As filed with the Securities and Exchange Commission on February 28, 1997
Registration No. 33-48605 and 811-06139
(The 59 Wall Street U.S. Equity Fund)
(The 59 Wall Street Inflation-Indexed Securities Fund
formerly, The 59 Wall Street Short/Intermediate Fixed
Income Fund)
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 8
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
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) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617)423-0800
PHILIP W. COOLIDGE Copy to: JOHN E. BAUMGARDNER, JR., ESQ.
6 St. James Avenue Sullivan & Cromwell
Boston, Massachusetts 02116 125 Broad Street
Name and Address of Agent for Service) New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
[X] immediately upon filing pursuant to pursuant to paragraph (b)
[ ] on (date) 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.
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
filed the Notice required by Rule 24f-2 on December 27, 1996, for Registrant's
fiscal year ending October 31, 1996.
===============================================================================
<PAGE>
EXPLANATORY NOTE
This Amendment (the "Amendment") to the Registrant's Registration Statement
relates to the Prospectus of The 59 Wall Street U.S. Equity Fund and The 59 Wall
Street Inflation-Indexed Securities Fund, formerly The 59 Wall Street
Short/Intermediate Fixed Income Fund, each a series of shares of the Registrant.
The other series of shares of the Registrant, The 59 Wall Small Company
Fund, The 59 Wall Street Pacific Basin Equity Fund and The 59 Wall Street
European Equity Fund are offered by Prospectuses that were included in Part A of
Amendment 28 to the Registrant's Registration Statement. The remaining series of
shares of the Registrant, The 59 Wall Street International Equity Fund and The
59 Wall Street Emerging Markets Fund are offered by the Prospectus that was
included in Part A of Amendment No. 26 to the Registrant's Registration
Statement.
This Amendment does not relate to, amend or otherwise affect the
above-referenced Prospectuses of The 59 Wall Small Company Fund, the Prospectus
which are incorporated herein by reference.
WS5231D
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location
Part A
Item 1. Cover Page . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . Expense Table
Item 3. Condensed Financial Information. . . . . . Financial Highlights
Item 4. General Description of Registrant. . . . . Investment Objective
and Restrictions;
Description of Shares
Item 5. Management of the Fund . . . . . . . . . . Management of the
Corporation; Expense
Table
Item 5A. Management's Description of Fund
Performance . . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities . . . . Description of Shares
Item 7. Purchase of Securities Being Offered . . . Management of the
Corporation
Item 8. Redemption or Repurchase . . . . . . . . . Redemption of Shares
Item 9. Pending Legal Proceedings. ... . . . . . . Not Applicable
Part B
Item 10. Cover Page . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents. . . . . . . . . . . . . Table of Contents
Item 12. General Information and History. . . . . . Not Applicable
Item 13. Investment Objectives and Policies . . . . Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund . . . . . . . . . . Directors and Officers
Item 15. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . Directors and Officers
Item 16. Investment Advisory and Other Services . . Administrator;
Distributor;
Investment Adviser;
Item 17. Brokerage Allocation and Other Practices . Portfolio Transactions
Item 18. Capital Stock and Other Securities . . . . Description of Shares
(in both the Prospectus
and the Statement of
Additional Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered. . . . . . . . Purchase of Shares; Net
Asset Value;
Redemption in Kind
Item 20. Tax Status . . . . . . . . . . . . . . . . Federal Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . Administrator;
Distributor; Purchase
of Shares
Item 22. Calculation of Performance Data . . . . . Computation of
Performance
Item 23. Financial Statements . . . . . . . . . . . Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
LOGO
U.S. Equity Fund
PROSPECTUS
February 28, 1997
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street U.S. Equity Fund
6 St. James Avenue, Boston, Massachusetts 02116
================================================================================
The 59 Wall Street U.S. Equity Fund is a separate portfolio of The 59 Wall
Street Fund, Inc. Shares of the Fund are offered by this Prospectus. The Fund's
investment objective is to provide investors with long-term capital growth while
also generating current income. The assets of the Fund under normal
circumstances are fully invested in equity securities of companies that are
well-established and financially sound. The Fund is an appropriate investment
for those investors seeking superior long-term returns combined with some
current income and who are able to accept the risks inherent in equity
investing. There can be no assurance that the Fund's investment objective will
be achieved.
Investments in the Fund are neither insured nor guaranteed by the U.S.
Government. Shares of the Fund are not deposits or obligations of, or guaranteed
by, Brown Brothers Harriman & Co. or any other bank, and the shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other federal, state or other governmental agency.
Brown Brothers Harriman & Co. is the investment adviser to, the
administrator of and the shareholder servicing agent for the Fund. Shares of the
Fund 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 the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated February 28, 1997. This information
is incorporated herein by reference and is available without charge upon request
from the Fund's distributor, 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, Massachusetts 02116.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is February 28, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Table ............................................................. 3
Financial Highlights....................................................... 4
Investment Objective and Policies.......................................... 5
Investment Restrictions.................................................... 8
Purchase of Shares......................................................... 9
Redemption of Shares....................................................... 9
Management of the Corporation.............................................. 10
Net Asset Value ........................................................... 15
Dividends and Distributions................................................ 15
Taxes...................................................................... 15
Description of Shares...................................................... 16
Additional Information..................................................... 17
Appendix .................................................................. 19
TERMS USED IN THIS PROSPECTUS
Corporation......................... The 59 Wall Street Fund, Inc.
Fund................................ The 59 Wall Street U.S. Equity Fund
Investment Adviser.................. Brown Brothers Harriman & Co.
Administrator....................... Brown Brothers Harriman & Co.
Subadministrator.................... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Distributor......................... 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act............................ The Investment Company Act of 1940,
as amended
2
<PAGE>
EXPENSE TABLE
================================================================================
The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the aggregate annual operating
expenses of the Fund, as a percentage of average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such estimated expenses on a
$1,000 investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases................................. None
Sales Load Imposed on Reinvested Dividends...................... None
Deferred Sales Load............................................. None
Redemption Fee.................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee............................. 0.65%
12b-1 Fee........................................... None
Other Expenses
Administration Fee................................ 0.15
Shareholder Servicing/
Eligible Institution Fee........................ 0.25%
Expense Payment Fee............................... 0.15 0.55
---- ----
Total Fund Operating Expenses....................... 1.20%
====
Example 1 year 3 years 5 years 10 years
-------- ------ ----- ------ -------
A shareholder of the Fund would pay the
following expenses on a $1,000
investment, assuming (1) 5% annual
return, and (2) redemption at the
end of each time period: ................. $12 $38 $66 $146
--- --- --- ----
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than the Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of the Fund
bear directly or indirectly.
For more information with respect to the expenses of the Fund see "Management
of the Corporation" herein.
3
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The following information has been audited by Deloitte & Touche LLP,
independent auditors. This information should be read in conjunction with the
financial statements and notes thereto, which are incorporated by reference in
the Statement of Additional Information. The ratios of expenses and net
investment income to average net assets are not indicative of future ratios.
<TABLE>
<CAPTION>
For the period
July 23, 1992
(commencement
For the years ended October 31, of operations) to
1996 1995 1994 1993 October 31, 1992
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 36.46 $ 29.84 $ 28.80 $ 25.77 $ 25.00
Income from investment operations:
Net investment income ...................... 0.16 0.26 0.26 0.28 0.07
Net realized and unrealized gain............ 6.75 7.15 1.05 3.04 0.76
Less dividends and distributions from:
Net investment income....................... (0.20) (0.28) (0.17) (0.29) (0.06)
Net realized gains.......................... (0.87) (0.51) (0.10) -- --
Net asset value, end of period.................. $ 42.30 $ 36.46 $ 29.84 $ 28.80 $ 25.77
Total return** ................................. 19.32% 25.50% 4.61% 12.91% 3.32%
Ratios/Supplemental Data:
Net assets, end of period
(000's omitted).......................... $50,773 $32,000 $22,124 $10,992 $ 2,378
Ratio of expenses to average
net assets............................. 1.20% 1.20% 1.20% 1.20% 1.20%*
Ratio of net investment income to average
net assets ............................. 0.40% 0.84% 1.06% 1.07% 1.20%*
Portfolio turnover rate..................... 42% 69% 61% 52% 2%
Average commission rate paid
per share................................ $ 0.08 $ 0.08 -- -- --
</TABLE>
- ----------
* Annualized.
** Had an expense payment agreement not been in place, the ratio of expenses to
average net assets for the years ended October 31, 1996, 1995, 1994, 1993 and
for the period ended October 31, 1992 would have been 1.21%, 1.28%, 1.46%,
2.09% and 5.58%, respectively. For the same periods, the total return of the
Fund would have been 19.31%, 25.42%, 4.35%, 12.02% and (1.06%), respectively.
Furthermore, the ratio of expenses to average net assets for the years ended
October 31, 1996 and 1995 reflect fees paid with brokerage commissions and
fees reduced in connection with specific agreement. Had these arrangements
not been in place, this ratio would have been 1.30% and 1.38%, respectively.
Further information about performance of the Fund is contained in the
Fund's annual report to shareholders which may be obtained without charge.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
================================================================================
The investment objective of the Fund is to provide investors with
long-term capital growth while also generating current income.
The investment objective of the Fund is a fundamental policy and may be
changed only with the approval of the holders of a "majority of the Fund's
outstanding voting securities" (as defined in the 1940 Act). (See "Additional
Information" in this Prospectus.) However, the investment policies of the Fund
as described below are not fundamental and may be changed without such approval.
The Corporation may, in the future, seek to achieve the Fund's investment
objective by investing all of the Fund's assets in a no-load, diversified,
open-end management investment company having substantially the same investment
objective as the Fund. Shareholders will receive 30 days prior written notice
with respect to any such investment.
The Fund is an appropriate investment for those investors seeking superior
long-term returns combined with some current income and who are able to accept
the risks inherent in equity investing.
The assets of the Fund under normal circumstances are fully invested in
equity securities traded on the New York Stock Exchange, American Stock Exchange
or the National Association of Securities Dealers Automated Quotations (NASDAQ)
System. Although the assets of the Fund are invested primarily in common stocks,
other securities with equity characteristics may be purchased, including
securities convertible into common stock, trust or limited partnership
interests, rights, warrants and American Depositary Receipts. Investments
generally consist of equities issued by domestic firms; however, equities of
foreign-based companies may also be purchased if they are registered under the
Securities Act of 1933.
The Fund primarily invests in medium and large sized companies with a
sound financial structure, proven management, an established industry position
and competitive products and services. In selecting individual securities, the
focus is primarily on those companies that exhibit above average revenue and
earnings growth as well as high or improving returns on investment. Investments
are also made in companies that pay out reasonable cash dividends.
The Fund holds a broadly diversified portfolio representing many sectors
of the U.S. economy. This industry diversification and participation in both
growth and income oriented equities is designed to control the portfolio's
exposure to market risk and company specific risk.
Historically, common stocks have provided investors with higher long-term
returns than other investment vehicles. The following graph illustrates that
over time, common stocks have outperformed investments in long-term government
5
<PAGE>
Growth of a $1 investment
made in 1925
[The following table was represented by a line chart in the printed material]
Growth of a $1 investment
made in 1926
1925 1935 1945 1955 1965 1975 1985 1995 1996
- ---- ---- ---- ---- ---- ---- ---- ---- ----
$1 $2 $4 $19 $53 $73 $279 $1,114 $1,371
$1 $2 $3 $3 $3 $5 $11 $34 $37
$1 $1 $1 $1 $2 $3 $8 $13 $14
$1 $1 $1 $2 $2 $3 $6 $9 $9
This graph illustrates the total return of the major classes of financial assets
since 1925, including common stocks, long-term government bonds and money market
securities as measured by U.S. Treasury bills. The Consumer Price Index is used
as a measure of inflation. This graph is not a prediction of the future
performance of any of these assets or of inflation. Source: Brown Brothers
Harriman & Co.
The Fund is actively managed by a team of investment professionals and
research analysts. (See "Investment Adviser".) The Investment Adviser analyzes
economic trends and identifies stocks appropriate for investment in the Fund.
Investment decisions are the result of a disciplined process which
systematically evaluates future growth expectations and asset valuations in
relation to prevailing price levels.
Risk Factors. Although the assets of the Fund are invested primarily in
equity securities of larger, well-established companies, the portfolio is
subject to market risk, meaning that stock prices in general may decline over
short or extended periods of time. As with any equity-based mutual fund, the
investor should be aware that unfavorable economic conditions can adversely
affect corporate earnings and cause declines in stock prices.
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, put and call options on stock indexes may be purchased and futures
contracts on stock indexes may be entered into for the Fund. (See Appendix on
page 19 for more detail.) For the same purpose, put and call options on stocks
may be purchased, although the current intention is not to do so in such a
manner that more than 5% of the Fund's net assets would be at risk.
Over-the-counter (OTC) options purchased are treated as not readily
marketable. (See "Investment Restrictions".)
Portfolio Brokerage
The portfolio of the Fund 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 50% annual turnover rate would occur, for example, if half of the
securities in the Fund's portfolio (excluding short-term obligations) were
replaced once in a period of one year. For the fiscal years ended October 31,
1995 and 1996, the portfolio turnover rate for the Fund was 69% and 42%,
6
<PAGE>
respectively. The amount of brokerage commissions and taxes on realized capital
gains to be borne by the shareholders of the Fund tend to increase as the
turnover rate activity increases.
In effecting securities transactions for the Fund, the Investment Adviser
seeks to obtain the best price in execution of orders. In selecting 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
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.
The Investment Adviser may direct a portion of the Fund's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from the Fund to pay other unaffiliated service
providers on behalf of the Fund for services provided for which the Fund would
otherwise be obligated to pay. Such commissions paid by the Fund are at the same
rate paid to other brokers for effecting similar transactions in listed equity
securities.
Brown Brothers Harriman & Co. acts as one of the principal brokers of the
Fund in the purchase and sale of portfolio securities when, in the judgment of
the Investment Adviser, that firm is able to obtain a price and execution at
least as favorable as other qualified brokers. As one of the principal brokers
of the Fund, Brown Brothers Harriman & Co. receives brokerage commissions from
the Fund.
On those occasions when Brown Brothers Harriman & Co. deems the purchase
or sale of a security to be in the best interests of the Fund as well as other
customers, Brown Brothers Harriman & Co., to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Fund with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Fund. In some instances, this procedure might adversely affect the Fund.
Other Investment Techniques
Short-Term Instruments. The assets of the Fund may be invested in U.S.
dollar denominated short-term instruments, including repurchase agreements,
obligations of the U.S. Government, its agencies or instrumentalities,
commercial paper and bank obligations (such as certificates of deposit, fixed
time deposits, and bankers' acceptances). Cash is held for the Fund in demand
deposit accounts with the Fund's custodian bank.
U.S. Government Securities. The assets of the Fund may be invested in
securities issued by the U.S. Government, its agencies or instrumentalities.
These securities include notes and bond issued by the U.S. Treasury, 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 the Fund. 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 up to 30% of the total value of the
securities of the Fund are permitted. These loans must be secured continuously
by cash or equivalent collateral or by an irrevocable letter of credit in favor
of the Fund at least equal at all times to 100% of the market value of the
securities loaned plus accrued income. By lending the securities of the Fund,
the Fund's income can be increased by the Fund continuing to receive income on
the loaned securities as well as by the opportunity for the Fund to receive
interest on the collateral. Any appreciation or depreciation in the market price
7
<PAGE>
of the borrowed securities which occurs during the term of the loan inures to
the Fund and its shareholders.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for the Fund 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 the Fund 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 the Fund's net
asset value. 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, the Fund 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 the Fund 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.
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Fund includes a listing of
the specific investment restrictions which govern the Fund's investment
policies. Certain of these investment restrictions are deemed fundamental
policies and may be changed only with the approval of the holders of a "majority
of the Fund's outstanding voting securities" (as defined in the 1940 Act) (see
"Additional Information in this Prospectus"), including a restriction that
excluding the Fund's investment of all of its investable assets in an open-end
investment company with substantially the same investment objective as the Fund,
not more than 10% of the net assets of the Fund may be invested in securities
that are subject to legal or contractual restrictions on resale.
As a non-fundamental policy, money is not borrowed for the Fund in an
amount in excess of 10% of the assets of the Fund. Money is borrowed only from
banks and only either to accommodate requests for the redemption of shares while
effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations. Securities are not purchased
for the Fund at any time at which the amount of its borrowings exceed 5% of its
assets.
Also as a non-fundamental policy, at least 65% of the value of the total
assets of the Fund is invested in equity securities.
In accordance with applicable regulations, the Fund does not purchase any
OTC option, repurchase agreement maturing in more than seven days, security of a
foreign issuer which is not registered or not exempt from registration under the
Securities Act of 1933, 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 market value of
the Fund's net assets would be represented by such investments.
The Fund is classified as diversified under the 1940 Act, which means that
at least 75% of its total assets is represented by cash; securities issued by
the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one company to an amount not greater in value than 5%
of the Fund's total assets. The Fund does not purchase more than 10% of the
outstanding voting securities of any company.
8
<PAGE>
PURCHASE OF SHARES
================================================================================
Shares of the Fund 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 Fund 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 13)
or a Financial Intermediary (see page 13) 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 Fund's 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 Fund's Shareholder Servicing
Agent, has established a minimum initial purchase requirement for the Fund of
$100,000 and a minimum subsequent purchase requirement for the Fund of $25,000.
These minimum purchase requirements may be amended from time to time.
Inquiries regarding the manner in which purchases of Fund shares may be
effected and other matters pertaining to the Fund should be directed to Brown
Brothers Harriman & Co., the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.)
REDEMPTION OF SHARES
================================================================================
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 that Eligible Institution or Financial Intermediary. Proceeds of a
redemption are paid to that shareholder's account at that Eligible Institution
or Financial Intermediary. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the redemption of Fund shares.
Shares held directly in the name of a shareholder on the books of the
Corporation may be redeemed by submitting a redemption request in good order to
the Corporation through the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.) Proceeds resulting from such redemption are paid
9
<PAGE>
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 Fund's Shareholder Servicing Agent (see page 12), each Eligible
Institution (see page 13) and each Financial Intermediary (see page 13) may
establish and amend from time to time for their respective customers a minimum
account size. If the value of a shareholder's holdings in the Fund falls below
that amount because of a redemption of shares, the shareholder's remaining
shares may be redeemed. If such remaining shares are to be redeemed, the
shareholder is so notified and is allowed 60 days to make an additional
investment to enable the shareholder to meet the minimum requirement before the
redemption is processed. Brown Brothers Harriman & Co., as the Fund's
Shareholder Servicing Agent, has established a minimum account size of $25,000.
Further Redemption Information
In the event a shareholder redeems all shares held in the Fund, future
purchases of shares of the Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares. 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 the 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 the Fund, either totally or partially, by a distribution in kind of
securities (instead of cash) from the 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
================================================================================
Directors and Officers
The Directors, in addition to supervising the actions of the
Administrator, Investment Adviser and Distributor of the Fund, as set forth
below, decide upon matters of general policy. Because of the services rendered
by the Investment Adviser and the Administrator, the Corporation itself requires
no employees other than its officers, none of whom, other than the Chairman,
receive compensation from the Fund and all of whom, other than the Chairman, are
employed by 59 Wall Street Administrators. (See "Directors 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
Chairman and Chief Executive Officer -- AT&T
Investment Management Corporation
Alan G. Lowy
Private Investor
Arthur D. Miltenberger
Vice President and Chief Financial Officer of
Richard K. Mellon and Sons
10
<PAGE>
Investment Adviser
The Investment Adviser to the Fund is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Fund. Subject to the general supervision of the
Corporation's Directors, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions for the Fund, places the purchase and sale orders for the
portfolio transactions of the Fund, and generally manages the Fund's
investments. Brown Brothers Harriman & Co. provides a broad range of investment
management services for customers in the United States and abroad. At June 30,
1996, it managed total assets of approximately $25 billion.
The Fund's portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. John A. Nielsen, Mr. Harry J. Martin, Mr. William M.
Weiss and Mr. George H. Boyd. 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. Mr. Martin holds a B.S. from the
U.S. Merchant Marine Academy, and a M.B.A. from Harvard Business School. He
joined Brown Brothers Harriman & Co. in 1973. Mr. Weiss holds a B.A. from
Colgate University, a M.B.A. from the University of Chicago, and is a Chartered
Financial Analyst. He joined Brown Brothers Harriman & Co. in 1987. Mr. Boyd
holds a B.A. from Colgate University, a M.B.A. from Columbia University and is a
Chartered Financial Analyst. He joined Brown Brothers Harriman & Co. in 1991.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreement, Brown Brothers Harriman & Co. receives from the
Fund an annual fee, computed daily and payable monthly, equal to 0.65% of the
average daily net assets of the Fund. Brown Brothers Harriman & Co. also
receives an administration fee from the Fund equal to 0.15% of the Fund's
average daily net assets. Brown Brothers Harriman & Co. also receives an annual
shareholder servicing/eligible institution fee from the Fund equal to 0.25% of
the average daily net assets of the 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 the
Fund are not exclusive under the terms of the Investment Advisory Agreement.
Brown Brothers Harriman & Co. is free to and does render investment advisory
services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of 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 the 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 the Fund to eliminate all reference to 59 Wall Street.
Pursuant to license agreements between Brown Brothers Harriman & Co. and
each of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
Licensee), dated June 22, 1993 and June 8, 1990, respectively, each Licensee may
continue to use in its name 59 Wall Street, the current and historic address of
Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co. does not
terminate the respective license agreement, which would require the Licensee to
change its name to eliminate all reference to 59 Wall Street.
11
<PAGE>
Administrator
Brown Brothers Harriman & Co. acts as Administrator for the Corporation.
(See "Administrator" in the Statement of Additional Information.)
In its capacity as Administrator, 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 Fund's 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 the Fund's prospectus, the printing of
such documents for the purpose of filings with the Securities and Exchange
Commission and state securities administrators, and the preparation of tax
returns for the Fund and reports to the 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 the Fund an annual fee, computed daily and
payable monthly, equal to 0.15% of the Fund's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the 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 Fund.
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 Fund, among other things:
answers inquiries from shareholders of and prospective investors in the Fund
regarding account status and history, the manner in which purchases and
redemptions of Fund shares may be effected and certain other matters pertaining
to the Fund; assists shareholders of and prospective investors in the Fund in
designating and changing dividend options, account designations and addresses;
and provides such other related services as the Corporation or a shareholder of
or prospective investor in the Fund may reasonably request. For these services,
Brown Brothers Harriman & Co. receives from the Fund an annual fee, computed
daily and payable monthly, equal to 0.25% of the 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.
12
<PAGE>
Financial Intermediaries
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Fund who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the 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 Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the 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 Fund. For these services, the Financial Intermediary
receives such fees from the Shareholder Servicing Agent as may be agreed upon
from time to time between the Shareholder Servicing Agent and such Financial
Intermediary.
Eligible Institutions
The 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 Fund 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 Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the 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 Fund. For these services, each financial institution
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of the 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 an agreement dated February 22, 1995, 59 Wall Street Administrators
pays the Fund's expenses (see "Expense Table"), other than fees paid to Brown
Brothers Harriman & Co. under the Corporation's Administration Agreement and
other than expenses relating to the organization of the Fund. In return, 59 Wall
Street Administrators receives a fee from the Fund such that after such payment
the aggregate expenses of the Fund do not exceed an agreed upon annual rate,
currently 1.20% of the average daily net assets of the Fund. Such fees are
13
<PAGE>
computed daily and paid monthly. During the fiscal year ended October 31, 1996,
59 Wall Street Administrators incurred $446,527 in expenses, including
investment advisory fees of $277,632 and shareholder servicing/eligible
institution fees of $106,782 on behalf of the Fund, and received fees of
$443,801 from the Fund.
The expense payment agreement will terminate on July 1, 1997. After the
expense payment agreement terminates, the Directors of the Corporation estimate
that, at the Fund's current level, the total operating expenses of the Fund are
expected to remain at approximately 1.20% of the average annual net assets of
the Fund.
The expenses of the Fund paid by 59 Wall Street Administrators under the
agreement include the shareholder servicing/eligible institution fees, the
compensation of the Directors of the Corporation; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Fund;
insurance premiums; expenses of calculating the net asset value of shares of the
Fund; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy statements and reports to shareholders and to governmental
officers and commissions; expenses of shareholder meetings; expenses relating to
the issuance, registration and qualification of shares of the Fund; and expenses
connected with the execution, recording and settlement of portfolio security
transactions; and the expenses associated with the investment advisory
agreement.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Fund. Its office is located at 6 St. James Avenue, Boston, Massachusetts 02116.
59 Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
the Fund's prospectus as required under federal and state securities laws. (See
"Distributor" in the Statement of Additional Information.) 59 Wall Street
Distributors holds itself available to receive purchase orders for Fund shares.
Custodian, Transfer and Dividend
Disbursing Agent
State Street Bank and Trust Company (State Street or the Custodian), 225
Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian,
Transfer and Dividend Disbursing Agent for the Fund.
As Custodian, it is responsible for maintaining books and records of the
Fund's portfolio transactions and holding the Fund's portfolio securities and
cash pursuant to a custodian agreement with the Corporation. Cash is held for
the Fund in demand deposit accounts at the Custodian. Subject to the supervision
of the Administrator, the Custodian maintains the Fund's accounting and
portfolio transaction records and for each day computes the Fund's net asset
value. As Transfer and Dividend Disbursing Agent it is responsible for
maintaining the books and records detailing the ownership of the Fund's shares.
Independent Auditors
Deloitte & Touche LLP are the independent auditors for the Fund.
14
<PAGE>
NET ASSET VALUE
================================================================================
The Fund's net asset value per share is determined once daily at 4:00
P.M., New York time on each day the New York Stock Exchange is open for regular
trading.
The determination of the Fund's net asset value per share is made by
subtracting from the value of the total assets of the Fund the amount of its
liabilities and dividing the difference by the number of shares of the Fund
outstanding at the time the determination is made.
Values of assets in the Fund's portfolio are determined on the basis of
their market or other fair value. (See "Net Asset Value; Redemption in Kind" in
the Statement of Additional Information.)
DIVIDENDS AND DISTRIBUTIONS
================================================================================
Substantially all of the Fund's net investment income, together with a
discretionary portion of any net short-term capital gains, is declared and paid
to shareholders as a dividend semi-annually. Substantially all of the Fund's
realized net long-term capital gains, if any, are declared and paid to
shareholders on an annual basis as a capital gains distribution. An additional
dividend and/or capital gains distribution may be made to the extent necessary
to avoid the imposition of federal excise tax on the Fund. (See "Taxes" below.)
Dividends and capital gains distributions are payable to shareholders of record
on the record date.
Unless a shareholder whose shares are held directly in the shareholder's
name on the books of the 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 qualify the Fund and elect that the
Fund be treated as a separate regulated investment company under the Internal
Revenue Code of 1986, as amended. Accordingly, the Fund is not subject to
federal income taxes on its net income and realized net long-term capital gains
that are distributed to its shareholders. A 4% non-deductible excise tax is
imposed on the Fund to the extent that certain distribution requirements for the
Fund for each calendar year are not met. The Corporation intends to meet such
requirements.
Dividends are taxable to shareholders of the Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Dividends paid from the Fund may be eligible for the dividends-received
deduction allowed to corporate shareholders because all or a portion of the
Fund's net income may 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
should be reduced below a shareholder's cost as a result of such a dividend or
15
<PAGE>
capital gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in the Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
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 the Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments are available which would not be subject to United
States withholding tax.
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 the
Fund's fiscal year. Additional tax information is mailed to shareholders in
January.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
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 $.001 per share, of which
25,000,000 shares have been classified as shares of the Fund. The Board of
Directors may increase the number of shares the Corporation is authorized to
issue without the approval of shareholders. The Board of Directors 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 six such series in addition to the Fund.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of the Fund are entitled to a full vote for each full share
held and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
16
<PAGE>
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 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 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.
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 the Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of shareholders of the 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 the Fund, each Eligible Institution, may vote any shares as
to which that Eligible Institution is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares otherwise represented
at the meeting in person or by proxy as to which that Eligible Institution is
the agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the Fund's outstanding
voting securities" (as defined in the 1940 Act) currently means the vote of (i)
67% or more of the Fund's shares present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present in person
or represented by proxy; or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors. The annual report also contains performance information
and is made available to investors upon request and without charge.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
The Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include the Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the Standard & Poor's 500 Index) and to investments
for which reliable performance data is available. Performance information may
also include comparisons to averages, performance rankings or other information
prepared by recognized mutual fund statistical services. To the extent that
unmanaged indexes are so included, the same indexes are used on a consistent
basis. The Fund's investment results as used in such communications are
calculated on a total rate of return basis in the manner set forth below.
Period and average annualized total rates of return may be provided in
such communications. The total rate of return refers to the change in the value
of an investment in the Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
17
<PAGE>
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.
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 Securities and Exchange Commission.
18
<PAGE>
APPENDIX -- HEDGING STRATEGIES
================================================================================
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) and
the New York Stock Exchange Composite Index (New York 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 will depend 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 will be equal to such difference between
the closing price of the index and the strike price of the option 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 of the Fund 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 for the Fund 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.
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.
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 Fund.
In order to assure that the Fund is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Fund 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 the Fund'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 the
Fund 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 the Fund's
19
<PAGE>
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 of 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 the future price movements over the short term in the overall
stock market may result in a poorer overall performance than if a Futures
Contract had not been purchased. Brokerage costs are incurred in entering into
and maintaining Futures Contracts.
When the Fund enters into a Futures Contract, it is initially required to
deposit, in a segregated account in the name of the broker performing in the
transaction, an "initial margin" of cash, U.S. Government securities or other
high grade liquid 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 the Fund 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.
Currently, Futures Contracts can be purchased on stock indexes such as the
Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange) and the
New York Stock Exchange Composite Index (New York Stock Exchange).
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.
20
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus and the Statement of Additional Information, in connection with the
offer contained in this Prospectus, and if given or made, such other
infor-mation 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>
LOGO
Inflation-Indexed
Securities Fund
PROSPECTUS
February 28, 1997
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street Inflation-Indexed
Securities Fund
6 St. James Avenue, Boston, Massachusetts 02116
================================================================================
The 59 Wall Street Inflation-Indexed Securities Fund is a separate
portfolio of The 59 Wall Street Fund, Inc. Shares of the Fund are offered by
this Prospectus.
The Fund's investment objective is to provide investors with a high level
of current income consistent with minimizing price fluctuations in net asset
value and maintaining liquidity. The Fund under normal circumstances is
primarily invested in securities that are structured to provide protection
against inflation. The Fund is an appropriate investment for investors who are
seeking to protect all or a part of their investment portfolio from the effects
of inflation. Although the Fund is designed to have lesser price fluctuations
than long term bond funds, investors should be able to accept fluctuations in
the net asset value of their investment. There can be no assurance that the
Fund's investment objective will be achieved.
Investments in the Fund are neither insured nor guaranteed by the U.S.
Government. Shares of the Fund are not deposits or obligations of, or guaranteed
by, Brown Brothers Harriman & Co. or any other bank, and the shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other federal, state or other governmental agency.
Brown Brothers Harriman & Co. is the investment adviser to, the
administrator of and the shareholder servicing agent for the Fund. Shares of the
Fund 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 the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated February 28, 1997. This information
is incorporated herein by reference and is available without charge upon request
from the Fund's distributor, 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, Massachusetts 02116.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is February 28, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Table .......................................................... 3
Financial Highlights ................................................... 4
Investment Objective and Policies ...................................... 5
Investment Restrictions ................................................ 9
Purchase of Shares ..................................................... 9
Redemption of Shares ................................................... 10
Management of the Corporation .......................................... 11
Page
----
Net Asset Value ........................................................ 15
Dividends and Distributions ............................................ 15
Taxes .................................................................. 16
Description of Shares .................................................. 17
Additional Information ................................................. 18
Appendix A ............................................................. 19
Appendix B ............................................................. 22
TERMS USED IN THIS PROSPECTUS
Corporation........................ The 59 Wall Street Fund, Inc.
Fund............................... The 59 Wall Street Inflation-Indexed
Securities Fund (the "Inflation-Indexed
Securities Fund")
Investment Adviser................. Brown Brothers Harriman & Co.
Administrator...................... Brown Brothers Harriman & Co.
Subadministrator................... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Distributor........................ 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act........................... The Investment Company Act of 1940,
as amended
2
<PAGE>
EXPENSE TABLE
================================================================================
The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the aggregate annual operating
expenses of the Fund, as a percentage of average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such estimated expenses on a
$1,000 investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases .......................... None
Sales Load Imposed on Reinvested Dividends ............... None
Deferred Sales Load ...................................... None
Redemption Fee ........................................... None
ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)
Investment Advisory Fee.............................. 0.25%
----
12b-1 Fee............................................ None
Other Expenses
Administration Fee................................. 0.10%
Expense Payment Fee................................ 0.30 0.40
---- ----
Total Fund Operating Expenses*....................... 0.65%
====
* The annual fund operating expenses for the past fiscal year have been
restated for purposes of this table to reflect fees currently in
effect.
Example 1 year 3 years 5 years 10 years
------- ------ ------- ------- --------
A shareholder of the Fund would pay
the following expenses on a $1,000
investment, assuming (1) 5% annual
return, and (2) redemption at the
end of each time period:............... $7 $21 $36 $81
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than the Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of the Fund
bear directly or indirectly.
Under an expense payment agreement, 59 Wall Street Administrators pays the
Fund's expenses, other than fees paid to Brown Brothers Harriman & Co. under the
Corporation's Administration Agreement and other than expenses relating to the
organization of the Fund. If this expense payment agreement was not in place,
the total Fund operating expenses would be 1.00% of the average annual net
assets of the Fund, and the shareholder expenses reflected in the example above
would be $10, $32, $55 and $123 for the Fund. (See "Expense Payment Agreement".)
For more information with respect to the expenses of the Fund see
"Management of the Corporation" herein.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Deloitte & Touche LLP,
independent auditors. This information should be read in conjunction with the
financial statements and notes thereto, which are incorporated by reference in
the Statement of Additional Information. The ratios of expenses and net
investment income to average net assets are not indicative of future ratios.
<TABLE>
<CAPTION>
For the period
July 23, 1992
For the years ended October 31, (commencement
------------------------------------------------------- of operations to
1996 1995 1994 1993 October 31, 1992
---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 9.76 $ 9.37 $ 10.17 $ 9.93 $ 10.00
Income from investment operations:
Net investment income ....................... 0.55 0.54 0.52 0.50 0.14
Net realized and unrealized (loss) gain ..... (0.09) 0.39 (0.74) 0.26 (0.09)
Less dividends and distributions:
From net investment income .................. (0.55) (0.54) (0.52) (0.52) (0.12)
From net realized gains ..................... -- -- (0.05) -- --
In excess of net realized gains ............. -- -- (0.01) -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $ 9.67 $ 9.76 $ 9.37 $ 10.17 $ 9.93
========== ========== ========== ========== ==========
Total return** ................................. 4.88% 10.26% (2.23)% 7.85% 0.49%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ... $ 16,821 $ 10,830 $ 10,328 $ 9,729 $ 1,648
Ratio of expenses to average net assets ..... 0.85% 0.85% 0.85% 0.85% 0.85%*
Ratio of net investment income to average
net assets ................................. 5.73% 5.66% 5.29% 5.32% 6.23%*
Portfolio turnover rate ..................... 114% 228% 129% 149% 207%
</TABLE>
- ----------
* Annualized.
** Had an expense payment agreement not been in place, the ratio of expenses to
average net assets for the years ended October 31, 1996, 1995, 1994, 1993 and
for the period ended October 31, 1992 would have been 1.40%, 1.40%, 1.46%,
1.46% and 6.99%, respectively. For the same periods, the total return of the
Fund would have been 4.33%, 9.71%, (2.84)%, 7.24% and (5.65)%, respectively.
Furthermore, the ratio of expenses to average net assets for the years ended
October 31, 1996 and 1995 reflect fees reduced in connection with specific
agreements. Had these arrangements not been in place, these ratios would have
been 1.42% and 1.43%, respectively.
Further information about performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
================================================================================
The investment objective of the Fund is to provide investors with a high
level of current income consistent with minimizing price fluctuations in net
asset value and maintaining liquidity.
The investment objective of the Fund is a fundamental policy and may be
changed only with the approval of the holders of a "majority of the Fund's
outstanding voting securities" (as defined in the 1940 Act). (See "Additional
Information" in this Prospectus.) However, the investment policies of the Fund
as described below are not fundamental and may be changed without such approval.
The Corporation may, in the future, seek to achieve the Fund's investment
objective by investing all of the Fund's assets in a no-load, diversified,
open-end management investment company having substantially the same investment
objective as the Fund. Shareholders will receive 30 days prior written notice
with respect to any such investment.
Under normal circumstances, the Fund will invest at least 65% of the value
of its total assets in securities that are structured to provide protection
against inflation ("Inflation-Indexed Securities" or "IIS"). Unlike traditional
notes and bonds, which pay a stated rate of interest in dollars and are redeemed
at their par amounts, IIS have regular adjustments to their interest payments
and redemption value to compensate for the loss of purchasing power from
inflation. The Fund may also invest in U.S. Government securities or securities
of its agencies or instrumentalities which are not indexed to inflation, if at
any time the Investment Adviser believes that there is an inadequate supply of
appropriate IIS in which to invest or if the Investment Adviser believes that
these issues will provide superior returns or liquidity. The Fund may consist of
any combination of these securities consistent with investment strategies
employed by the Investment Adviser.
The first IIS was issued by the U.S. Treasury as a ten-year note. The U.S.
Treasury has announced its intention to issue additional securities with a term
to maturity as long as 30 years and as short as five years. The Investment
Adviser believes that U.S. Government agencies, foreign governments and
corporate issuers will also issue these types of securities in the future. When
these securities with different maturities and different issuers are issued, the
Investment Adviser will buy from among the available issues those securities
that will provide the maximum relative value to the Fund.
U.S. Treasury IIS provide for semi-annual payments of interest and a
payment of principal at maturity. Each interest payment will be adjusted up or
down to take into account any inflation or deflation that occurs between the
issue date of the security and the interest payment date. The principal amount
of a U.S. Treasury IIS will be adjusted up at maturity to take into account the
inflation that occurred between the issue date of the security and its maturity
date. The repayment of principal will never be less than the original face or
par amount of the security at issuance. All inflation adjustments will be based
on changes in the non-seasonally adjusted U.S. City Average All Items Consumer
Price Index for All Urban Consumers ("CPI-U"), which is published monthly by the
Bureau of Labor Statistics of the U.S. Department of Labor. This adjustment will
be based on the value of the CPI-U reported for the third preceding month. Each
semi-annual payment of interest will be determined by multiplying a single fixed
semi-annual payment of interest by the inflation-adjusted principal amount of
the security for the date of the interest payment. Thus, although the interest
rate will be fixed, the amount of each interest payment will vary with the
changes in the adjusted principal of the security. These securities trade for
purchases and sales with a daily inflation adjustment to their par amount.
In addition to investing in U.S. Treasury IIS, the Fund may invest in IIS
issued by U.S. Government agencies or instrumentalities (including mortgage
backed securities), sovereign foreign governments and their agencies or
instrumentalities and, U.S. and foreign corporations and banks. IIS may be
"stripped" of their interest and principal components and purchased by the Fund
as separate instruments. All IIS purchased by the Fund must be rated at least A
by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
5
<PAGE>
("S&P") (or, if unrated, determined by the Adviser to be of comparable quality).
The exchange rate risk on all non-U.S. dollar denominated IIS will be hedged
back into U.S. dollars.
The Fund's income will be comprised primarily of coupon interest payments
and inflation adjustments to IIS held. Both of the components will be accrued
daily and paid monthly to shareholders. The inflation adjustment and the coupon
interest on recently issued IIS result in a yield that approximates the nominal
yield available on similar maturity U.S. Treasury securities, however this may
or may not be true in the future depending on the market's projection of future
inflation rates versus current inflation rates.
The Investment Adviser currently believes that the market for IIS will be
sufficient to permit the Fund to pursue its investment objective. However,
should the market for IIS issued by the U.S. Treasury and other issuers prove
less active than anticipated by the Investment Adviser, the Investment Adviser
is authorized to treat such an environment as an abnormal market condition. This
means that the Investment Adviser may purchase other types of U.S. Government
securities in excess of 35% of the Fund's total assets.
The Fund is actively managed by a team of investment professionals (see
"Investment Adviser"). The Investment Adviser analyzes and monitors economic
trends, monetary policy and bond credit ratings on a continuous basis. The
holdings of the Fund are regularly reviewed in an effort to enhance returns.
Risk Factors
You should read this section carefully to make sure you understand the
nature of the Fund before you invest in it.
Fund share price volatility. In contrast to money market funds, but similar
to bond funds, the Fund's shares are expected to have a net asset value that
fluctuates for two reasons: (1) changes in real interest rates and (2) changes
in demand and supply of the particular issues held by the Fund. As interest
rates rise, bond prices fall, and conversely, as interest rates decline, bond
prices rise. Generally, bonds with longer maturities are more sensitive to
interest rate movements than those with shorter maturities.
"Real" interest rates (the market rate of interest less the rate of
inflation) change over time either because of a change in what investors require
for lending their money or an anticipated change in the rate of inflation. IIS
prices will move up or down when real rates change, since these securities were
sold originally based upon a "real" interest rate that is no longer prevailing.
Should market expectations for real interest rates rise, the price of IIS and
the share price of the Fund will fall.
The IIS Market. IIS in which the Fund may invest are new securities subject
to possible illiquidity. It is not possible to predict with assurance how the
market for IIS will develop. While the U.S. Treasury expects that there will be
an active secondary market for IIS issued by it, that market initially may not
be as active or liquid as the secondary market for fixed-principal Treasury
securities. This is because, as a new product, IIS may not be as widely traded
or as well understood as fixed-principal Treasury securities. As a result, there
may be larger spreads between bid and asked prices for such IIS than the
bid-asked spreads for fixed-principal securities with the same remaining
maturity. Larger bid-asked spreads ordinarily result in higher transaction costs
and, thus, lower overall returns.
Indexing Methodology. The calculation of the inflation index ratio for
IIS issued by the U.S. Treasury incorporates an approximate three-month lag,
which may have an effect on the trading price of the securities, particularly
during periods of significant, rapid changes in the inflation index. To the
extent that inflation has increased the three months prior to an interest
payment, that interest payment will not be protected from the inflation
increase. Further, to the extent that inflation has increased during the final
three months of a security's maturity, the final value of the security will not
be protected against that increase, which will negatively impact the value of
the security. Additionally, there is disagreement among financial market
professionals as to whether the Consumer Price Index actually reflects the true
rate of inflation. If the market perceives that the adjustment mechanism of the
IIS does not accurately adjust for inflation, the value of the IIS could be
adversely affected. In the event of sustained deflation, the amount of the
6
<PAGE>
semi-annual interest payments, the inflation-adjusted principal of the security
and the value of any stripped components, will decrease.
Taxation. IIS will be subject to specific tax regulations under the
original issue discount rules of the Internal Revenue Code of 1986, as amended
(the "Code"). Generally, an inflation-adjusted increase in principal is required
to be included as income in the year the increase occurs even though the
investor will not receive payment of amounts equal to such increase until the
security matures. During periods of rising interest rates, the Fund will be
required to accrue an increasing amount of inflation-adjusted income. To
maintain its qualification as a regulated investment company and avoid liability
for federal income taxes, the Fund will be required to distribute dividends
equal to substantially all of its net investment income, including the daily
accretion of inflation adjustments accrued by the Fund with respect to IIS for
which the Fund receives no payments in cash prior to their maturity.
Consequently, the Fund may have to dispose of securities under disadvantageous
circumstances in order to generate cash to satisfy the Fund's distribution
requirements.
Credit. Credit risk is the likelihood that an issuer will default on
interest or principal payments. The Fund invests in high quality bonds with a
rating of A or better, which reduces the portfolio's exposure to credit risk.
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, put and call options on fixed income securities may be purchased and
interest rate futures contracts may be entered into for the Fund. (See Appendix
B on page 22 for more detail.)
Also subject to applicable laws and regulations and as a hedge against
changes in the market value of portfolio securities or securities intended to be
purchased, but also to enhance the income of the Fund, options on fixed income
securities may be written for the Fund.
Over-the-counter (OTC) options purchased are treated as not readily
marketable. (See "Investment Restrictions".)
The Investment Adviser enters into forward foreign exchange contracts in
order to protect the dollar value of all investments in IIS 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.
Portfolio Brokerage
The securities in which the Fund invests are traded primarily in the
over-the-counter market on a net basis and do not normally involve either
brokerage commissions or transfer taxes. Where possible transactions on behalf
of the Fund are entered directly with the issuer or from an underwriter or
market maker for the securities involved. Purchases from underwriters of
securities may include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers may include a
spread between the bid and asked price. The policy of the Fund regarding
purchases and sales of securities is that primary consideration is given to
obtaining the most favorable prices and efficient executions of transactions. In
seeking to implement the Fund's policies, the Investment Adviser effects
transactions with those brokers and dealers who the Investment Adviser believes
provide the most favorable prices and are capable of providing efficient
executions. While reasonably competitive spreads or commissions are sought for
the Fund, it will not necessarily be paying the lowest spread or commission
available. If the Investment Adviser believes such prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or Investment Adviser. Such services may
include, but are not limited to, any one or more of the following: information
7
<PAGE>
as to the availability of securities for purchase or sale; statistical or
factual information or opinions pertaining to investment; wire services; and
appraisals or evaluations of portfolio securities. For the fiscal years ended
October 31, 1995 and 1996, the portfolio turnover rate for the Fund was 228% and
114%, respectively. (See "Portfolio Transactions" in the Statement of Additional
Information.)
On those occasions when Brown Brothers Harriman & Co. deems the purchase or
sale of a security to be in the best interests of the Fund as well as other
customers, Brown Brothers Harriman & Co., to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Fund with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Fund. In some instances, this procedure might adversely affect the Fund.
Other Investment Techniques
Loans of Portfolio Securities. Loans up to 30% of the total value of the
securities of the Fund are permitted. These loans must be secured continuously
by cash or equivalent collateral or by an irrevocable letter of credit in favor
of the Fund at least equal at all times to 100% of the market value of the
securities loaned plus accrued income. By lending the securities of the Fund,
the Fund's income can be increased by the Fund continuing to receive income on
the loaned securities as well as by the opportunity for the Fund 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
the Fund and its shareholders.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for the Fund 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 the Fund until delivery and payment take
place. At the time the commitment to purchase securities for the Fund on a
when-issued or delayed delivery basis is made, the transaction is recorded and
thereafter the value of such securities are reflected each day in determining
the Fund's net asset value. At the time of its acquisition, a when-issued or
delayed delivery security may be valued at less than the purchase price. 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, the Fund 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 the Fund may not be entered into if such
commitments exceed in the aggregate 15% of the market value of the Fund's total
assets, less liabilities other than the obligations created by when-issued or
delayed delivery commitments.
8
<PAGE>
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Fund includes a listing of
the specific investment restrictions which govern the Fund's investment
policies. Certain of these investment restrictions are deemed fundamental
policies and may be changed only with the approval of the holders of a "majority
of the Fund's outstanding voting securities" (as defined in the 1940 Act) (see
"Additional Information in this Prospectus"), including a restriction that
excluding the Fund's investment of all of its investable assets in an open-end
investment company with substantially the same investment objective as the Fund,
not more than 10% of the net assets of the Fund may be invested in securities
that are subject to legal or contractual restrictions on resale.
As a non-fundamental policy, money is not borrowed for the Fund in an
amount in excess of 10% of the assets of the Fund. Money is borrowed only from
banks and only either to accommodate requests for the redemption of shares while
effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations. Securities are not purchased
for the Fund at any time at which the amount of its borrowings exceed 5% of its
assets.
Also as a non-fundamental policy, at least 65% of the value of the total
assets of the Fund is invested in securities that are structured to provide
protection against inflation.
In accordance with applicable regulations, the Fund does not purchase any
OTC option, repurchase agreement maturing in more than seven days, 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 market value of the Fund's net assets would be
represented by such investments.
The Fund is classified as diversified under the 1940 Act, which means that
at least 75% of its total assets is represented by cash; securities issued by
the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one company to an amount not greater in value than 5%
of the Fund's total assets. The Fund does not purchase more than 10% of all
outstanding debt obligations of any one issuer (other than obligations issued by
the U.S. Government, its agencies or instrumentalities).
PURCHASE OF SHARES
================================================================================
Shares of the Fund 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 Fund 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 14)
or a Financial Intermediary (see page 13) 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
9
<PAGE>
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 Fund's 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 Fund's Shareholder Servicing
Agent, has established a minimum initial purchase requirement for the Fund of
$100,000 and a minimum subsequent purchase requirement for the Fund of $25,000.
These minimum purchase requirements may be amended from time to time.
Inquiries regarding the manner in which purchases of Fund shares may be
effected and other matters pertaining to the Fund should be directed to Brown
Brothers Harriman & Co., the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.)
REDEMPTION OF SHARES
================================================================================
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 that Eligible Institution or Financial Intermediary. Proceeds of a
redemption are paid to that shareholder's account at that Eligible Institution
or Financial Intermediary. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the redemption of Fund shares.
Shares held directly in the name of a shareholder on the books of the
Corporation may be redeemed by submitting a redemption request in good order to
the Corporation through the Fund's Shareholder Servicing 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 Fund's Shareholder Servicing Agent (see page 13), each Eligible
Institution (see page 14) and each Financial Intermediary (see page 13) may
establish and amend from time to time for their respective customers a minimum
account size. If the value of a shareholder's holdings in the Fund falls below
that amount because of a redemption of shares, the shareholder's remaining
shares may be redeemed. If such remaining shares are to be redeemed, the
shareholder is so notified and is allowed 60 days to make an additional
investment to enable the shareholder to meet the minimum requirement before the
redemption is processed. Brown Brothers Harriman & Co., as the Fund's
Shareholder Servicing Agent, has established a minimum account size of $25,000.
Further Redemption Information
In the event a shareholder redeems all shares held in the Fund, future
purchases of shares of the Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
10
<PAGE>
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 the 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 the Fund, either totally or partially, by a distribution in kind of
securities (instead of cash) from the 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
================================================================================
Directors and Officers
The Directors, in addition to supervising the actions of the Administrator,
Investment Adviser and Distributor of the Fund, as set forth below, decide upon
matters of general policy. Because of the services rendered by the Investment
Adviser and the Administrator, the Corporation itself requires no employees
other than its officers, none of whom, other than the Chairman, receive
compensation from the Fund and all of whom, other than the Chairman, are
employed by 59 Wall Street Administrators. (See "Directors 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
Chairman and Chief Executive Officer - AT&T
Investment Management Corporation
Alan G. Lowy
Private Investor
Arthur D. Miltenberger
Vice President and Chief Financial Officer of
Richard K. Mellon and Sons
Investment Adviser
The Investment Adviser to the Fund is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Fund. Subject to the general supervision of the
Corporation's Directors, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions for the Fund, places the purchase and sale orders for the
portfolio transactions of the Fund, and generally manages the Fund's
investments. Brown Brothers Harriman & Co. provides a broad range of investment
management services for customers in the United States and abroad. At June 30,
1996, it managed total assets of approximately $25 billion.
The Fund's portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. Jeffrey A. Schoenfeld, Mr. Christopher F. Kinney, Mr.
Glenn E. Baker and Mr. James J. Evans. Mr. Schoenfeld holds a B.S. from the
University of California, Berkeley and a M.B.A. from the University of
Pennsylvania. He joined Brown Brothers Harriman & Co. in 1984.
11
<PAGE>
Mr. Kinney holds a B.A. from Yale University, a M.A. from Johns Hopkins
University and a M.B.A. from Columbia University. He joined Brown Brothers
Harriman & Co. in 1984. Mr. Baker holds both a B.A. and a M.B.A. from the
University of Michigan. He joined Brown Brothers Harriman & Co. in 1991. Mr.
Evans holds a B.S. from the University of Delaware and a M.B.A. from New York
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
Fund an annual fee, computed daily and payable monthly, equal to 0.25% of the
average daily net assets of the Fund. Prior to March 1, 1997, the Adviser
received from the Fund a fee accrued daily, and paid monthly at an annual rate
equal to 0.40% of the Fund's average daily net assets, on an annualized basis
for the Fund's then-current fiscal year. Brown Brothers Harriman & Co. also
receives an administration fee from the Fund equal to 0.10% of the Fund's
average daily net assets. Brown Brothers Harriman & Co. also receives a
shareholder servicing/eligible institution fee from the Fund equal to 0.25% of
the Fund's average daily net assets 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 the
Fund are not exclusive under the terms of the Investment Advisory Agreement.
Brown Brothers Harriman & Co. is free to and does render investment advisory
services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of 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 the 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 the Fund to eliminate all reference to 59 Wall Street.
Pursuant to license agreements between Brown Brothers Harriman & Co. and
each of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
Licensee), dated June 22, 1993 and June 8, 1990, respectively, each Licensee may
continue to use in its name 59 Wall Street, the current and historic address of
Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co. does not
terminate the respective license agreement, which would require the Licensee to
change its name to eliminate all reference to 59 Wall Street.
Administrator
Brown Brothers Harriman & Co. acts as Administrator for the Corporation.
(See "Administrator" in the Statement of Additional Information.)
In its capacity as Administrator, 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 Fund's Custodian, Transfer and Dividend
Disbursing Agent; (iii) provides the Corporation with adequate office space and
12
<PAGE>
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 the Fund's prospectus, the printing of such documents
for the purpose of filings with the Securities and Exchange Commission and state
securities administrators, and the preparation of tax returns for the Fund and
reports to the 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 the Fund an annual fee, computed daily and
payable monthly, equal to 0.10% of the Fund's average daily net assets. Prior to
March 1, 1997, the Administrator received from the Fund a fee accrued daily and
paid monthly at an annual rate equal to 0.15% of the Fund's average daily net
assets, on an annualized basis for the Fund's then-current fiscal year.
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 Fund.
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 Fund, among other things:
answers inquiries from shareholders of and prospective investors in the Fund
regarding account status and history, the manner in which purchases and
redemptions of Fund shares may be effected and certain other matters pertaining
to the Fund; assists shareholders of and prospective investors in the Fund in
designating and changing dividend options, account designations and addresses;
and provides such other related services as the Corporation or a shareholder of
or prospective investor in the Fund may reasonably request. For these services,
Brown Brothers Harriman & Co. receives from the Fund an annual fee, computed
daily and payable monthly, equal to 0.25% of the 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.
Financial Intermediaries
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Fund who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the 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 Fund; provides periodic statements showing a customer's account balance
13
<PAGE>
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 Fund. For these services, the Financial Intermediary
receives such fees from the Shareholder Servicing Agent as may be agreed upon
from time to time between the Shareholder Servicing Agent and such Financial
Intermediary.
Eligible Institutions
The 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 Fund 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 Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the 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 Fund. For these services, each financial institution
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of the 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 an expense payment agreement, 59 Wall Street Administrators pays
the Fund's expenses (see "Expense Table"), other than fees paid to Brown
Brothers Harriman & Co. under the Corporation's Administration Agreement and
other than expenses relating to the organization of the Fund. In return, 59 Wall
Street Administrators receives a fee from the Fund such that after such payment
the aggregate expenses of the Fund do not exceed an agreed upon annual rate,
currently 0.65% of the average daily net assets of the Fund. Prior to March 1,
1997, under an agreement dated February 22, 1995, 59 Wall Street Administrators
received a fee from the Fund such that after such payment the aggregate expenses
of the Fund did not exceed an agreed upon annual rate of 0.85% of the average
daily net assets of the Fund. Such fees are computed daily and paid monthly.
During the fiscal year ended October 31, 1996, 59 Wall Street Administrators
incurred $140,502 in expenses, including investment advisory fees of $46,266 and
shareholder servicing/eligible institution fees of $28,917, on behalf of the
Fund and received fees of $76,498 from the Fund.
The expense payment agreement will terminate on July 1, 2000. If there had
been no expense payment agreement, the Directors of the Corporation estimate
that, at the Fund's current level, the total operating expenses of the Fund may
increase to approximately 1.00% of the average annual net assets of the Fund.
The expenses of the Fund paid by 59 Wall Street Administrators under the
agreement include the shareholder servicing/eligible institution fees, the
compensation of the Directors of the Corporation; governmental fees; interest
14
<PAGE>
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Fund;
insurance premiums; expenses of calculating the net asset value of shares of the
Fund; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy statements and reports to shareholders and to governmental
officers and commissions; expenses of shareholder meetings; expenses relating to
the issuance, registration and qualification of shares of the Fund; and expenses
connected with the execution, recording and settlement of portfolio security
transactions; and the expenses associated with the investment advisory
agreement.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Fund. Its office is located at 6 St. James Avenue, Boston, Massachusetts 02116.
59 Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
the Fund's prospectus as required under federal and state securities laws. (See
"Distributor" in the Statement of Additional Information.) 59 Wall Street
Distributors holds itself available to receive purchase orders for Fund shares.
Custodian, Transfer and Dividend
Disbursing Agent
State Street Bank and Trust Company (State Street or the Custodian), 225
Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian,
Transfer and Dividend Disbursing Agent for the Fund.
As Custodian, it is responsible for maintaining books and records of the
Fund's portfolio transactions and holding the Fund's portfolio securities and
cash pursuant to a custodian agreement with the Corporation. Cash is held for
the Fund in demand deposit accounts at the Custodian. Subject to the supervision
of the Administrator, the Custodian maintains the Fund's accounting and
portfolio transaction records and for each day computes the Fund's net asset
value. As Transfer and Dividend Disbursing Agent it is responsible for
maintaining the books and records detailing the ownership of the Fund's shares.
Independent Auditors
Deloitte & Touche LLP are the independent auditors for the Fund.
NET ASSET VALUE
================================================================================
The 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 the Fund's net asset value per share is made by
subtracting from the value of the total assets of the Fund the amount of its
liabilities and dividing the difference by the number of shares of the Fund
outstanding at the time the determination is made.
Values of assets in the Fund's portfolio are determined on the basis of
their market or other fair value. (See "Net Asset Value; Redemption in Kind" in
the Statement of Additional Information.)
DIVIDENDS AND DISTRIBUTIONS
================================================================================
Substantially all of the Fund's net investment income is declared daily and
paid to shareholders as a dividend monthly. Substantially all of the Fund's
realized capital gains, if any, are declared and paid to shareholders on an
annual basis as a capital gains distribution. An additional dividend and/or
capital gains distribution may be made to the extent necessary to avoid the
imposition of federal excise tax on the Fund. (See "Taxes" below.) Dividends and
capital gains distributions are payable to shareholders of record on the record
date.
15
<PAGE>
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 qualify the Fund and elect that the
Fund be treated as a separate regulated investment company under the Internal
Revenue Code of 1986, as amended. Accordingly, the Fund is not subject to
federal income taxes on its net income and realized net long-term capital gains
that are distributed to its shareholders. A 4% non-deductible excise tax is
imposed on the Fund to the extent that certain distribution requirements for the
Fund for each calendar year are not met. The Corporation intends to meet such
requirements.
Dividends are taxable to shareholders of the Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Capital gains 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
should be reduced below a shareholder's cost as a result of such a dividend or
capital gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in the Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
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 the Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
16
<PAGE>
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments are available which would not be subject to United
States withholding tax.
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 the Fund's
fiscal year. Additional tax information is mailed to shareholders in January.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
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 $.001 per share, of which
25,000,000 shares have been classified as shares of the Fund. The Board of
Directors may increase the number of shares the Corporation is authorized to
issue without the approval of shareholders. The Board of Directors 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 Fund.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of the Fund are entitled to a full vote for each full share
held and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
The rights of redemption are described elsewhere herein. Shares are fully paid
and nonassessable by the Corporation. It is the intention of the Corporation not
to hold meetings of shareholders annually. The Directors 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 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.
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 the Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of shareholders of the 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 the Fund, each Eligible Institution, may vote any shares as to
which that Eligible Institution is the agent of record and which are otherwise
not represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by holders of all shares otherwise represented at
the meeting in person or by proxy as to which that Eligible Institution is the
agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
17
<PAGE>
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term majority of the Fund's outstanding
voting securities as defined in the 1940 Act currently means the vote of (i) 67%
or more of the Fund's shares present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present in person or
represented by proxy; or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors. The annual report also contains performance information
and is made available to investors upon request and without charge.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
The Fund's performance may be used from time to time in shareholder reports
or other communications to shareholders or prospective investors. Performance
figures are based on historical earnings and are not intended to indicate future
performance. Performance information may include the Fund's investment results
and/or comparisons of its investment results to various unmanaged indexes (such
as Donoghue's Money Fund Index and Shearson Lehman Intermediate Bond Index) and
to investments for which reliable performance data is available. Performance
information may also include comparisons to averages, performance rankings or
other information prepared by recognized mutual fund statistical services. To
the extent that unmanaged indexes are so included, the same indexes are used on
a consistent basis. The Fund's investment results as used in such communications
are calculated on a total rate of return basis in the manner set forth below.
Period and average annualized total rates of return may be provided in such
communications. The total rate of return refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
of return may be annualized. An annualized total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a one year period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return is slightly
higher than a period total rate of return if the period is shorter than one
year, because of the assumed reinvestment.
The Fund's yield and effective yield may be used from time to time in
shareholder reports or other communications to shareholders or prospective
investors. Both yield figures are based on historical earnings and are not
intended to indicate future performance. The yield of the Fund refers to the
projected income generated by an investment in the Fund over a 30-day or
one-month period (which period is stated). This income is then annualized. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
This Prospectus omits certain of the information contained in the Statement
of Additional Information and the Registration Statement filed with the
Securities and Exchange Commission. The Statement of Additional Information may
be obtained from 59 Wall Street Distributors without charge and the Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Securities and
Exchange Commission.
18
<PAGE>
APPENDIX A
================================================================================
This Appendix is intended to provide descriptions of the other securities
the Fund may purchase. However, the Fund may purchase additional securities not
mentioned below if they meet the quality and maturity guidelines set forth in
the Fund's Investment Policies.
- --------------------------------------------------------------------------------
U.S. Government Securities
Assets of the Fund may be invested in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. These securities,
including those which are guaranteed by federal agencies or instrumentalities,
may or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, it may not be possible to assert a claim against the United States
itself in the event the agency or instrumentality issuing or guaranteeing the
security for ultimate repayment does not meet its commitments. Securities which
are not backed by the full faith and credit of the United States include, but
are not limited to, securities of the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA) and the U.S. Postal Service, each of which
has a limited right to borrow from the U.S. Treasury to meet its obligations,
and securities of the Federal Farm Credit System, the Federal Home Loan Banks,
the Federal Home Loan Mortgage Corporation (FHLMC) and the Student Loan
Marketing Association, the obligations of each of which may be satisfied only by
the individual credit of the issuing agency. Securities which are backed by the
full faith and credit of the United States include Treasury bills, Treasury
notes, Treasury bonds and pass through securities of the Government National
Mortgage Association (GNMA), the Farmers Home Administration and the
Export-Import Bank. There is no percentage limitation with respect to
investments in U.S. Government securities.
Mortgage-Backed Securities
Assets of the Fund also include mortgage-backed securities (MBS) which are
issued by, or are collateralized by securities guaranteed by, the U.S.
Government, its agencies or instrumentalities. These securities represent an
undivided interest in a pool of residential mortgages. These securities,
including those issued by GNMA, FNMA and FHLMC, provide investors with payments
consisting of both interest and principal as the mortgages in the underlying
pools are repaid. Unlike conventional bonds, MBS pay back principal over the
life of the MBS rather than at maturity. Thus, a holder of the MBS, such as the
Fund, would receive monthly scheduled payments of principal and interest and may
receive unscheduled principal prepayments representing payments on the
underlying mortgages. At the time the Fund reinvests the scheduled principal
payments and any unscheduled prepayment of principal that it receives, the Fund
may receive a rate of interest which is higher or lower than the rate of
interest paid on the existing MBS, thus affecting the yield of the Fund.
Asset-Backed Securities
Asset-backed securities represent interests in pools of loans (generally
unrelated to mortgage loans). Interest and principal payments ultimately depend
on payment of the underlying loans by individuals, although the securities may
be supported by letters of credit or other credit enhancements. The value of
asset-backed securities may also be affected by the creditworthiness of the
servicing agent for the loan pool, the originator of the loans or the financial
institution providing the credit enhancement.
Bank Obligations
Assets of the Fund may be invested in U.S. dollar-denominated negotiable
certificates of deposit, fixed time deposits and bankers acceptances of banks,
savings and loan associations and savings banks organized under the laws of the
United States or any state thereof, including obligations of non-U.S. branches
19
<PAGE>
of such banks, or of non-U.S. banks or their U.S. or non-U.S. branches, provided
that in each case, such bank has more than $500 million in total assets, and has
an outstanding short-term debt issue rated within the highest rating category
for short-term debt obligations by at least two (unless only rated by one)
nationally recognized statistical rating organizations (e.g., Moody's and S&P)
or, if unrated, are of comparable quality as determined by or under the
direction of the Board of Directors. See "Corporate Bond and Commercial Paper
Ratings" in the Statement of Additional Information. There is no percentage
limitation with respect to investments in negotiable certificates of deposit,
fixed time deposits and bankers acceptances of U.S. branches of U.S. banks and
U.S. branches of non-U.S. banks that are subject to the same regulation as U.S.
banks. While early withdrawals are not contemplated, fixed time deposits are not
readily marketable and may be subject to early withdrawal penalties, which may
vary. Assets of the Fund are not invested in obligations of Brown Brothers
Harriman & Co., the Administrator, the Distributor, or in the obligations of the
affiliates of any such organization or in fixed time deposits with a maturity of
over seven calendar days, or in fixed time deposits with a maturity of from two
business days to seven calendar days if more than 10% of the Fund's total assets
would be invested in such deposits.
Repurchase Agreements
Repurchase agreements may be entered into only with a primary dealer (as
designated by the Federal Reserve Bank of New York) in U.S. Government
obligations. This is an agreement in which the seller (the Lender) of a security
agrees to repurchase from the Fund the security sold at a mutually agreed upon
time and price. As such, it is viewed as the lending of money to the Lender. The
resale price normally is in excess of the purchase price, reflecting an agreed
upon interest rate. The rate is effective for the period of time assets of the
Fund are invested in the agreement and is not related to the coupon rate on the
underlying security. The period of these repurchase agreements is usually short,
from overnight to one week, and at no time are assets of the Fund invested in a
repurchase agreement with a maturity of more than one year. The securities which
are subject to repurchase agreements, however, may have maturity dates in excess
of one year from the effective date of the repurchase agreement. The Fund always
receives as collateral securities which are issued or guaranteed by the
U.S.Government, its agencies or instrumentalities. Collateral is marked to the
market daily and has a market value including accrued interest at least equal to
100% of the dollar amount invested on behalf of the Fund in each agreement along
with accrued interest. Payment for such securities is made for the Fund only
upon physical delivery or evidence of book entry transfer to the account of
State Street Bank and Trust Company, the Fund's Custodian. If the Lender
defaults, the Fund might incur a loss if the value of the collateral securing
the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the Lender, realization upon the
collateral on behalf of the Fund may be delayed or limited in certain
circumstances. A repurchase agreement with more than seven days to maturity may
not be entered into for the Fund if, as a result, more than 10% of the market
value of the Fund's total assets would be invested in such repurchase agreements
together with any other investment being held for the Fund for which market
quotations are not readily available.
20
<PAGE>
Reverse Repurchase Agreements
Reverse repurchase agreements may be entered into only with a primary
dealer (as designated by the Federal Reserve Bank of New York) in U.S.Government
obligations. This is an agreement in which the Corporation agrees for the Fund
to repurchase securities sold by it at a mutually agreed upon time and price. As
such, it is viewed as the borrowing of money for the Fund. Proceeds of
borrowings under reverse repurchase agreements is invested for the Fund. This is
the speculative factor known as leverage. If interest rates rise during the term
of a reverse repurchase agreement utilized for leverage, the value of the
securities to be repurchased for the Fund as well as the value of securities
purchased with the proceeds will decline. Proceeds of a reverse repurchase
transaction are not invested for a period which exceeds the duration of the
reverse repurchase agreement. A reverse repurchase agreement may not be entered
into for the Fund if, as a result, more than one-third of the market value of
the Fund's total assets, less liabilities other than the obligations created by
reverse repurchase agreements, would be engaged in reverse repurchase
agreements. In the event that such agreements exceed, in the aggregate,
one-third of such market value, the amount of the Fund's obligations created by
reverse repurchase agreements will be reduced within three days thereafter (not
including weekends and holidays) or such longer period as the Securities and
Exchange Commission may prescribe, to an extent that such obligations will not
exceed, in the aggregate, one-third of the market value of the Fund's assets, as
defined above. A segregated account with the Custodian is established and
maintained for the Fund with liquid assets in an amount at least equal to the
Fund's purchase obligations under its reverse repurchase agreements. Such
segregated account consists of liquid assets marked to the market daily, with
additional liquid assets added when necessary to insure that at all times the
value of such account is equal to the purchase obligations.
21
<PAGE>
APPENDIX B--HEDGING STRATEGIES
================================================================================
Options on Fixed Income Securities. A call option on fixed income
securities gives the purchaser of the option the right to buy the underlying
securities 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
securities 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.
The effectiveness of purchasing options on fixed income securities as a
hedging technique depends upon the extent to which price movements in the
portion of the securities portfolio of the Fund being hedged correlate with
price movements of the fixed income securities selected. The value of these
options depends upon future movements in the level of interest rates as
reflected in the price of the underlying fixed income securities before the
expiration of the option. Accordingly, the successful use of options on fixed
income securities for the Fund is subject to the Investment Adviser's ability to
select appropriate underlying fixed income securities and to predict future
interest rate movements over the short term in the overall market. Brokerage
costs are incurred in the purchase of options on fixed income securities and the
incorrect choice of underlying fixed income securities or an incorrect
assessment of future interest rate movements may result in poorer overall
performance than if such an option had not been purchased.
The Corporation intends to write (sell) covered put and call options on
optionable fixed income securities on behalf of the Fund. Call options written
by the Corporation give the holder the right to buy the underlying securities
during the term of the option at a stated exercise price; put options give the
holder the right to sell the underlying security to the Fund during the term of
the option at a stated exercise price. Call options are covered, for example,
when the Fund owns the underlying securities, and put options are covered, for
example, when the Fund has established a segregated account of cash and U.S.
Government securities which can be liquidated promptly to satisfy any obligation
to purchase the underlying securities. The Corporation may also write straddles
(combinations of puts and calls on the same underlying security) on behalf of
the Fund.
The Fund receives a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. The amount of the premium reflects, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option and the remaining term of the option. By writing a
call option, the Corporation limits the opportunity of the Fund to profit from
any increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, the Corporation assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security subsequently appreciates in value.
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.
Futures Contracts on Fixed Income Securities. 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 fixed income securities ("Futures Contracts") may be entered into for the
Fund, although the current intention is not to do so in such a manner that more
than 5% of the Fund's net assets would be at risk.
22
<PAGE>
In order to assure that the Fund is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Fund enters 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 the Fund's
assets.
Futures Contracts are used to hedge against anticipated future changes in
interest rates which otherwise might either adversely affect the value of
securities held for the Fund or adversely affect the prices of securities which
are intended to be purchased at a later date for the Fund. 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 for the Fund would rise in value by an
amount which approximately offsets the decline in value of the portion of the
investment 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 fixed
income securities selected. The value of a Futures Contract depends upon future
movements in the price of the fixed income securities before the closing out of
the Futures Contract. Accordingly, the successful use of Futures Contracts for
the Fund is subject to the Investment Adviser's ability both to select
appropriate fixed income securities and to predict future price movements over
the short term in those securities. The incorrect choice of fixed income
securities or an incorrect assessment of future price movements over the short
term in those securities 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 the Fund enters into a Futures Contract, it is initially required to
deposit with the custodian, 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 the Fund 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.
Currently, interest rate Futures Contracts can be purchased on debt
securities such as U.S. Treasury bills and bonds, U.S. Treasury notes with
maturities between 61/2 to 10 years, GNMA certificates and bank certificates of
deposit. As a purchaser of an interest rate Futures Contract, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of an interest rate Futures Contract, the Fund incurs an obligation to
deliver the specified amount of the underlying obligation at a specified time in
return for an agreed upon price.
23
<PAGE>
Exchanges my 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
securities subject to Futures Contracts (and thereby the Futures Contract
prices) may correlate imperfectly with the behavior of the cash prices of the
Fund's portfolio securities. Another such risk is that the price of the Futures
Contract may not move in tandem with the change in prevailing interest rates
against which the Fund seeks a hedge. An interest rate correlation may be
distorted by the fact that the futures market is dominated by short-term traders
seeking to profit from the difference between a contract or security price
objective and their cost of borrowed funds. Such distortions are generally minor
and would diminish as the contract approached maturity.
24
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus and the Statement of Additional Information, in connection with the
offer contained in this Prospectus, and if given or made, such other
informa-tion 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 U.S. EQUITY FUND
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
================================================================================
The 59 Wall Street U.S. Equity Fund (the "U.S. Equity Fund" of 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 be invested in a portfolio of equity securities of companies that
are well established and financially sound. The Fund's investment objective is
to provide investors with long-term capital growth while also generating current
income. There can be no assurance that the investment objective of the Fund will
be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the
"Investment Adviser") to the Fund. This Statement of Additional Information is
not a prospectus and should be read in conjunction with the Prospectus dated
February 28, 1997, 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 5-9
Investment Restrictions . . . . . . . . . . . . . . 5 9
Directors and Officers . . . . . . . . . . . . . . . 8 12
Investment Adviser . . . . . . . . . . . . . . . . . 11 12-13
Administrator . . . . . . . . . . . . . . . . . . . 12 13-14
Distributor . . . . . . . . . . . . . . . . . . . . 13 15-16
Net Asset Value; Redemption in Kind . . . . . . . . 13 16
Computation of Performance . . . . . . . . . . . . . 14 19
Federal Taxes . . . . . . . . . . . . . . . . . . . 15 17-18
Description of Shares . . . . . . . . . . . . . . . 17 18
Portfolio Transactions . . . . . . . . . . . . . . . 19 8-9
Corporate Bond, Commercial Paper and Note Ratings . 21 20-23
Additional Information . . . . . . . . . . . . . . . 22 19
Financial Statements . . . . . . . . . . . . . . . . 23 4
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS FEBRUARY 28, 1997.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund.
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 CONTRACTS
OPTIONS ON STOCK. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for the Fund, although the current intention
is not to do so in such a manner that more than 5% of the Fund'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 for the Fund at any time prior to the expiration of the option which
involves selling the option previously purchased.
2
<PAGE>
LOANS OF PORTFOLIO SECURITIES
Securities of the Fund may be loaned if such loans are secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the Fund at least equal at all times to 100% of the market
value of the securities loaned plus accrued income. While such securities are on
loan, the borrower pays the Fund any income accruing thereon, and cash
collateral may be invested for the Fund, thereby earning additional income. All
or any portion of interest earned on invested collateral may be paid to the
borrower. Loans are subject to termination by the Corporation in the normal
settlement time, currently three business days after notice, or by the borrower
on one day's notice. Borrowed securities are returned when the loan is
terminated. Any appreciation or depreciation in the market price of the borrowed
securities which occurs during the term of the loan inures to the Fund and its
shareholders. Reasonable finders' and custodial fees may be paid in connection
with a loan. In addition, all facts and circumstances, including the
creditworthiness of the borrowing financial institution, are considered before a
loan is made and no loan is made in excess of one year. There is the risk that a
borrowed security may not be returned to the Fund. Securities of the Fund are
not loaned to Brown Brothers Harriman & Co. or to any affiliate of the
Corporation or Brown Brothers Harriman &
Co.
INVESTMENT RESTRICTIONS
================================================================================
The Fund is operated under the following investment restrictions which
are deemed fundamental policies and may be changed only with the approval of the
holders of a "majority of the Fund's outstanding voting securities" (as defined
in the 1940 Act). (See "Additional Information".)
Except that the 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, the Corporation, with respect to the
Fund, may not:
(1) borrow money or mortgage or hypothecate its assets, except that in
an amount not to exceed 1/3 of the current value of its net assets, it may
borrow money as a temporary measure for extraordinary or emergency purposes, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money will be borrowed
only from banks and only either to accommodate requests for the redemption of
Fund shares while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete a
portfolio
3
<PAGE>
security transaction or other similar situations); 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 or the purchase, ownership,
holding, sale or writing of options;
(3) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933 in
selling a portfolio security;
(4) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its 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 (5) 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 is part of an
issue to the public shall not be considered the making of a loan;
(5) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
4
<PAGE>
(6) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and 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);
(7) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue 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);
(8) 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;
(9) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior
security for purposes of this restriction;
(10) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than obligations issued by the U.S.
Government, its agencies or instrumentalities); provided, however, that up to
25% of its total assets may be invested without regard to this restriction; or
(11) purchase more than 10% of the outstanding voting securities of
any one issuer.
5
<PAGE>
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies the Fund may not as a matter of operating
policy (except that the 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): (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 exceeds 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
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; 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, securities of foreign issuers which are not registered
under the Securities Act of 1933 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 (this restriction shall not apply to any obligations of the U.S.
Government, its agencies or instrumentalities), 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 is an officer or
6
<PAGE>
partner of the Investment Adviser, if after the purchase of the
securities of such issuer one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities, or both, all taken at market value,
of such issuer, and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities,
or both, all taken at market value. These policies are not fundamental and may
be changed without shareholder approval in response to changes in the various
state and federal
requirements.
PERCENTAGE AND RATING RESTRICTIONS. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy.
DIRECTORS AND OFFICERS
================================================================================
The Directors and executive officers of the Corporation, their
principal occupations 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, 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;
Chairman and Chief Executive Officer - AT&T Investment Management Corporation;
Director of Dreyfus Mutual Funds, Equity Fund of Latin America , New World
Balanced Fund , India Magnum Fund, and U.S. Prime Properties Inc.; Trustee of
Corporate Property Investors. His business address is 3 Tall Oaks Drive,
Warren, NJ 07059.
7
<PAGE>
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.
OFFICERS OF THE CORPORATION
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); graduate student, Boston
University School of Law (prior to May, 1992).
MOLLY S. MUGLER -- Assistant Secretary; Vice President and Assistant
Secretary of SFG; Assistant Secretary of
10
<PAGE>
59 Wall Street Distributors and 59 Wall Street Administrators (since
June 1993).
- -------------------------
* Mr. Shields is an "interested person" of the Corporation because of
his affiliation with a registered broker-dealer.
** These Directors are members of the Audit Committee 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,
Enterprise Corporation, Vought Aircraft Corporation, Caterair International, The
Carlyle Group and Morgenthaler Venture Funds, with which Mr. Miltenberger is or
has been associated, are a private foundation, a private foundation, a business
development firm, an aircraft manufacturer, an airline food services company, a
merchant bank, and a venture capital partnership, respectively.
Each Director and officer listed above holds the equivalent position
with The 59 Wall Street Trust. The address of each officer is 6 St. James
Avenue, Boston, Massachusetts 02116. Messrs. Coolidge, Hoolahan, and Elder and
Mss. Gibson and Mugler also hold similar positions with other investment
companies for which affiliates of
59 Wall Street Distributors serve as the principal underwriter.
Except for Mr. Shields, no Director is an "interested person" of the
Corporation as that term is defined in the 1940 Act.
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. The aggregate compensation to each Director from the Corporation and
the Fund Complex (the Fund Complex consists of the Corporation and The 59 Wall
Street Trust which currently consists of three series) was less than $60,000.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement and the Administration Agreement
(see "Investment Adviser" and "Administrator"), the Corporation does not require
employees other than its officers, and none of its officers devote full time to
the affairs of the Corporation, or,
11
<PAGE>
other than the Chairman, receive any compensation from the Fund.
As of January 31, 1997, the Corporation's Directors and officers as a
group beneficially owned less than 1% of the outstanding shares of the
Corporation. At the close of business on that date, no person, to the knowledge
of management, owned beneficially more than 5% of the outstanding shares of the
Fund except that the Baird Family Trust Account owned 113,450 (9.1%) shares of
the Fund.
The address of each of the above named is c/o Brown Brothers Harriman &
Co., 59 Wall Street, New York, New York 10005. As of that date, partners of
Brown Brothers Harriman & Co. and their immediate families owned an additional
60,512 (4.9%) shares of the Fund . Also, Brown Brothers Harriman & Co. Employee
Pension Plan on that date held 284,932 (22.9%) shares of the Fund. Brown
Brothers Harriman and its affiliates separately are able to direct the
disposition of an additional 397,600 (32.0%) shares of the Fund , as to which
shares Brown Brothers Harriman & Co. disclaims
beneficial ownership.
INVESTMENT ADVISER
===============================================================================
Under an Investment Advisory Agreement with the Corporation, subject to
the general supervision of the Corporation's Directors and in conformance with
the stated policies of the Fund, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Fund. In this regard,
it is the responsibility of Brown Brothers Harriman & Co. to make the day-to-day
investment decisions for the Fund, to place the purchase and sale orders for
portfolio transactions of the Fund, and to manage, generally, the investments of
the Fund.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Corporation is dated June 9, 1992, as amended and restated November 1,
1993 and remains in effect for two years from such date and thereafter, but only
as long as the agreement is specifically approved at least annually (i) by a
vote of the holders of a "majority of the Fund's outstanding voting securities"
(as defined in the 1940 Act) or by the Corporation's Directors, and (ii) by a
vote of a majority of the
12
<PAGE>
Directors of the Corporation who are not parties to the Investment
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of the
Corporation ("Independent Directors") 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 Directors on December 18, 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 Directors
of the Corporation or by a vote of the holders of a "majority of the Fund's
outstanding voting securities" (as defined in the 1940 Act) on 60 days' written
notice to Brown Brothers Harriman & Co. and by Brown Brothers Harriman & Co. on
90 days' written notice to the Corporation.
(See "Additional Information".)
The investment advisory fee paid to the Investment Adviser is
calculated daily and paid monthly at an annual rate equal to 0.65% of the Fund's
average daily net assets. For the fiscal years ended October 31, 1994 , 1995,
and 1996, the Fund incurred $107,493 , $167,339, and $277,632,
respectively, for advisory services.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Fund.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing investment advisory,
administrative or shareholder servicing/eligible institution functions. If Brown
Brothers Harriman & Co. were to terminate its Investment Advisory Agreement with
the Corporation or were prohibited from acting in such capacity, it is expected
that the Directors would recommend the shareholders that they approve a new
investment advisory agreement for the Fund with another qualified adviser. If
Brown Brothers Harriman & Co. were to terminate its Eligible Institution
Agreement or Administration Agreement with the Corporation or were prohibited
from acting in any such capacity, its customers would be permitted to remain
13
<PAGE>
shareholders of the Corporation 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.
ADMINISTRATOR
================================================================================
The Administration Agreement between the Corporation and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, but only so long as such agreement is specifically
approved at least annually in the same manner as the Investment Advisory
Agreement (see "Investment Adviser"). The Independent Directors most recently
approved the Corporation's Administration Agreement on December 18, 1996. The
agreement will terminate automatically if assigned by either party thereto and
is terminable at any time without penalty by a vote of a majority of the
Directors of the Corporation, or by a vote of the holders of a "majority of the
Corporation's outstanding voting securities " (as defined in the 1940 Act). (See
"Additional Information"). The 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. and by Brown Brothers Harriman &
Co. on 90 days' written
notice to the Corporation.
The administrative fee payable to Brown Brothers Harriman & Co. from
the Fund is calculated daily and payable monthly at an annual rate equal to
0.15% of the Fund's average daily net assets.
For the fiscal years ended October 31, 1994 , 1995 and 1996 the Fund
incurred $24,806, $38,617 and $64,069, respectively, for administrative
services.
DISTRIBUTOR
================================================================================
14
<PAGE>
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 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 Fund's outstanding voting securities" (as
defined in the 1940 Act). (See "Additional Information".) The Distribution
Agreement is terminable with respect to the Fund by the 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.
15
<PAGE>
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 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.) This
determination of net asset value of each share of the Fund is made once during
each such day as of the close of regular trading on such Exchange by subtracting
from the value of the Fund's total assets the amount of its liabilities, and
dividing the difference by the number of shares of the Fund outstanding at the
time the determination is
made.
The value of investments listed on a securities exchange is based on
the last sale prices as of the close of regular trading 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. 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.
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Directors. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing
16
<PAGE>
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Corporation's
Directors. Short-term investments which mature in 60 days or less are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their original maturity when
acquired for the Fund was more than 60 days, unless this is determined not to
represent fair
value by the Directors.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
the 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 the
Fund solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets
at the
beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
===============================================================================
The average annual total rate of return of the Fund is calculated for
any period by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period,
and (c) subtracting 1 from the result.
The total rate of return of the Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate
17
<PAGE>
net asset value per share on the last day of the period of shares
purchased with a $1,000 payment on the first day of the period and the aggregate
net asset value per share on the last day of the period of shares purchasable
with dividends and capital gains distributions declared during such period with
respect to shares purchased on the first day of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
$1,000, and (b) subtracting 1 from the result.
The average annual total rate of return for the Fund for the period
July 23, 1992 (commencement of operations) to October 31, 1996 was 15.15%. The
average annual total rate of return for the Fund for the fiscal year ended
October 31, 1996 was 19.32%.
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 the market value of, and dividends and
interest received from, the investments held by the Fund and the Fund's expenses
during the period.
Total 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.
18
<PAGE>
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 or other
income derived with respect to its business of investing in such securities; (b)
less than 30% of the Fund's annual gross income be derived from gains (without
offset for losses) from the sale or other disposition of securities held for
less than three months; and (c) the holdings of the Fund be diversified so that,
at the end of each quarter of its fiscal year, (i) at least 50% of the market
value of the Fund's assets be represented by cash, U.S. Government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
assets be invested in the securities of any one issuer (other than U.S.
Government securities). In addition, in order not to be subject to federal
income tax, at least 90% of the Fund's net investment income and net short-term
capital gains earned in each year must be distributed to the Fund's
shareholders.
Gains or losses on sales of securities for the Fund are treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where a put has been acquired or a
call has been written thereon for the Fund. 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 Fund lapses or is terminated through a closing transaction, such as a
repurchase for the Fund of the option from its holder, the Fund may realize a
short-term capital gain or loss, depending on whether the premium income is
greater or less than the amount
19
<PAGE>
paid in the closing transaction. If securities are sold for the Fund
pursuant to the exercise of a call option written for it, the premium received
is 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 ability to write options and engage in
transactions involving stock index futures .
Certain options contracts held for the Fund 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 such options were held. The Fund 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 by
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 would be treated
as long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
OTHER TAXES. The Fund may be subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws. Shareholders
should consult their own tax advisors with respect
to any state or local taxes.
DESCRIPTION OF SHARES
================================================================================
20
<PAGE>
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 U.S. Equity 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.
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.
The Corporation may, in the future, seek to achieve the
21
<PAGE>
Fund's investment objective by investing all of the Fund's investable
assets in a no-load, diversified, open-end management investment company having
substantially the same investment objective as those applicable to the Fund. In
such event, the Fund would no longer directly require investment advisory
services and therefore would pay no investment advisory fees. Further, the
administrative services fee paid from the Fund would be reduced. At a
shareholder's meeting held on September 23, 1993, the Fund's shareholders
approved changes to the investment restrictions of the Fund to authorize such an
investment. Such an investment would be made only if the Directors believe that
the aggregate per share expenses of the Fund and such other investment company
would be less than or approximately equal to the expenses which the Fund would
incur if the Corporation were to continue to retain the services of an
investment adviser for the Fund and the assets of the Fund were
to continue to be invested directly in portfolio securities.
It is expected that the investment of the Fund in another investment
company will have no preference, preemptive, conversion or similar rights, and
will be fully paid and non-assessable. It is expected that the investment
company will not be required to hold annual meetings of investors, but will hold
special meetings of investors when, in the judgment of its trustees, it is
necessary or desirable to submit matters for an investor vote. It is expected
that each investor will be entitled to a vote in proportion to the share of its
investment in such investment company. Except as described below, whenever the
Corporation is requested to vote on matters pertaining to the investment
company, the Corporation would hold a meeting of the Fund's shareholders and
would cast its votes on each matter at a meeting of investors in the investment
company
proportionately as instructed by the Fund's shareholders.
PORTFOLIO TRANSACTIONS
================================================================================
In effecting securities transactions for the Fund, the Investment
Adviser seeks to obtain the best price and execution of orders. In selecting a
broker, the Investment Adviser considers a broker's ability to execute orders
without disturbing the market price, a broker's reliability for prompt, accurate
confirmations and on-time delivery of securities, and the quality and
reliability of brokerage services, including execution
22
<PAGE>
capability and performance and financial responsibility, and may
consider the research and other investment information provided by such brokers.
Accordingly, the commissions charged by a 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 that broker.
For the fiscal years ended October 31, 1994 , 1995 and 1996, the
aggregate commissions paid by the Fund were $47,685 , $66,007, and $91,075,
respectively.
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 Corporation uses Brown Brothers Harriman & Co. as one of the Fund's
principal brokers where, in the judgment of the Investment Adviser, such firm is
able to obtain a price and execution at least as favorable as prices and
executions provided by other qualified brokers. As one of the Fund's principal
brokers, Brown Brothers Harriman & Co. receives brokerage
commissions from the Fund.
The use of Brown Brothers Harriman & Co. as a broker for the Fund is
subject to the provisions of Rule 11a2-2(T) under the Securities Exchange Act of
1934 which permits the Corporation 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 Fund 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.
A committee of non-interested Directors from time to time reviews,
among other things, information relating to the commissions charged by Brown
Brothers Harriman & Co. to the Fund 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 Harriman &
Co. effects brokerage transactions for the Fund are reviewed and approved no
less often than annually by a majority of the non-interested Directors.
For the fiscal years ended October 31, 1994, 1995 and 1996, total
transactions with a principal value of $25,304,200, $38,139,053 and $43,947,413
were effected for the Fund of which transactions with a principal value of
$12,461,904, $16,283,300 and $20,646,719 were effected by Brown Brothers
Harriman & Co. which
23
<PAGE>
involved payments of commissions to Brown Brothers Harriman & Co. of
$24,675, $35,145 and $50,078, respectively.
A portion of the transactions for the Fund 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 Fund. The Investment Adviser
believes that the value of research services received is not determinable nor
does such research significantly reduce its expenses. The Corporation does not
reduce the fee paid by the Fund to the Investment Adviser by any amount that
might be attributable to the value of such services.
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 Directors of the Corporation review regularly the reasonableness of
commissions and other transaction costs incurred for the Fund 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.
24
<PAGE>
MISCELLANEOUS
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 Corporation 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 Corporation 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 Corporation 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.
25
<PAGE>
26
<PAGE>
ADDITIONAL INFORMATION
===============================================================================
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the Fund's outstanding voting securities" (as defined in
the 1940 Act) currently means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's outstanding
voting securities are present in person or represented by proxy; or (ii) more
than 50% of the Fund's
outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, the Fund's portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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
27
<PAGE>
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 Annual Report of the Fund dated October 31, 1996 has been filed
with the Securities and Exchange Commission pursuant to Section 30(b) of the
1940 Act and Rule 30b2-1 thereunder and is hereby incorporated herein by
reference. A copy of the Annual Report will be provided, without charge, to
each person receiving this Statement of Additional Information.
WS5462
28
<PAGE>
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
6 St. James Avenue, Boston, Massachusetts 02116
================================================================================
The 59 Wall Street Inflation-Indexed Securities Fund (the
"Inflation-Indexed Securities Fund" or 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 Inflation-Indexed Securities Fund is designed to enable
investors to be invested in a portfolio of securities that are structured to
provide protection against inflation. The Inflation-Indexed Securities Fund's
investment objective is to provide investors with
a high level of current income consistent with minimizing price
fluctuations in net asset value and maintaining liquidity. There can be no
assurance that the investment objective of the Fund will be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the "Investment
Adviser") to the Fund. This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated February
28, 1997, 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 5-9
Investment Restrictions . . . . . . . . . . . . . . 5 9
Directors and Officers . . . . . . . . . . . . . . . 8 12
Investment Adviser . . . . . . . . . . . . . . . . . 11 12-13
Administrator . . . . . . . . . . . . . . . . . . . 12 13-14
Distributor . . . . . . . . . . . . . . . . . . . . 13 15-16
Net Asset Value; Redemption in Kind . . . . . . . . 13 16
Computation of Performance . . . . . . . . . . . . . 14 19
Federal Taxes . . . . . . . . . . . . . . . . . . . 15 17-18
Description of Shares . . . . . . . . . . . . . . . 17 18
Portfolio Transactions . . . . . . . . . . . . . . . 19 8-9
Corporate Bond, Commercial Paper and Note Ratings . 21 20-23
Additional Information . . . . . . . . . . . . . . . 22 19
Financial Statements . . . . . . . . . . . . . . . . 23 4
The date of this Statement of Additional Information is February 28, 1997.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and
techniques of the Fund.
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.
4
Loans of Portfolio Securities
Securities of the Fund may be loaned if such loans are secured continuously
by cash or equivalent collateral or by an irrevocable letter of credit in favor
of the Fund at least equal at all times to 100% of the market value of the
securities loaned plus accrued income. While such securities are on loan, the
borrower pays the Fund any income accruing thereon, and cash collateral may be
invested for the Fund, thereby earning additional income. All or any portion of
interest earned on invested collateral may be paid to the borrower. Loans are
subject to termination by the Corporation in the normal settlement time,
currently three business days after notice, or by the borrower on one day's
notice. Borrowed securities are returned when the loan is terminated. Any
appreciation or depreciation in the market price of the borrowed securities
which occurs during the term of the loan inures to the Fund and its
shareholders. Reasonable finders' and custodial fees may be paid in connection
with a loan. In addition, all facts and circumstances, including the
creditworthiness of the borrowing financial institution, are considered before a
loan is made and no loan is made in excess of one year. There is the risk that a
borrowed security may not be returned to the Fund. Securities of the Fund are
not loaned to Brown Brothers Harriman & Co. or to any affiliate of the
Corporation or Brown Brothers Harriman &
Co.
INVESTMENT RESTRICTIONS
================================================================================
The Fund is operated under the following investment restrictions which are
deemed fundamental policies and may be changed only with the approval of the
holders of a "majority of the Fund's outstanding voting securities" (as defined
in the 1940 Act). (See "Additional Information".)
Except that the 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, the Corporation, with respect to the
Fund, may not:
(1) borrow money or mortgage or hypothecate its assets, except that in an
amount not to exceed 1/3 of the current value of its net assets, it may borrow
money as a temporary measure for extraordinary or emergency purposes, and except
that it may pledge, mortgage or hypothecate not more than 1/3 of such assets to
secure such borrowings (it is intended that money will be borrowed only from
banks and only either to accommodate requests for the redemption of Fund shares
while effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations) or,
5
<PAGE>
reverse repurchase agreements, 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 or the purchase, ownership, holding, sale
or writing of options;
(3) underwrite securities issued by other persons except insofar as it may
technically be deemed an underwriter under the Securities Act of 1933 in selling
a portfolio security;
(4) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its 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 (5) 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 is part of an
issue to the public shall not be considered the making of a loan;
(5) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(6) enter into reverse repurchase agreements which, including any
borrowings described in paragraph (1), exceed, in the aggregate, one-third of
the market value of the Fund's total assets, less liabilities other than
obligations created by reverse repurchase agreements. In the event that such
agreements exceed, in the aggregate, one-third of such market value, it will,
within three days thereafter (not including weekends and holidays) or such
longer period as the Securities and Exchange Commission may prescribe, reduce
the amount of the obligations
6
<PAGE>
created by reverse repurchase agreements to an extent that such obligations
will not exceed, in the aggregate, one-third of the market value of its assets;
(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;
(11) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than obligations issued by the U.S.
Government, its agencies or instrumentalities); provided, however, that up to
25% of its total assets may be invested without regard to this restriction;
(12) purchase more than 10% of all outstanding debt obligations of any one
issuer (other than obligations issued by the U.S. Government, its agencies or
instrumentalities)
.
7
<PAGE>
State and Federal Restrictions. In order to comply with certain state and
federal statutes and policies the Fund may not as a matter of operating policy
(except that the 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): (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 exceeds 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 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; 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, securities of foreign issuers which are not registered
under the Securities Act of 1933 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 (this restriction shall not apply to any obligations of the U.S.
Government, its agencies or instrumentalities), 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 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
8
<PAGE>
beneficially more than 1/2 of 1% of the shares or securities, or both, all
taken at market value, of such issuer, and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more than 5% of such
shares or securities, or both, all taken at market value. These policies are not
fundamental and may be changed without shareholder approval in response to
changes in the various state and federal requirements.
Percentage and Rating Restrictions. If a percentage or rating restriction
on investment or utilization of assets set forth above or referred to in the
Prospectus is adhered to at the time an investment is made or assets are so
utilized, a later change in percentage resulting from changes in the value of
the portfolio securities or a later change in the rating of a portfolio security
is not considered a violation of policy.
9
<PAGE>
DIRECTORS AND OFFICERS
================================================================================
The Directors and executive officers of the Corporation, their principal
occupations 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, 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;
Chairman and Chief Executive Officer - AT&T Investment Management Corporation;
Director of Dreyfus Mutual Funds, Equity Fund of Latin America , New World
Balanced Fund , India Magnum Fund, and U.S. Prime Properties Inc.; Trustee of
Corporate Property Investors. His business address is 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
10
<PAGE>
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.
OFFICERS OF THE CORPORATION
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).
Administrators (since June 1993).
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); graduate student, Boston
University School of Law (prior to May, 1992).
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).
- -------------------------
11
<PAGE>
* Mr. Shields is an "interested person" of the Corporation because of his
affiliation with a registered broker-dealer.
** These Directors are members of the Audit Committee 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, Enterprise
Corporation, Vought Aircraft Corporation, Caterair International, The Carlyle
Group and Morgenthaler Venture Funds, with which Mr. Miltenberger is or has been
associated, are a private foundation, a private foundation, a business
development firm, an aircraft manufacturer, an airline food services company, a
merchant bank, and a venture capital partnership, respectively.
Each Director and officer listed above holds the equivalent position with
The 59 Wall Street Trust. The address of each officer is 6 St. James Avenue,
Boston, Massachusetts 02116. Messrs. Coolidge, Hoolahan, and Elder and Mss.
Gibson and Mugler also hold similar positions with other investment companies
for which affiliates of 59 Wall Street Distributors serve as the principal
underwriter.
Except for Mr. Shields, no Director is an "interested person" of the
Corporation as that term is defined in the 1940 Act.
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. The aggregate compensation to each Director from the Corporation and
the Fund Complex (the Fund Complex consists of the Corporation and The 59 Wall
Street Trust which currently consists of three series) was less than $60,000.
By virtue of the responsibilities assumed by Brown Brothers Harriman & Co.
under the Investment Advisory Agreement and the Administration Agreement (see
"Investment Adviser" and "Administrator"), the Corporation does not require
employees other than its officers, and none of its officers devote full time to
the affairs of the Corporation, or, other than the Chairman, receive any
compensation from the Fund.
12
<PAGE>
As of January 31, 1997, the Corporation's Directors and officers as a group
beneficially owned less than 1% of the outstanding shares of the Corporation. At
the close of business on that date, no person, to the knowledge of management,
owned beneficially more than 5% of the outstanding shares of the Fund except
that the Catholic Charities Gift owned 88,803 (5.3%) shares of the Fund and
Fleckenstein Foundation owned 250,374 (14.9%) shares of the Fund. The address of
each of the above named is c/o Brown Brothers Harriman & Co., 59 Wall Street,
New York, New York 10005. As of that date, partners of Brown Brothers Harriman &
Co. and their immediate families owned an additional 15,319 (0.9%) shares of the
Fund. Also, Brown Brothers Harriman & Co. Employee Pension Plan on that date
held 186,111 (11.1%) shares of the Fund. Brown Brothers Harriman & Co. and its
affiliates separately are able to direct the disposition of an additional
383,810 (22.9%) shares of the Fund , as to which shares Brown
Brothers Harriman & Co. disclaims beneficial ownership.
INVESTMENT ADVISER
===============================================================================
Under an Investment Advisory Agreement with the Corporation, subject to the
general supervision of the Corporation's Directors and in conformance with the
stated policies of the Fund, Brown Brothers Harriman & Co. provides investment
advice and portfolio management services to the Fund. In this regard, it is the
responsibility of Brown Brothers Harriman & Co. to make the day-to-day
investment decisions for the Fund, to place the purchase and sale orders for
portfolio transactions of the Fund , and to manage, generally, the investments
of the Fund.
The Investment Advisory Agreement between Brown Brothers Harriman & Co. and
the Corporation is dated December 15, 1993 and remains in effect for two years
from such date and thereafter, but only as long as the agreement is specifically
approved at least annually (i) by a vote of the holders of a "majority of the
Fund's outstanding voting securities" (as defined in the 1940 Act ) or by the
Corporation's Directors, and (ii) by a vote of a majority of the Directors of
the Corporation who are not parties to the Investment Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of the Corporation
("Independent
13
<PAGE>
Directors") 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 Directors on February 18, 1997. The Investment Advisory
Agreement terminates automatically if assigned and is terminable 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 Fund's outstanding voting
securities" (as defined in the 1940 Act) on 60 days' written notice to Brown
Brothers Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written
notice to the Corporation.
(See "Additional Information".)
The investment advisory fee paid to the Investment Adviser is calculated
daily and paid monthly at an annual rate equal to 0.25% of the Fund's average
daily net assets. Prior to February 28, 1997, the Adviser received from the Fund
a fee accrued daily, and paid monthly at an annual rate equal to 0.40% of the
Fund's average daily net assets, on an annualized basis for the Fund's
then-current fiscal year. For the fiscal years ended October 31, 1994, 1995 and
1996, the Fund incurred $40,169, $40,190, and $46,266,
respectively, for advisory services.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Fund.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing investment advisory,
administrative or shareholder servicing/eligible institution functions. If Brown
Brothers Harriman & Co. were to terminate its Investment Advisory Agreement with
the Corporation or were prohibited from acting in such capacity, it is expected
that the Directors would recommend the shareholders that they approve a new
investment advisory agreement for the Fund with another qualified adviser. If
Brown Brothers Harriman & Co. were to terminate its Eligible Institution
Agreement or Administration Agreement with the Corporation or were prohibited
from acting in
14
<PAGE>
any such capacity, its customers would be permitted to remain shareholders
of the Corporation 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.
ADMINISTRATOR
================================================================================
The Administration Agreement between the Corporation and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, but only so long as such agreement is specifically
approved at least annually in the same manner as the Investment Advisory
Agreement (see "Investment Adviser"). The Independent Directors most recently
approved the Corporation's Administration Agreement on December 18, 1996. The
agreement will terminate automatically if assigned by either party thereto and
is terminable at any time without penalty by a vote of a majority of the
Directors of the Corporation or by a vote of the holders of a "majority of the
Corporation's outstanding voting securities " (as defined in the 1940 Act). (See
"Additional Information"). The 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. and by Brown Brothers Harriman &
Co. on 90 days' written
notice to the Corporation.
The administrative fee payable to Brown Brothers Harriman & Co. from the
Fund is calculated daily and payable monthly at an annual rate equal to 0.15% of
the Fund's average daily net assets.
For the fiscal years ended October 31, 1994, 1995 and 1996 the Fund
incurred $15,063, $15,071 and $17,350, respectively, for administrative
services.
DISTRIBUTOR
================================================================================
15
<PAGE>
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 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 Fund's outstanding voting securities" (as
defined in the 1940 Act). (See "Additional Information".) The Distribution
Agreement is terminable with respect to the Fund by the 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 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.) This
determination of net asset value of each share of the Fund is made once during
each such day as of the close of regular trading on such Exchange by subtracting
from the value of the Fund's total assets the amount of its liabilities, and
dividing the difference by the number of shares of the Fund outstanding at the
time the determination is
made.
The value of investments listed on a securities exchange is based on the
last sale prices as of the close of regular trading 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. 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.
Bonds and other fixed income securities (other than short-term obligations
but including listed issues) are valued on the basis of valuations furnished by
a pricing service, use of which has been approved by the Board of Directors. In
making
16
<PAGE>
such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Corporation's
Directors. Short-term investments which mature in 60 days or less are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their original maturity when
acquired for the Fund was more than 60 days, unless this is determined not to
represent fair
value by the Directors.
Subject to the Corporation's compliance with applicable regulations, the
Corporation has reserved the right to pay the redemption price of shares of the
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 the
Fund solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets
at the
beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
================================================================================
The average annual total rate of return of the Fund is calculated for any
period by (a) dividing (i) the sum of the aggregate net asset value per share on
the last day of the period of shares purchased with a $1,000 payment on the
first day of the period and the aggregate net asset value per share on the last
day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period,
and (c) subtracting 1 from the result.
17
<PAGE>
The total rate of return of the Fund for any specified period is calculated
by (a) dividing (i) the sum of the aggregate net asset value per share on the
last day of the period of shares purchased with a $1,000 payment on the first
day of the period and the aggregate net asset value per share on the last day of
the period of shares purchasable with dividends and capital gains distributions
declared during such period with respect to shares purchased on the first day of
such period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) $1,000, and (b) subtracting 1 from the
result.
The average annual total rate of return for the Fund for the period July
23, 1992 (commencement of operations) to October 31, 1996 was 4.87%. The average
annual total rate of return for the Fund for the fiscal year ended October 31,
1996 was 4.88%.
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 the market value of, and dividends and interest
received from, the investments held by the Fund and the Fund's expenses during
the period.
Total 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.
Any "yield" quotation of the Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a
30-day or one-month period and is calculated by (a) raising to the sixth power
the sum of 1 plus the quotient obtained by dividing the Fund's net investment
income earned during the period by the product of the average daily number of
shares outstanding during the period that were entitled to receive dividends and
the maximum offering price per share on the last day of the period, (b)
subtracting 1 from the result, and (c) multiplying the result
by 2.
The yield should not be considered a representation of the yield of the
Fund in the future since the yield is not fixed. Actual yields depend on the
type, quality and maturities of the investments held by the Fund, changes in
interest rates on investments, and the Fund's expenses during the period.
18
<PAGE>
Yield information may be useful for reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which pay a fixed yield for a
stated period of time, the Fund's yield does fluctuate, and this should be
considered when reviewing performance or making comparisons.
FEDERAL TAXES
================================================================================
Each year, the 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 or other income derived
with respect to its business of investing in such securities; (b) less than 30%
of the Fund's annual gross income be derived from gains (without offset for
losses) from the sale or other disposition of securities held for less than
three months; and (c) the holdings of the Fund be diversified so that, at the
end of each quarter of its fiscal year, (i) at least 50% of the market value of
the Fund's assets be represented by cash, U.S. Government securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of the Fund's assets be invested
in the securities of any one issuer (other than U.S. Government securities). In
addition, in order not to be subject to federal income tax, at least 90% of the
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's
shareholders.
Gains or losses on sales of securities for the Fund are treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where a put has been acquired or a
call has been written thereon for the Fund. 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 Fund lapses or is terminated through a closing transaction, such as a
19
<PAGE>
repurchase for the Fund of the option from its holder, the Fund 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 for the Fund pursuant to the exercise of a call option written for it,
the premium received is 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 ability to write
options and engage in transactions involving stock index futures .
Certain options contracts held for the Fund 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 such options were held. The Fund 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 by
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 would be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
Other Taxes. The Fund may be subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws. Shareholders
should consult their own tax advisors with respect
to any state or local taxes.
20
<PAGE>
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
Inflation-Indexed Securities 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.
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
21
<PAGE>
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.
The Corporation may, in the future, seek to achieve the Fund's investment
objective by investing all of the Fund's investable assets in a no-load,
diversified, open-end management investment company having substantially the
same investment objective as those applicable to the Fund. In such event, the
Fund would no longer directly require investment advisory services and therefore
would pay no investment advisory fees. Further, the administrative services fee
paid from the Fund would be reduced. At a shareholder's meeting held on
September 23, 1993, the Fund's shareholders approved changes to the investment
restrictions of the Fund to authorize such an investment. Such an investment
would be made only if the Directors believe that the aggregate per share
expenses of the Fund and such other investment company would be less than or
approximately equal to the expenses which the Fund would incur if the
Corporation were to continue to retain the services of an investment adviser for
the Fund and the assets of the Fund were
to continue to be invested directly in portfolio securities.
It is expected that the investment of the Fund in another investment
company will have no preference, preemptive, conversion or similar rights, and
will be fully paid and non-assessable. It is expected that the investment
company will not be required to hold annual meetings of investors, but will hold
special meetings of investors when, in the judgment of its trustees, it is
necessary or desirable to submit matters for an investor vote. It is expected
that each investor will be entitled to a vote in proportion to the share of its
investment in such investment company. Except as described below, whenever the
Corporation is requested to vote on matters pertaining to the investment
company, the Corporation would hold a meeting of the Fund's shareholders and
would cast its votes on each matter at a meeting of investors in the investment
company
proportionately as instructed by the Fund's shareholders.
PORTFOLIO TRANSACTIONS
===============================================================================
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 Corporation 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 Corporation 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 Corporation 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.
NOTE RATINGS
================================================================================
25
<PAGE>
Notes rated MIG-1 by Moody's are judged to be of the best quality, enjoying
strong protection from established cash flow of funds for their services or from
established and broad-based access to the market for refinancing or both. Notes
rated MIG-2 are judged to be of high quality with ample margins of protection,
though not as large as MIG-1. The commercial paper rating Prime-1 is the highest
commercial paper rating assigned by Moody's and denotes that the issuer has
superior capacity for repayment. Among the factors considered by Moody's in
assigning note and commercial paper ratings are the following: (i) evaluation of
the management of the issuer; (ii) economic evaluation of the issuer's industry
or industries and an appraisal of speculative-type risks which may be inherent
in certain areas; (iii) evaluation of the issuer's products in relation to
competition and customer acceptance; (iv) liquidity; (v) amount and quality of
long-term debt; (vi) trend of earnings over a period of 10 years; (vii)
financial strength of a parent company and the relationships which exist with
the issuer; and (viii) recognition by management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations.
With respect to notes, an SP-1 rating indicates a very strong or strong
capacity to pay principal and interest. Issues determined to possess
overwhelming safety characteristics are given a plus (+) designation. SP-2
denotes a satisfactory capacity to pay principal and interest. The commercial
paper rating A-1 is the highest paper rating assigned by Standard & Poor's and
indicates a strong degree of safety regarding timely payments. Issues determined
to possess overwhelming safety characteristics are given a plus (+) designation.
Among the factors considered by Standard & Poor's in assigning bond, note and
commercial paper
26
<PAGE>
ratings are the following: (i) trend of earnings and cash flow with
allowances made for unusual circumstances, (ii) stability of the issuer's
industry, (iii) the issuer's relative strength and position within the industry
and (iv) the reliability and quality of management.
27
<PAGE>
ADDITIONAL INFORMATION
================================================================================
As used in this Statement of Additional Information and the Prospectus, the
term "majority of the Fund's outstanding voting securities" (as defined in the
1940 Act) currently means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's outstanding
voting securities are present in person or represented by proxy; or (ii) more
than 50% of the Fund's
outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
A shareholder's right to receive payment with respect to any redemption may
be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, the Fund's portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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
28
<PAGE>
================================================================================
The Annual Report of the Fund dated October 31, 1996 has been filed with
the Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder and is hereby incorporated herein by reference. A
copy of the Annual Report will be provided, without charge, to
each person receiving this Statement of Additional Information.
WS5463
29
<PAGE>
WS5231D
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Financial Statements included in the Prospectus constituting Part A of this
Registration Statement:
For each of The 59 Wall Street U.S. Equity Fund and The 59 Wall Street
Inflation-Indexed Securities Fund (formerly, The 59 Wall Street
Short/Intermediate Fixed Income Fund):
Financial Highlights for the period July 23, 1992
(commencement of operations) to October 31, 1992 and
the fiscal years ended October 31, 1993, 1994, 1995
and 1996.
Financial Statements incorporated by reference in the Statement of Additional
Information constituting Part B of this Registration Statement:
For each of The 59 Wall Street U.S. Equity Fund and The 59 Wall Street
Inflation-Indexed Securities Fund (formerly, The 59 Wall Street
Short/Intermediate Fixed Income Fund):
Portfolio of Investments at October 31, 1996.
Statement of Assets and Liabilities at October 31, 1996.
Statement of Operations for the fiscal year ended
October 31, 1996.
Statement of Changes in Net Assets for the fiscal years
ended October 31, 1995 and 1996.
Financial Highlights for the period July 23, 1992
(commencement of operations) to October 31, 1992 and the
fiscal years ended October 31, 1993, 1994, 1995 and 1996.
Notes to Financial Statements.
Independent Auditors' Report
Management's Discussion of Fund Performance
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 The 59 Wall Street Short/
Intermediate Fixed Income Fund as The 59 Wall Street
Inflation-Indexed Securities Fund. (8)
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)
(c) Form of Advisory Agreement with respect to The 59 Wall
Street Inflation-Indexed Securities Fund.(8)
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)
(b) Subadministrative Services Agreement.(6)
(c) Form of License Agreement.(1)
(d) Amended and Restated Shareholder Servicing Agreement.(6)
(e) Amended and Restated Eligible Institution Agreement.(6)
(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)
(h) Form of Expense Payment Agreement with respect to
The 59 Wall Street Inflation-Indexed Securities Fund.(8)
10 -- Opinion of Counsel (including consent).(2)
C-2
<PAGE>
11 -- Independent auditors' consent.(8)
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.(5)
17 -- Financial Data Schedule.(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 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 January 31, 1997)
The 59 Wall Street Small Company Fund 502
The 59 Wall Street European Equity Fund 1,422
The 59 Wall Street Pacific Basin Equity Fund 1,466
The 59 Wall Street Inflation-Indexed Securities Fund
(formerly, The 59 Wall Street Short/Intermediate
Fixed Income Fund) 115
The 59 Wall Street U.S. Equity Fund 445
The 59 Wall Street International Equity Fund 0
The 59 Wall Street Emerging Markets 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
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.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement on Form N1-A ("Registration Statement") pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Boston, and Commonwealth of Massachusetts on the
18th day of February, 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 G. LOWY Director
(Alan G. Lowy)
/S/ JOHN R. ELDER Treasurer and Principal
(John R. Elder) Accounting and Financial
Officer
C-7
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1(f). Redesignation of series of the The 59 Wall Street Short/
Intermediate Fixed Income Fund as The 59 Wall Street
Inflation-Indexed Securities Fund.
5(c) Advisory Agreement with respect to The 59 Wall Street
Inflation-Indexed Securities Fund.
9(h) Form of Expense Payment Agreement with respect to The
59 Wall Street Inflation-Indexed Securities Fund.
11. Consent of Deloitte & Touche LLP.
17. Financial Data Schedules.
WS5041C
THE 59 WALL STREET FUND, INC.
Re-designation of Series of Shares of
Common Stock (par value $0.001 per share)
Pursuant to Section 2-105 of the Maryland General Corporation Law and
Article Fifth, paragraph 3 of the restated charter of the Corporation (the
"Charter"), the Board of Directors of the Corporation hereby re-designate a
series of Shares of common stock (the "Fund") to have the following special and
relative rights:
1. The Fund named "The 59 Wall Street Short/Intermediate Fixed Income
Fund" shall hereinafter be known as "The 59 Wall Street Inflation-Indexed
Securities Fund".
IN WITNESS WHEREOF, the undersigned Directors have executed this
instrument this 18th day of February, 1997.
Director and
/s/J.V. Shields, Jr. Chairman of the Board
J.V. Shields, Jr.
/s/David P. Feldman Director
David P. Feldman
/s/Arthur D. Miltenberger Director
Arthur D. Miltenberger
/s/Eugene P. Beard Director
Eugene P. Beard
/s/Alan G. Lowy Director
Alan G. Lowy
WS5041C
THE 59 WALL STREET FUND, INC.
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
AGREEMENT, originally made on the 9th day of June, 1992, as amended and
restated November 1, 1993 and February 28, 1997, between THE 59 WALL STREET
FUND, INC., a Maryland corporation (the "Corporation"), on behalf of The 59 Wall
Street Inflation-Indexed Securities Fund (the "Fund"), and BROWN BROTHERS
HARRIMAN & CO., a New York limited partnership (the "Adviser"),
WHEREAS, the Corporation is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the " 1940
Act"); and
WHEREAS, the Corporation desires to retain the Adviser to render
investment advisory services to the Fund, and the Adviser is willing to render
such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Corporation hereby appoints the Adviser to act as investment
adviser to the Fund for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. Subject to the general supervision of the Directors of the
Corporation, the Adviser shall manage the investment operations of the Fund and
the composition of the Fund's portfolio of securities and investments, including
cash, the purchase, retention and disposition thereof and agreements relating
thereto, in accordance with the Fund's investment objective and policies as
stated in the Prospectus (as defined in paragraph 3 of this Agreement) and
subject to the following understandings:
(a) the Adviser shall furnish a continuous investment program for
the Fund's portfolio and determine from time to time what investments or
securities will be purchased, retained, sold or lent by the Fund, and
what portion of the assets will be invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in the
management of the Fund's portfolio as it uses in the administration of
other accounts for which it has investment responsibility as agent;
<PAGE>
(c) the Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Corporation's
Articles of Incorporation and By-Laws and the Prospectus of the Fund and
with the instructions and directions of the Directors of the Corporation
and will conform to and comply with the requirements of the 1940 Act and
all other applicable federal and state laws and regulations including,
without limitation, the regulations and rulings of the New York State
Banking Department;
(d) the Adviser shall determine the securities to be purchased,
sold or lent by the Fund and as agent for the Fund will effect portfolio
transactions pursuant to its determinations either directly with the
issuer or with any broker and/or dealer in such securities; in placing
orders with brokers and or dealers the Adviser intends to seek best
price and execution for purchases and sales; the Adviser shall also make
recommendations regarding whether or not the Fund shall enter into
repurchase or reverse repurchase agreements and interest rate futures
contracts.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other customers, the Adviser,
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased in order to
obtain the best execution and lower brokerage commissions, if any. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other customers;
(e) the Adviser shall maintain books and records with respect to
the Fund's securities transactions and shall render to the Corporation's
Directors such periodic and special reports as the Directors may
reasonably request; and
(f) the investment management services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others.
3. The Corporation has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all future
amendments and supplements, it any:
(a) Articles of Incorporation of the Corporation, filed with the
State of Maryland on July 16, 1990 (such Articles of Incorporation, as
presently in effect and as amended from time to time, are herein called
the "Articles of Incorporation");
(b) By-Laws of the Corporation (such By-Laws, as presently in
effect and as amended from time to time, are herein called
the "By-Laws");
(c) Certified resolutions of the Directors of the Corporation
authorizing the appointment of the Adviser and approving the form of
this Agreement;
<PAGE>
(d) Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (No. 33-46805) (the "Registration
Statement") as filed with the Securities and Exchange Commission (the
"Commission") on March 1, 1993 relating to the Corporation and the
shares of common stock. par value $.001 per share (the "Shares"), of the
Fund;
(e) Notification of Registration of the Corporation under the
1940 Act on Form N-8A as filed with the Commission on July 16, 1990; and
(f) Prospectus of the Fund, dated March 1, 1993 (such prospectus,
as presently in effect and as amended or supplemented with respect to
the Fund from time to time, is herein called the "Prospectus").
4. The Adviser shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2(e). The Adviser agrees that all records
which it maintains for the Fund are the property of the Fund and it will
promptly surrender any of such records to the Fund upon the Fund's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 of
the Commission under the 1940 Act any such records as are required to be
maintained by the Adviser with respect to the Fund by Rule 31a-1 of the
Commission under the 1940 Act.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities and investments purchased for the Fund (including taxes
and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Adviser will receive from the Fund as full compensation therefor
a fee at an annual rate equal to 0.25% of the Fund's average daily net assets.
This fee will be computed based on net assets at 4:00 P.M. New York time on each
day the New York Stock Exchange is open for trading and will be paid to the
Adviser monthly during the succeeding calendar month.
7. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or a loss resulting from wilful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
8. This Agreement shall continue in effect for two years from the date
of its execution and thereafter, but only so long as its continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated with
respect to the Fund by the Corporation at any time, without the payment of any
penalty, by vote of a majority of all the Directors of the Corporation or by
"vote of a majority of the outstanding voting securities" of the Fund on
<PAGE>
60 days written notice to the Adviser, or by the Adviser at any time, without
the payment of any penalty, on 90 days written notice to the Corporation. This
Agreement will automatically and immediately terminate in the event of its
"assignment".
9. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Directors of the Corporation from time to time, have no
authority to act for or represent the Fund or the Corporation in any way or
otherwise be deemed an agent of the Fund or the Corporation.
10. This Agreement may be amended by mutual consent, but the consent of
the Corporation must be approved (a) by vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or "interested persons" of
any such party, cast in person at a meeting called for the purpose of voting on
such amendment, and (b) by "vote of a majority of the outstanding voting
securities" of the Fund.
11. As used in this Agreement, the terms "assignment", "interested
persons" and "vote of a majority of the outstanding voting securities" shall
have the meanings assigned to them respectively in the 1940 Act.
12. Notices of any kind to be given to the Adviser by the Corporation
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 59 Wall Street, New York, New York 10005, Attention: Treasurer, or at
such other address or to such other individual as shall be specified by the
Adviser to the Corporation. Notices of any kind to be given to the Corporation
by the Adviser shall be in writing and shall be duly given if mailed or
delivered to the Corporation at The 59 Wall Street Fund, Inc., 6 St. James
Avenue, Boston, Massachusetts 02116, Attention: Secretary, or at such other
address or to such other individual as shall be specified by the Corporation to
the Adviser.
13. The Directors have authorized the execution of this Agreement in
their capacity as Directors and not individually and the Adviser agrees that
neither the shareholders nor the Directors nor any officer, employee,
representative or agent of the Corporation shall be personally liable upon, nor
shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Corporation,
that the shareholders, Directors, officers, employees, representatives and
agents of the Corporation shall not be personally liable hereunder, and the
Adviser shall look solely to the property of the Corporation for the
satisfaction of any claim hereunder.
14. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers or Partners designated below on the day and year
first above written.
THE 59 WALL STREET FUND, INC.
ATTEST:_______________________ By__________________________
BROWN BROTHERS HARRIMAN & CO.
ATTEST:_______________________ By__________________________
WS5081A1
February 28, 1997
The 59 Wall Street Fund, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Re: THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
Dear Sirs:
This letter agreement (the "Agreement") confirms the agreement of the
undersigned 59 Wall Street Administrators, Inc. ("Administrators") and The 59
Wall Street Fund, Inc. (the "Corporation") (collectively, the "Parties").
Administrators agrees to pay all of the operating expenses of The 59 Wall Street
Inflation-Indexed Securities Fund (the "Fund"), as described in the Prospectus
or Statement of Additional Information with respect to the Fund included as part
of the Registration Statement on Form N-1A of the Corporation filed with the
Securities and Exchange Commission as amended (the "Prospectus" and "SAI",
respectively) other than fees paid under the Administration Agreement referred
to in the Prospectus and SAI, and other than expenses relating to the
organization of the Fund.
The Corporation hereby agrees to pay to Administrators a fee from the
Fund, in addition to the administration fees payable pursuant to such
Administration Agreement, estimated and accrued daily and paid monthly in an
amount to be determined from time to time by the Corporation and Administrators
provided, however, that such amount shall not exceed the amount such that
immediately after any such payment the aggregate expenses of the Fund would not
on a per annum basis exceed 0.60% of such average daily net assets or such other
percentage as may from time to time be agreed upon among the Parties.
This Agreement, which supersedes the letter agreement dated February 22,
1995, shall be effective as of the date hereof and shall terminate on July 1,
2000, unless sooner terminated by mutual agreement of the Parties or pursuant to
the following sentence. In the event that the Administration Agreement between
the Corporation and Administrators shall cease to be in full force and effect,
Administrators may, at its option, upon not less than 30 days nor more than 60
days written notice to the Corporation, terminate this Agreement.
<PAGE>
The 59 Wall Street Fund, Inc.
February 28, 1997
Page 2
If the foregoing correctly sets forth our agreement, kindly so confirm
by signing the enclosed counterpart of this letter in the space indicated for
signature on behalf of the Corporation below.
Very truly yours,
59 WALL STREET ADMINISTRATORS, INC.
By______________________________
Philip W. Coolidge, President
Agreed:
THE 59 WALL STREET FUND, INC.
By________________________________
Joseph V. Shields, Jr., Chairman
WS5080B
EXHIBIT 11(i)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 7 to Registration Statement (No. 33-48605) of The 59 Wall Street Fund,
Inc. on behalf of The 59 Wall Street U.S. Equity Fund and The 59 Wall Street
Inflation-Indexed Securities Fund (formerly, The 59 Wall Street Short/
Intermediate Fixed Income Fund (two of the series constituting The 59 Wall
Street Fund, Inc.) of our reports dated December 17, 1996, appearing in the
Annual Reports to Shareholders for the year ended October 31, 1996, and to the
references to us under the headings "Financial Highlights" appearing in the
Prospectuses, which are a part of such Registration Statement.
/S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the 59 Wall
Street U. S. Equity Fund Annual Report dated 10/31/96 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 4
<NAME> THE 59 WALL STREET U.S. EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 38,580,181
<INVESTMENTS-AT-VALUE> 50,175,234
<RECEIVABLES> 173,204
<ASSETS-OTHER> 521,554
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,869,992
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97,296
<TOTAL-LIABILITIES> 97,296
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,640,923
<SHARES-COMMON-STOCK> 1,200,204
<SHARES-COMMON-PRIOR> 877,598
<ACCUMULATED-NII-CURRENT> 33,631
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,503,089
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,595,053
<NET-ASSETS> 50,772,696
<DIVIDEND-INCOME> 684,147
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 512,350
<NET-INVESTMENT-INCOME> 171,797
<REALIZED-GAINS-CURRENT> 1,528,243
<APPREC-INCREASE-CURRENT> 5,413,968
<NET-CHANGE-FROM-OPS> 7,114,008
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 199,768
<DISTRIBUTIONS-OF-GAINS> 781,118
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 528,010
<NUMBER-OF-SHARES-REDEEMED> 222,860
<SHARES-REINVESTED> 17,456
<NET-CHANGE-IN-ASSETS> 18,773,013
<ACCUMULATED-NII-PRIOR> 61,602
<ACCUMULATED-GAINS-PRIOR> 755,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 277,632
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 512,350
<AVERAGE-NET-ASSETS> 42,712,679
<PER-SHARE-NAV-BEGIN> 36.46
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> 6.75
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0.87
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 42.30
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from The 59 Wall Street
Inflation-Indexed Securities Fund (formerly known as The 59 Wall Street
Short/Intermediate Fund) Annual Report dated 10/31/96 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000865898
<NAME> The 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 5
<NAME> THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 16,731,655
<INVESTMENTS-AT-VALUE> 16,835,925
<RECEIVABLES> 273,857
<ASSETS-OTHER> 16,549
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,126,331
<PAYABLE-FOR-SECURITIES> 284,458
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,154
<TOTAL-LIABILITIES> 305,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,187,474
<SHARES-COMMON-STOCK> 1,739,269
<SHARES-COMMON-PRIOR> 1,109,810
<ACCUMULATED-NII-CURRENT> 406
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (471,431)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,270
<NET-ASSETS> 16,820,719
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 760,780
<OTHER-INCOME> 0
<EXPENSES-NET> 98,298
<NET-INVESTMENT-INCOME> 662,482
<REALIZED-GAINS-CURRENT> (38,209)
<APPREC-INCREASE-CURRENT> (14,892)
<NET-CHANGE-FROM-OPS> (53,101)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 662,076
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,102,127
<NUMBER-OF-SHARES-REDEEMED> 511,651
<SHARES-REINVESTED> 38,983
<NET-CHANGE-IN-ASSETS> 5,990,713
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (433,222)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,266
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 98,298
<AVERAGE-NET-ASSETS> 11,566,621
<PER-SHARE-NAV-BEGIN> 9.76
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.67
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
