor more
than 5% of the aggregate beneficial interests in the Portfolio.
INVESTMENT ADVISER
================================================================================
Under its Investment Advisory Agreement with the Portfolio, subject to
the general supervision of the Portfolio's Trustees and in conformance with the
stated policies of the Portfolio, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Portfolio. In this
regard, it is the responsibility of Brown Brothers Harriman & Co. to make the
day-to-day investment decisions for the Portfolio, to place the purchase and
sale orders for portfolio transactions and to manage, generally, the Portfolio's
investments.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Portfolio is dated August 22, 1995 and remains in effect for two years
from such date and thereafter, but only so long as the agreement is specifically
approved at least annually (i) by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio, or
by the Portfolio's Trustees, and (ii) by a vote of a majority of the Trustees of
the Portfolio who are not parties to the Investment Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of the Portfolio ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreement was most recently approved by the
Independent Trustees on
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December 11, 1996. The Investment Advisory Agreement terminates
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Trustees of the Portfolio or by a vote of the holders
of a "majority of the outstanding voting securities" (as defined in the 1940
Act) of the Portfolio on 60 days' written notice to Brown Brothers Harriman &
Co. and by Brown Brothers Harriman & Co. on 90 days' written notice to the
Portfolio (see "Additional Information").
With respect to the Portfolio, the investment advisory fee paid to the
Investment Adviser is calculated daily and paid monthly at an annual rate equal
to 0.65% of the Portfolio's average daily net assets.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Fund.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing the investment advisory,
administrative or shareholder servicing/eligible institution functions described
above. If Brown Brothers Harriman & Co. were to terminate its Investment
Advisory Agreement with the Portfolio, or were prohibited from acting in such
capacity, it is expected that the Trustees of the Portfolio would recommend to
the investors that they approve a new investment advisory agreement for the
Portfolio with another qualified adviser. If Brown Brothers Harriman & Co. were
to terminate its Shareholder Servicing Agreement, Eligible Institution Agreement
or Administration Agreement with the Corporation or were prohibited from acting
in any such capacity, its customers would be permitted to remain shareholders of
the Fund and alternative means for providing shareholder services or
administrative services, as the case may be, would be sought. In such event,
although the operation of the 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 Portfolio and Brown
Brothers Harriman Trust Company (Cayman) Limited (dated August 22, 1995) will
remain in effect for two years from such respective date and thereafter, but
only so long as each such agreement is specifically approved at least annually
in the same manner as the Portfolio's Investment Advisory Agreement (see
"Investment Adviser"). The Independent Directors/Trustees most recently approved
the Corporation's Administration Agreement and the Portfolio's Administration
Agreement on December 18, 1996 and December 11, 1996, respectively. Each
agreement will terminate automatically if assigned by either party thereto and
is terminable by the Corporation or the Portfolio at any time without penalty by
a vote of a majority of the Directors of the Corporation or the Trustees of the
Portfolio, as the case may be, or by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Corporation
or the 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. The Portfolio's Administration Agreement is
terminable by the Trustees of the Portfolio or by the Fund and other investors
in the Portfolio on 60 days' written notice to Brown Brothers Harriman Trust
Company (Cayman) Limited. Each agreement is terminable by the respective
Administrator on 90 days' written notice to the Corporation or the Portfolio, as
the case may be.
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<PAGE>
The administrative fee payable to Brown Brothers Harriman & Co. from
the Fund is calculated daily and payable monthly at an annual rate equal to
0.125% of the Fund's average daily net assets.
The administrative fee paid to Brown Brothers Harriman Trust Company
(Cayman) Limited by the Portfolio is calculated and paid monthly at an annual
rate equal to 0.035% of the Portfolio's average daily net assets. Brown Brothers
Harriman Trust Company (Cayman) Limited is a wholly-owned subsidiary of Brown
Brothers Harriman Trust Company of New York, which is a wholly-owned subsidiary
of Brown Brothers Harriman & Co.
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 the Portfolio's
Investment Advisory Agreement (see "Investment Adviser"). The Distribution
Agreement was most recently approved by the Independent Directors of the
Corporation on February 18, 1997. The agreement terminates automatically if
assigned by either party thereto and is terminable with respect to the Fund at
any time without penalty by a vote of a majority of the Directors of the
Corporation or by a vote of the holders of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Fund (see "Additional
Information"). The Distribution Agreement is terminable with respect to the Fund
by the Corporation's Directors or shareholders of the Fund on 60 days' written
notice to 59 Wall Street Distributors. The agreement is terminable by 59 Wall
Street Distributors on 90 days' written notice to the Corporation.
NET ASSET VALUE; REDEMPTION IN KIND
==============================================================================
The net asset value of each of the Fund's shares is determined each day the
New York Stock Exchange is open for regular trading. (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, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) This determination of net asset value of each
share of the Fund is made once during each such day as of the close of regular
trading on such Exchange by subtracting from the value of the Fund's total
assets (I.E., the value of its investment in the Portfolio and other assets) the
amount of its liabilities, including expenses payable or accrued, and dividing
the difference by the number of shares of the Fund outstanding at the time the
determination is made.
The value of the Portfolio's net assets (I.E., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the Fund is determined. The value of the Fund's investment in
the Portfolio is determined by multiplying the value of the Portfolio's net
assets by the percentage, effective for that day, which represents the Fund's
share of the aggregate beneficial interests in the Portfolio.
The 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.
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<PAGE>
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.
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 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 Portfolio.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
a 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 the Fund is calculated for any
period by (a) dividing (i) the sum of the aggregate net asset value per share on
the last day of the period of shares purchased with a $1,000 payment on the
first day of the period and the aggregate net asset value per share on the last
day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period, and
(c) subtracting 1 from the result.
The total rate of return of the Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
Performance calculations should not be considered a representation of
the average annual or total rate of return of the 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
15
<PAGE>
the market value of, and dividends and interest received from, the
investments held by the Portfolio and the Fund's and the Portfolio's expenses
during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time, the Fund's
total rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
FEDERAL TAXES
================================================================================
Each year, the Corporation intends to continue to qualify the Fund and
elect that the Fund be treated as a separate "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Subchapter M of the Code the Fund is not subject to federal
income taxes on amounts distributed to shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that (a) at least 90% of the Fund's annual gross income,
without offset for losses from the sale or 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 the Fund's annual gross income be derived from
gains (without offset for losses) from the sale or other disposition of
securities held for less than three months; and (c) the holdings of the Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of the Fund's assets be represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Fund's assets be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other investment companies). In
addition, in order not to be subject to federal income tax, at least 90% of the
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's shareholders.
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 the Portfolio lapses or is
terminated through a closing transaction, such as a repurchase of the option
from its holder, the 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 the Fund's gross income be
derived from gains from the sale of securities held for less than three months
may limit the Portfolio's ability to write options and engage in transactions
involving stock index futures.
Certain options contracts held for the 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
16
<PAGE>
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 the Portfolio has held such options. The 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.
RETURN OF CAPITAL. If the net asset value of shares is reduced below a
shareholder's cost as a result of a dividend or capital gains distribution from
the Fund, such dividend or capital gains distribution would be taxable even
though it represents a return of invested capital.
REDEMPTION OF SHARES. Any gain or loss realized on the redemption of Fund
shares by a shareholder who is not a dealer in securities is treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
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 Mid-Cap Fund. The Corporation currently consists of
eight 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.
17
<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 the Portfolio have no preference, preemptive, conversion
or similar rights, and are fully paid and non-assessable. The Portfolio is not
required to hold annual meetings of investors, but will hold special meetings of
investors when, in the judgment of its Trustees, it is necessary or desirable to
submit matters for an investor vote. Each investor is entitled to a vote in
proportion to the share of its investment in the Portfolio.
PORTFOLIO TRANSACTIONS
================================================================================
In effecting securities transactions for the Portfolio, 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 research and other investment 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.
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. The Portfolio uses Brown Brothers Harriman & Co. as one of its principal
brokers when, in the judgment of the Investment Adviser, that firm will be able
to obtain a price and execution at least as favorable as other qualified
brokers. As one of the Portfolio's principal brokers, Brown Brothers Harriman &
Co. receives brokerage commissions from the Portfolio.
The use of Brown Brothers Harriman & Co. as a broker for the Portfolio is
subject to the provisions of Rule 11a2-2(T) under the Securities Exchange Act of
1934 which permits the Portfolio to use Brown Brothers Harriman & Co. as a
broker provided that certain conditions are met.
In addition, under the 1940 Act, commissions paid by the Portfolio to
Brown Brothers Harriman & Co. in connection with a purchase or sale of
securities offered on a securities exchange may not exceed the usual and
customary broker's commission.
The Trustees of the Portfolio from time to time review, among otherthings,
information relating to the commissions charged by Brown Brothers Harriman & Co.
to the Portfolio and to its other customers and information concerning the
prevailing level of commissions charged by other qualified brokers. In addition,
the procedures pursuant to which Brown Brothers
18
<PAGE>
Harriman & Co. effects brokerage transactions for the Portfolio are
reviewed and approved no less often than annually by a majority of the
non-interested Trustees of the Portfolio.
A portion of the transactions for the Portfolio are executed through
qualified brokers other than Brown Brothers Harriman & Co. In selecting such
brokers, the Investment Adviser may consider the research and other investment
information provided by such brokers. 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 the Portfolio. The Investment Adviser
believes that the value of research services received is not determinable nor
does such research significantly reduce its expenses. The Portfolio does not
reduce the fee paid to the Investment Adviser by any amount that might be
attributable to the value of such services.
The Investment Adviser may direct a portion of the Portfolio's
securities transactions to certain unaffiliated brokers which in turn use a
portion of the commissions they receive from the 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 the Portfolio are at the same rate paid to other brokers for effecting
similar transactions in listed equity securities.
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 the Portfolio review regularly the reasonableness of
commissions and other transaction costs incurred for the 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 the 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 the 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 the 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 the Portfolio as
well as other customers, Brown
19
<PAGE>
Brothers Harriman & Co., to the extent permitted by applicable laws and
regulations, may, but is not obligated to, aggregate the securities to be sold
or purchased for the Portfolio with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Portfolio. In some instances, this procedure might adversely affect the
Portfolio.
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 other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
================================================================================
The statement of assets and liabilities and Report of Independent
Accountants for U.S. Mid-Cap Portfolio as of October 31, 1997 is attached
hereto.
20
<PAGE>
U.S. MID-CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
(EXPRESSED IN UNITED STATES DOLLARS)
OCTOBER 31, 1997
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $100,100
Total assets . . .. . . . . 100,100
LIABILITIES:
Total liabilities . . . . . . . . . . . . . . . 0
-------
NET ASSETS: . . . . . . . . . . . . . . . . . . . . . . . . . $100,100
=======
NOTES:
(1) U.S. Mid-Cap Portfolio, a New York trust (the "Portfolio"), was
organized on June 15, 1993 and has been inactive since that date, except for
matters relating to the organization of the Portfolio, the registration of the
Portfolio under the Investment Company Act of 1940, as amended, the request and
receipt of private letter rulings from the Internal Revenue Service, the sale of
a beneficial interest therein at the purchase price of $100,000 to BBH & Co.
Mid-Cap Fund (Cayman) and the sale of a beneficial interest therein at the
purchase price of $100 to Signature Financial Group (Cayman) Ltd.
(2) At the close of each business day of the Portfolio, the value of an
investor's beneficial interest in the Portfolio is equal to the product of (i)
the aggregate net asset value of the Portfolio multiplied by (ii) the percentage
effective for that day for that investor.
21
<PAGE>
DELOITTE & TOUCHE
- ----------------- --------------------------------------------
LOGO One Capital Place Telephone: 345-949-7500
P.O. Box 1787 GT Facsimile: 345-949-8238
Grand Cayman
Cayman Islands, B.W.I.
INDEPENDENT AUDITORS' REPORT
To the Trustee of
U.S. Mid-Cap Portfolio
We have audited the accompanying statement of assets and liabilities of the U.S.
Mid-Cap Portfolio as of October 31, 1997 (all expressed in United States
dollars). This financial statement is the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statement presents fairly, in all material
respects, the financial position of U.S. Mid-Cap Portfolio at October 31, 1997
in conformity with accounting principles generally accepted in the United States
of America.
/S/DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
October 31, 1997
Deloitte Touche
Tohmatsu
International
22
