As filed with the Securities and Exchange Commission on February 27, 1998
Registration Nos. 33-35827 and 811-06139
(The 59 Wall Street European Equity Fund)
(The 59 Wall Street Pacific Basin Equity Fund)
(The 59 Wall Street Small Company Fund)
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 19
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)
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 January 30, 1998 for
Registrant's fiscal year ended October 31, 1997.
The U.S. Small Company Portfolio has also executed this Registration Statement.
================================================================================
<PAGE>
EXPLANATORY NOTE
This Amendment (the "Amendment") to the Registrant's Registration
Statement relates to the Prospectus of The 59 Wall Street European Equity Fund,
The 59 Wall Street Pacific Basin Equity Fund and The 59 Wall Street Small
Company Fund, each a series of shares of the Registrant. Two other series of
shares of the Registrant, The 59 Wall Street U.S. Equity Fund and The 59 Wall
Street Inflation-Indexed Securities Fund, are offered by Prospectuses that were
included in Part A of Amendment No. 34 to the Registrant's Registration
Statement. One other series of shares of the Registrant are offered by the
Prospectus that was included in Part A of Amendment No. 31 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, were offered by the Prospectus that was included in Part A of
Amendment No. 33 to the Registrant's Registration Statement.
This Amendment does not relate to, amend or otherwise affect the
above-referenced Prospectuses, which are incorporated herein by reference.
WS5595
<PAGE>
[Logo]
Small Company Fund
PROSPECTUS
February 27, 1998
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street Small Company Fund
21 Milk Street, Boston, Massachusetts 02109
================================================================================
The 59 Wall Street Small Company Fund is an open-end investment company
which is a separate diversified portfolio of The 59 Wall Street Fund, Inc.
Shares of the Fund are offered by this Prospectus.
The Fund is designed to enable investors to participate in the
opportunities available in the smaller capitalization segment of the U.S. equity
market. The investment objective of the Fund is to provide investors with
long-term maximization of total return, primarily through capital appreciation.
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., and the shares are not insured by the Federal
Deposit Insurance Corporation or any other federal, state or other governmental
agency.
The Corporation seeks to achieve the investment objective of the Fund by
investing all of the Fund's assets in the U.S. Small Company Portfolio, a
diversified open-end investment company having the same investment objective as
the Fund.
Brown Brothers Harriman & Co. is the investment adviser to the Portfolio
and the administrator and shareholder servicing agent of the Fund. Shares of the
Fund are offered at net asset value 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 27, 1998. This information
is incorporated herein by reference and is available without charge upon request
from the Fund's distributor, 59 Wall Street Distributors, Inc., 21 Milk Street,
Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
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 27, 1998.
<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 and
the Portfolio ........................................................ 10
Net Asset Value.......................................................... 15
Dividends and Distributions.............................................. 16
Taxes ................................................................... 16
Description of Shares ................................................... 17
Additional Information................................................... 18
Appendix................................................................. 20
TERMS USED IN THIS PROSPECTUS
Corporation ............................. The 59 Wall Street Fund, Inc.
Fund..................................... The 59 Wall Street Small Company Fund
Portfolio ............................... U.S. Small Company Portfolio
Investment Adviser....................... Brown Brothers Harriman & Co.
Administrator of the Corporation......... Brown Brothers Harriman & Co.
Administrator of the Portfolio........... Brown Brothers Harriman
Trust Company (Cayman) Limited
Subadministrator of the Corporation ..... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Subadministrator of the Portfolio........ Signature Financial Group (Cayman)
Limited ("SFG-Cayman")
Distributor ............................. 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act................................. The Investment Company Act of 1940,
as amended
2
<PAGE>
EXPENSE TABLE
- --------------------------------------------------------------------------------
The following table provides (i) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the aggregate annual operating
expenses of the Fund and the Portfolio, 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. The Directors of the Corporation
believe that the aggregate per share expenses of the Fund and the Portfolio will
be less than or approximately equal to the expenses which the Fund would incur
if the Corporation retained the services of an investment adviser on behalf of
the Fund and the assets of the Fund were invested directly in the type of
securities being held by the Portfolio.
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 .......................................... 0.16%
Shareholder Servicing/Eligible Institution Fee............... 0.25
Other Expenses............................................... 0.27 0.68
---- ----
Total Fund Operating Expenses.................................. 1.33%
====
- ----------------
* The annual fund operating expenses for the past fiscal year have been
restated for the purposes of this table to reflect fees currently in
effect.
<TABLE>
<CAPTION>
Example 1 year 3 years 5 years 10 years
------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
A shareholder of the Fund would pay the following
expenses on a $1,000 investment, assuming (1) 5%
annual return, and (2) redemption at the end of
each time period:............................... $14 $42 $73 $160
--- --- --- ----
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than 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 and the
Portfolio, see "Management of the Corporation and the Portfolio" 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
April 23, 1991
For the years ended October 31, (commencement of
-------------------------------------------------------- operations) to
1997 1996 1995 1994 1993 1992 October 31, 1991
---- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $14.85 $12.81 $11.54 $12.92 $10.70 $10.36 $10.00
Income from investment operations:
Net investment income (loss).............. (0.04) 0.01 0.03 0.05 0.01 0.02 0.01
Net realized and unrealized gain (loss)... 3.60 2.05 1.31 (1.04) 2.84 0.34 0.35
Less dividends and distributions (Note 1):
From net investment income................ -- (0.02) (0.07) (0.01) (0.01) (0.02) --
In excess of net investment income........ (0.01) -- -- -- -- -- --
Net realized gains ....................... (0.61) -- -- (0.38) (0.62) -- --
In excess of net realized gains........... -- -- -- 0.00(1) -- -- --
------ ----- ------ ------ ------ ------ ------
Net asset value, end of year.............. $17.79 14.85 $12.81 $11.54 $12.92 $10.70 $10.36
====== ===== ====== ====== ====== ====== ======
Total return(2)............................. 24.65% 16.10% 11.69% (7.81)% 27.00% 3.46% 3.60%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).. $38,668 $35,102 $29,408 $39,401 $41,062 $20,504 $11,097
Expenses as a percentage of average
net assets(2) .......................... 1.12% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%(4)
Ratio of net investment income (loss) to
average net assets ..................... (0.23)% 0.08% 0.25% 0.40% 0.04% 0.16% 0.36%(4)
Portfolio turnover rate................... N/A N/A 16%(3) 140% 116% 67% 8%
Average commission rate paid per share.... N/A N/A $0.08%(3) -- -- -- --
</TABLE>
- ------
(1) Less than $0.01 per share.
(2) Had the expense payment agreement not been in place, the ratio of expenses
to average net assets and total return would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets. 1.33% 1.32% 1.27% 1.21% 1.38% 1.46% 2.25%(4)
Total return............................ 24.44% 15.88% 11.52% (7.94)% 26.72% 3.10% 3.00%
</TABLE>
The expense payment agreement terminated on July 1, 1997.
Furthermore, the ratio of expenses to average net assets for the year
ended October 31, 1995 reflect fees paid with brokerage commissions and
fees reduced in connection with specific agreements. Had these
arrangements not been in place, the ratio would have been 1.39%.
(3) Portfolio turnover and average commission paid represents the rate of
portfolio activity and average commission rate for the period while the
Fund was making investments directly in securities. The portfolio turnover
rate and average commission rate paid for the period since the Fund
transferred all of its investable assets to the Portfolio is shown in the
Portfolio's Financial Highlights which is included elsewhere in this
report.
(4) Annualized.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The investment objective of the Fund and the Portfolio is to provide
investors with long-term maximization of total return, primarily through capital
appreciation.
The investment objective of the Fund and the Portfolio is a fundamental
policy and may be changed only with the approval of the holders of a "majority
of the outstanding voting securities" (as defined in the 1940 Act) of the Fund
or the Portfolio, as the case may be. (See "Additional Information" in this
Prospectus.) However, the investment policies as described below which are the
same for the Fund and the Portfolio are not fundamental and may be changed
without such approval.
The assets of the Portfolio under normal circumstances are fully invested
in equity securities of small companies, consisting primarily of common stocks
listed on securities exchanges or traded in the over-the-counter market in the
United States. Although the assets of the Portfolio 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 and warrants.
The Portfolio currently focuses on approximately 1,600 companies which
have a stock market capitalization of less than $3 billion and more than $400
million. The common stocks of these companies represent approximately 17% of the
market value of U.S. equities and have a total market value of over $1.6
trillion. Although much smaller in capitalization than the companies in the
Standard & Poor's 500 Index, the equity securities of these companies generally
offer sufficient liquidity for use in the Portfolio.
BREAKDOWN OF U.S. STOCKS
BY MARKET CAPITALIZATION
(as of December 31, 1997)
Total Market Capitalization
---------------------------
Market Approximate Dollars % of
Capitalization No. of Stocks (Billions) Total
-------------- ------------- ---------- -----
over $3 bil...................... 551 8,086 77.3
$400 mil - $3 bil................ 1,683 1,822 17.4
$3 mil - $400 mil................ 6,391 557 5.3
----- ----- -----
Totals........................... 8,625 10,465 100.0
Dow Jones Ind. Avg............... 30 945 18.6
S&P 500 Index.................... 500 7,550 72.2
Source: Brown Brothers Harriman & Co. figures do not include American depository
receipts, limited partnerships or closed-end mutual funds.
The Investment Adviser screens this stock universe of approximately 1,600
companies on an ongoing basis and ranks the stocks in the universe on the basis
of proprietary quantitative models utilizing various fundamental and valuation
criteria. The ranking of securities according to these models is the basis for
constructing and changing the composition of the securities held by the
Portfolio. This computerized quantitative approach enables the Portfolio to have
a highly diversified portfolio, typically with securities of 90-200 companies.
This diversification serves to reduce specific company risk and permits many
sectors of the U.S. economy to be represented.
5
<PAGE>
Historically, the common stocks of small companies have provided investors
with higher long-term returns than the common stocks of large companies as
represented by the Standard & Poor's 500 Index or the Dow Jones Industrial
Average. This superior long-term performance has been achieved in an irregular
fashion as the common stocks of small companies have experienced relatively long
periods of outperformance followed by periods of underperformance. Over the past
40 years, the major periods of outperformance were from 1958 to 1968, from 1973
to 1983 and from late 1990 to mid-1994. Since mid-1994, the common stocks of
small companies have lagged the performance of common stocks of large companies.
RELATIVE PERFORMANCE CYCLE
(TOTAL RETURN)
<TABLE>
<CAPTION>
Jan. 1, 1951 Jan. 1, 1958 Jan. 1, 1969 July 1, 1973 Aug. 1, 1983 Nov. 1, 1990 July 1, 1994
to to to to to to to
Dec. 31, 1957 Dec. 31, 1968 June 30, 1973 July 31, 1983 Oct. 31, 1990 June 30, 1994 Dec. 31, 1997
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 Index......... +178% +272% +16% + 152% +146% + 63% +137%
Small Company
Stock Index......... + 79% +985% - 46% +1,101% + 9% +115% +102%
(Ibbotson Associates)
Russell 2000 Index*... N.A. N.A. N.A. N.A. + 15% +102% + 92%
(Index started Dec. 1978)
S&P 600 Index......... N.A. N.A. N.A. N.A. N.A. +100% +108%
(Index started Jan. 1984)
</TABLE>
- ---------------
Note: Periods shown except for beginning and end points are based on peaks and
troughs of relative performance.
* Index comprised of those U.S. stocks ranked from the 1,001st largest to the
3,000th largest based on market capitalization.
ANNUALIZED TOTAL RETURN JAN. 1, 1951 - DEC. 31, 1997
(COMPOUND RATE)
S&P 500 Index................................................. +12.9% per year
Small Company Stock Index (Ibbotson Associates)............... +15.5% per year
Risk Factors
Investing in equity securities of small companies involves risks not
typically associated with investing in comparable securities of large companies.
Assets of the Portfolio are invested in companies which may have narrow product
lines and limited financial and managerial resources. Since the market for the
equity securities of small companies is often characterized by less information
and liquidity than that for the equity securities of large companies, the
Portfolio's investments can experience unexpected sharp declines in their market
prices. Therefore, shares of the Fund may be subject to greater declines in
value than shares of equity funds investing in the equity securities of large
companies.
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 Portfolio. (See Appendix
on page 21 for more detail.)
Portfolio Brokerage
Utilization of the Investment Adviser's proprietary quantitative models
for the selection of portfolio securities, and the resulting periodic
rebalancing of portfolio holdings, causes turnover in the Portfolio which is
relatively high compared to more traditionally
6
<PAGE>
managed portfolios. Securities are not traded for short-term profits but, when
circumstances warrant, securities are sold without regard to the length of time
held. A 100% annual turnover rate would occur, for example, if all portfolio
securities (excluding short-term obligations) were replaced once in a period of
one year. For the fiscal years ended October 31, 1996 and 1997, the portfolio
turnover rate of the Portfolio was 51% and 63%, 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 level of portfolio activity
increases.
In effecting securities transactions the Investment Adviser seeks to
obtain the best price and execution of orders. In selecting a broker, the
Investment Adviser considers a number of factors including: the broker's ability
to execute orders without disturbing the market price; the broker's reliability
for prompt, accurate confirmations and on-time delivery of securities; the
broker's financial condition and responsibility; the research and other
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 Portfolio's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from the Portfolio to pay other unaffiliated service
providers on behalf of the Portfolio for services provided for which the
Portfolio would otherwise be obligated to pay. Such commissions paid by the
Portfolio are at the same rate paid to other brokers for effecting similar
transactions in listed equity securities.
Brown Brothers Harriman & Co. acts as one of the principal brokers of the
Portfolio in the purchase and sale of portfolio securities when, in the judgment
of the Investment Adviser, that firm will be able to obtain a price and
execution at least as favorable as other qualified brokers. As one of the
principal brokers for the Portfolio, Brown Brothers Harriman & Co. receives
brokerage commissions from the Portfolio.
On those occasions when Brown Brothers Harriman & Co. deems the purchase
or sale of a security to be in the best interests of the Portfolio as well as
other customers, Brown Brothers Harriman & Co., to the extent permitted by
applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
Other Investment Techniques
Short-Term Instruments. The assets of the Portfolio 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 Portfolio in
demand deposit accounts with the Portfolio's custodian bank.
U.S. Government Securities. The assets of the Portfolio may be invested in
securities issued by the U.S. Government, its agencies or instrumentalities.
These securities include notes and bonds 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 Portfolio. The price paid
for these securities, or received upon resale, may be lower than the price paid
or received for similar securities with a more liquid market. Accordingly, the
valuation of these securities reflects any limitation on their liquidity. (See
"Investment Restrictions".)
7
<PAGE>
Loans of Portfolio Securities. Loans of portfolio securities up to 30% of
the total value of the Portfolio are permitted. These loans must be secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned plus accrued income. By lending
securities, the Portfolio's income can be increased by its continuing to receive
income on the loaned securities as well as by the opportunity to receive
interest on the collateral. Any appreciation or depreciation in the market price
of the borrowed securities which occurs during the term of the loan inures to
the Portfolio and its investors.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for the Portfolio on a when-issued or delayed delivery basis. For example,
delivery and payment may take place a month or more after the date of the
transaction. The purchase price and the interest rate payable on the securities,
if any, are fixed on the transaction date. The securities so purchased are
subject to market fluctuation and no income accrues to the Portfolio until
delivery and payment take place. At the time the commitment to purchase
securities on a when-issued or delayed delivery basis is made, the transaction
is recorded and thereafter the value of such securities is reflected each day in
determining the Portfolio'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 Portfolio could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-issued or
delayed delivery commitments for the Portfolio may not be entered into if such
commitments exceed in the aggregate 15% of the market value of its total assets,
less liabilities other than the obligations created by when-issued or delayed
delivery commitments.
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Fund includes a listing of
the specific investment restrictions which govern the investment policies of the
Fund and the Portfolio. Certain of these investment restrictions are deemed
fundamental policies and may be changed only with the approval of the holders of
a "majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Fund or the Portfolio, as the case may be (see "Additional Information"
in this Prospectus).
As a fundamental policy, money is not borrowed by the Portfolio in an
amount in excess of 33 1/3% of its assets. It is intended that money will be
borrowed only from banks and only either to accommodate requests for the
withdrawal of part or all of an interest while effecting an orderly liquidation
of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction or other
similar situations.
As a non-fundamental policy, under normal circumstances, at least 65% of
the value of the total assets of the Portfolio is invested in the equity
securities of companies with a market capitalization of less than $3 billion and
more than $400 million. For these purposes, equity securities are defined as
common stock, securities convertible into common stock, trust or limited
partnership interests, rights and warrants.
The Fund and the Portfolio are classified as "diversified" under the 1940
Act, which means that at least 75% of the Portfolio's total assets is
represented by cash; securities issued by the U.S. Government, its agencies or
instrumentalities; and other securities limited in respect of any one issuer to
an amount no greater than 5% of the Portfolio's total assets and not more than
10% of the outstanding voting securities of such issuer.
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 14)
or a Financial Intermediary (see page 14) 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 on a date established by the 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.
9
<PAGE>
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 14), each Eligible
Institution and each Financial Intermediary (see page 14) 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 $100,000.
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 AND THE PORTFOLIO
================================================================================
Directors, Trustees and Officers
The Corporation's Directors, in addition to supervising the actions of the
Administrator of the Corporation and Distributor, as set forth below, decide
upon matters of general policy with respect to the Corporation. The Portfolio's
Trustees, in addition to supervising the actions of the Portfolio's Investment
Adviser and Administrator, as set forth below, decide upon matters of general
policy with respect to the Portfolio. The Corporation's Directors are not the
same individuals as the Portfolio's Trustees.
Because of the services rendered to the Portfolio by the Investment
Adviser and to the Corporation and the Portfolio by their respective
Administrators, the Corporation and the Portfolio require no employees, and
their respective officers, other than the Chairman, receive no compensation from
the Fund or the Portfolio. (See "Directors, Trustees and Officers" in the
Statement of Additional Information.)
The Directors of the Corporation are:
J.V. Shields, Jr.
Chairman and Chief Executive Officer of Shields & Company
Eugene P. Beard
Vice Chairman-Finance and Operations of The Interpublic Group of
Companies
David P. Feldman
Retired,Chairman and Chief Executive Officer-AT&T Investment Management
Corporation
10
<PAGE>
Alan G. Lowy
Private Investor
Arthur D. Miltenberger
Vice President and Chief Financial Officer of Richard K. Mellon and Sons
The Trustees of the Portfolio are:
H.B. Alvord
Retired, Former Treasurer and Tax Collector of Los Angeles County
Richard L. Carpenter
Retired, Director of Internal Investments of the Public School
Employees' Retirement System
Clifford A. Clark
Retired, Former Senior Manager of Brown Brothers Harriman & Co.
David M. Seitzman
Retired, Physician with Seitzman, Shuman, Kwart and Phillips
Investment Adviser
The Investment Adviser to the Portfolio is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Portfolio. Subject to the general supervision of the
Portfolio's Trustees, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions, places the purchase and sale orders for portfolio
transactions, and generally manages the Portfolio'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, 1997, it managed total
assets of approximately $25 billion.
The Portfolio is managed on a day-to-day basis by a team of individuals,
including Mr. Donald B. Murphy, Mr. John A. Nielsen, Mr. George H. Boyd and Mr.
Paul R. Lenz. Mr. Murphy holds a B.A. from Yale University and a M.B.A. from
Columbia University. He joined Brown Brothers Harriman & Co. in 1966. 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. 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. Mr. Lenz holds a B.S. from The State University of New
York, Stony Brook, M.S. from the University of Oregon and a Ph.D. from the
University of Wisconsin, Madison. 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
Portfolio an annual fee, computed daily and payable monthly, equal to 0.65% of
the average daily net assets of the Portfolio. Brown Brothers Harriman & Co. and
its affiliates also receive annual administration fees from the Fund equal to
0.125% of the average daily net assets of the Fund, annual administration fees
from the Portfolio equal to 0.035% of the average daily net assets of the
Portfolio and 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 owned during the period by customers for whom Brown Brothers Harriman &
Co. is the holder or agent of record.
The investment advisory services of Brown Brothers Harriman & Co. to the
Portfolio are not exclusive under the terms of the Investment Advisory
Agreement. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co.
11
<PAGE>
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 Corporation 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".
Administrators
Brown Brothers Harriman & Co. acts as Administrator of the Corporation and
Brown Brothers Harriman Trust Company (Cayman) Limited acts as Administrator of
the Portfolio. (See "Administrators" in the Statement of Additional
Information.) Brown Brothers Harriman Trust Company (Cayman) Limited is a
wholly-owned subsidiary of Brown Brothers Harriman Trust Company of New York,
which is a wholly-owned subsidiary of Brown Brothers Harriman & Co.
In its capacity as Administrator of the Corporation, Brown Brothers
Harriman & Co. administers all aspects of the Corporation's operations subject
to the supervision of the Corporation's Directors except as set forth below
under "Distributor". In connection with its responsibilities as Administrator
and at its own expense, Brown Brothers Harriman & Co. (i) provides the
Corporation with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary in order to provide
effective administration of the Corporation, including the maintenance of
certain books and records; (ii) oversees the performance of administrative and
professional services to the Corporation by others, including the Fund's
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 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 0.125% of the Fund's average daily net assets.
Brown Brothers Harriman Trust Company (Cayman) Limited, in its capacity as
Administrator of the Portfolio, administers all aspects of the Portfolio's
operations subject to the supervision of the Portfolio's Trustees except as set
forth above under "Investment Adviser". In connection with its responsibilities
as Administrator for the Portfolio and at its own expense, Brown Brothers
Harriman Trust Company (Cayman) Limited (i) provides the Portfolio with the
services of persons competent to perform such supervisory, administrative and
clerical functions as are necessary in order to provide effective administration
of the Portfolio, including the maintenance of certain books and records,
receiving and processing requests for increases and decreases in the beneficial
interests in the Portfolio, notification to the Investment Adviser of available
funds for investment, reconciliation of account information and balances between
the Custodian and the Investment Adviser, and processing, investigating and
responding to investor inquiries; (ii) oversees the performance of
administrative and professional services to the
12
<PAGE>
Portfolio by others, including the Custodian; (iii) provides the Portfolio with
adequate office space and communications and other facilities; and (iv) prepares
and/or arranges for the preparation, but does not pay for, the periodic updating
of the Portfolio's registration statement for filing with the Securities and
Exchange Commission, and the preparation of tax returns for the Portfolio and
reports to investors and the Securities and Exchange Commission.
For the services rendered to the Portfolio and related expenses borne by
Brown Brothers Harriman Trust Company (Cayman) Limited as Administrator of the
Portfolio, Brown Brothers Harriman Trust Company (Cayman) Limited receives from
the Portfolio an annual fee, computed daily and payable monthly, equal to 0.035%
of the Portfolio's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the Corporation as are from time to time agreed upon by the parties.
The offices of 59 Wall Street Administrators are located at 21 Milk Street,
Boston, Massachusetts 02109. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the 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.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company (Cayman) Limited, SFG-Cayman performs such
subadministrative duties for the Portfolio as are from time to time agreed upon
by the parties. The offices of SFG-Cayman are located at Elizabethan Square,
George Town, Grand Cayman BWI. SFG-Cayman is a wholly-owned subsidiary of SFG.
SFG-Cayman's subadministrative duties may include providing equipment and
clerical personnel necessary for maintaining the organization of the Portfolio,
participation in the preparation of documents required for compliance by the
Portfolio with applicable laws and regulations, preparation of certain documents
in connection with meetings of Trustees of and investors in the Portfolio, and
other functions that would otherwise be performed by the Administrator of the
Portfolio as set forth above. For performing such subadministrative services,
SFG-Cayman receives such compensation as is from time to time agreed upon, but
not in excess of the amount paid to the Administrator from the Portfolio.
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 average daily net assets of the
Fund represented by shares owned during the period for which payment was being
made by shareholders who did not hold their shares with an Eligible Institution.
Financial Intermediaries
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and
13
<PAGE>
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 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, each financial institution
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of the average daily net assets of the Fund represented by shares owned
during the period for which payment was being made by customers for whom the
financial institution was the holder or agent of record.
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 statement 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.
14
<PAGE>
Custodian, Transfer and
Dividend Disbursing Agent
State Street Bank and Trust Company ("State Street" or the "Custodian"),
225 Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian for
the Fund and the Portfolio and Transfer and Dividend Disbursing Agent for the
Fund.
As Custodian for the Fund, it is responsible for holding the Fund's assets
(i.e., cash and the Fund's interest in the Portfolio) pursuant to a custodian
agreement with the Corporation. Cash is held for the Fund in demand deposit
accounts at the Custodian. Subject to the supervision of the Administrator of
the Corporation, the Custodian maintains the accounting records for the Fund and
each day computes the net asset value per share of the Fund. As Transfer and
Dividend Disbursing Agent it is responsible for maintaining the books and
records detailing the ownership of the Fund's shares.
As Custodian for the Portfolio, it is responsible for maintaining books
and records of portfolio transactions and holding the Portfolio's securities and
cash pursuant to a custodian agreement with the Portfolio. Cash is held for the
Portfolio in demand deposit accounts at the Custodian. Subject to the
supervision of the Administrator of the Portfolio, the Custodian maintains the
accounting and portfolio transaction records for the Portfolio and each day
computes the net asset value and net income of the Portfolio.
Independent Auditors
Deloitte & Touche LLP, Boston, Massachusetts are the independent auditors
for the Fund. Deloitte & Touche, Grand Cayman are the independent auditors for
the Portfolio.
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 (i.e., the value of
its investment in the Portfolio and other 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 the Fund's investment in the Portfolio is also determined
once daily at 4:00 P.M., New York time on each day the New York Stock Exchange
is open for regular trading.
The determination of the value of the Fund's investment in the Portfolio
is made by subtracting from the value of the total assets of the Portfolio the
amount of the Portfolio's liabilities and multiplying the difference by the
percentage, effective for that day, which represents the Fund's share of the
aggregate beneficial interests in the Portfolio.
Values of assets held by the Portfolio are determined on the basis of
their market or other fair value. (See "Determination of Net Asset Value;
Redemption in Kind" in the Statement of Additional Information.)
DIVIDENDS AND DISTRIBUTIONS
================================================================================
Substantially all of the Fund's net investment income ("Net Income"),
including its pro rata share of the Portfolio's net income and realized net
short-term capital gains in excess of net long-term capital losses is declared
and paid to Fund shareholders at least annually as a dividend, and substantially
all of the Fund's pro rata share of the Portfolio's realized net long-term
capital gains in excess of net short-term capital losses is declared and paid to
Fund shareholders on an annual basis as a capital gains distribution. An
additional dividend and/or capital gains distribution may be made in a given
year to the extent necessary to avoid the imposition of federal excise tax on
the Fund. (See "Taxes" below.) Dividends and capital gains distributions are
payable to Fund 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 continue 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 in excess of net short-term capital losses 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 continue to meet such requirements.
The Portfolio is also not required to pay any federal income or excise taxes.
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
Portfolio'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 is
reduced below a shareholder's cost as a result of such a dividend or capital
gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in the Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
Under U.S. Treasury regulations, the Corporation and each Eligible
Institution are required to withhold and remit to the U.S. Treasury a portion
(31%) of dividends and capital gains distributions on the accounts of those
shareholders who fail to provide a correct taxpayer identification number
(Social Security Number for individuals) or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
State and Local Taxes
The treatment of each Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
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
16
<PAGE>
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 21 Milk Street, Boston, Massachusetts 02109; 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 of the Corporation may increase the number of shares the Corporation
is authorized to issue without the approval of shareholders. The Board of
Directors of the Corporation also has the power to designate one or more series
of shares of common stock and to classify and reclassify any unissued shares
with respect to such series. Currently there are seven 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 of the Corporation may
call meetings of shareholders for action by shareholder vote as may be required
by the 1940 Act or as may be permitted by the Articles of Incorporation or
By-Laws. Shareholders have under certain circumstances (e.g., upon application
and submission of certain specified documents to the Directors of the
Corporation by a specified number of shareholders) the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Directors of the Corporation. Shareholders
also have the right to remove one or more Directors of the Corporation without a
meeting by a declaration in writing by a specified number of shareholders.
The By-Laws of the Corporation provide that the presence in person or by
proxy of the holders of record of one third of the shares of the Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of Fund shareholders, except as otherwise required by applicable law.
The By-Laws further provide that all questions shall be decided by a majority of
the votes cast at any such meeting at which a quorum is present, except as
otherwise required by applicable law.
The 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
17
<PAGE>
to which that Eligible Institution is the agent of record. Any shares so voted
by an Eligible Institution are deemed represented at the meeting for purposes of
quorum requirements.
The Portfolio, in which all of the assets of the Fund are invested, is
organized as a trust under the law of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) are each liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Directors of the Corporation believe that neither the Fund nor
its shareholders will be adversely affected by reason of the investment of all
of the assets of the Fund in the Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange is open
for regular trading. At 4:00 P.M., New York time on each such business day, the
value of each investor's beneficial interest in the Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals, which are to be
effected on that day, are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of 4:00 P.M., New York time on such
day plus or minus, as the case may be, the amount of any additions to or
withdrawals from the investor's investment in the Portfolio effected on such
day, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of 4:00 P.M., New York time on such day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined is then applied to determine the value of the investor's interest
in the Portfolio as of 4:00 P.M., New York time on the following business day of
the Portfolio.
Whenever the Corporation is requested to vote on a matter pertaining to
the Portfolio, the Corporation will vote its shares without a meeting of
shareholders of the Fund if the proposal is one, if which made with respect to
the Fund, would not require the vote of shareholders of the Fund, as long as
such action is permissible under applicable statutory and regulatory
requirements. For all other matters requiring a vote, the Corporation will hold
a meeting of shareholders of the Fund and, at the meeting of investors in the
Portfolio, the Corporation will cast all of its votes in the same proportion as
the votes of the Fund's shareholders even if all Fund shareholders did not vote.
Even if the Corporation votes all its shares at the Portfolio meeting, other
investors with a greater pro rata ownership in the Portfolio could have
effective voting control of the operations of the Portfolio.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the outstanding voting
securities" (as defined in the 1940 Act) currently means the vote of (i) 67% or
more of the outstanding voting securities present at a meeting, if the holders
of more than 50% of the outstanding voting securities are present in person or
represented by proxy; or (ii) more than 50% of the outstanding voting
securities, whichever is less.
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.
Other mutual funds or institutional investors may invest in the Portfolio
on the same terms and conditions
18
<PAGE>
as the Fund. However, these other investors may have different sales commissions
and other operating expenses which may generate different aggregate performance
results. Information concerning other investors in the Portfolio is available
from Brown Brothers Harriman & Co. (See the back cover for the address and phone
number.)
The Corporation may withdraw the Fund's investment in the Portfolio as a
result of certain changes in the Portfolio's investment objective, policies or
restrictions or if the Board of Directors of the Corporation determines that it
is otherwise in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Directors of the Corporation would consider what action
might be taken, including the investment of all of the assets of the Fund in
another pooled investment entity or the retaining of an investment adviser to
manage the Fund's assets in accordance with the investment policies of the
Portfolio (See "Investment Objective and Policies" on page 5). In the event the
Directors of the Corporation were unable to accomplish either, the Directors
will determine the best course of action.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
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 600 Index and the Russell 2000
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.
This Prospectus omits certain of the information contained in the
Statement of Additional Information and the Registration Statement filed with
the Securities and Exchange Commission. The Statement of Additional Information
may be obtained from 59 Wall Street Distributors without charge and the
Registration Statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed by the Rules and Regulations of
the Commission.
19
<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) and the
Russell 2000 Index (Chicago Board of Options Exchange).
Options on stock indexes are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of stock at a fixed price (strike price), an option on a
stock index gives the holder the right to receive a cash exercise settlement
amount equal to (a) the amount, if any, by which the strike price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by (b)
a fixed index multiplier. Receipt of this cash amount depends upon the closing
level of the stock index upon which the option is based being greater than, in
the case of a call, or less than, in the case of a put, the price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the strike price of the option expressed in U.S. dollars
times a specified multiple.
The effectiveness of purchasing stock index options as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of an index option depends upon future movements in
the level of the overall stock market measured by the underlying index before
the expiration of the option. Accordingly, the successful use of options on
stock indexes is subject to the Investment Adviser's ability both to select an
appropriate index and to predict future price movements over the short term in
the overall stock market. Brokerage costs are incurred in the purchase of stock
index options and the incorrect choice of an index or an incorrect assessment of
future price movements may result in poorer overall performance than if a stock
index option had not been purchased.
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 Portfolio.
In order to assure that the Portfolio is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Portfolio enter into transactions
in futures contracts and options on futures contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of the
Portfolio's assets.
Futures Contracts provide for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for the
Portfolio or adversely affect the prices of securities which are intended to be
purchased at a later date. A Futures Contract may also be entered into to close
out or offset an existing futures position.
20
<PAGE>
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 Portfolio's
investments that is being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized. There is also the risk of a potential lack
of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging
technique depends upon the extent 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 Portfolio 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 Portfolio may be required to make subsequent deposits of
cash or eligible securities called "variation margin", with its futures contract
clearing broker, which are reflective of price fluctuations in the Futures
Contract.
Currently, Futures Contracts can be purchased on stock indexes such as the
Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange), the
Russell 2000 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.
21
<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.
25 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been
authorized to give any information or to make any
representations, other than those contained in this
Prospectus and the Statement of Additional Information,
in connection with the offer contained in this
Prospectus, and if given or made, such other information
or representations must not be relied upon as having been
authorized by the Corporation or the Distributor. This
Prospectus does not constitute an offer by the
Corporation or by the Distributor to sell or the
solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom
it is unlawful for the Corporation or the Distributor to
make such offer in such jurisdiction.
<PAGE>
===============================================================================
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET SMALL COMPANY FUND
6 St. James Avenue, Boston, Massachusetts 02116
===============================================================================
The 59 Wall Street Small Company Fund (the "Fund") is a separate
portfolio of The 59 Wall Street Fund, Inc. (the "Corporation"), a management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund is designed to enable investors to
participate in the opportunities available in the smaller capitalization segment
of the U.S. equity market. The investment objective of the Fund is to provide
investors with long-term maximization of total return, primarily through capital
appreciation. The Corporation seeks to achieve the investment objective of the
Fund by investing all of the Fund's assets in the U.S. Small Company Portfolio
(the "Portfolio"), a diversified open-end investment company having the same
investment objective as the Fund. There can be no assurance that the Fund's
investment objective will be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the
"Investment Adviser") of the Portfolio. This Statement of Additional Information
is not a prospectus and should be read in conjunction with the Prospectus dated
February 27, 1998, a copy of which may be obtained from the Corporation at the
address noted above.
Table of Contents
Cross-Reference
to
Page in
Page Prospectus
Investment Objective and Policies . . . . . 2 5-8
Investment Restrictions . . . . . . . . 4 8-9
Directors, Trustees and Officers . . . . . 8 11
Investment Adviser . . . . . . . . . . 10 11-12
Administrators. . . . . . . . . . . . 11 12-13
Distributor . . . . . . . . . . . . 12 15
Financial Intermediaries. . . . . . . . . 15 13
Net Asset Value; Redemption in Kind . . . . 13 16
Computation of Performance . . . . . . . 14 19
<PAGE>
Federal Taxes . . . . . . . . . . . . 15 17
Description of Shares . . . . . . . . . 16 18-19
Portfolio Transactions . . . . . . . . . 17 7
Additional Information . . . . . . . . . 19 19
Financial Statements . . . . . . . . . 19 4
The date of this Statement of Additional Information is February
27, 1998.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Portfolio.
Equity Investments
Equity investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of convertible preferred stock, the holder's claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
Options on Stock. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for the Portfolio, although the current
intention is not to do so in such a manner that more than 5% of the Portfolio's
net assets would be at risk. A call option on a stock gives the purchaser of the
option the right to buy the underlying stock at a fixed price at any time during
the option period. Similarly, a put option gives the purchaser of the option the
right to sell the underlying stock at a fixed price at any time during the
option period. To liquidate a put or call option position, a "closing sale
transaction" may be made at any time prior to the expiration of the option which
involves selling the option previously purchased. Over-the-counter options ("OTC
Options") purchased are treated as not readily marketable. (See "Investment
Restrictions").
Covered call options may also be sold (written) on stocks,
although in each case the current intention is not to do so. A
call option is "covered" if the writer owns the underlying
security.
Loans of Portfolio Securities
Securities of the Portfolio may be loaned if such loans are secured
continuously by cash or equivalent liquid securities as collateral or by an
irrevocable letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value
2
<PAGE>
of the securities loaned plus accrued income. While such securities are on loan,
the borrower pays the Portfolio any income accruing thereon, and cash collateral
may be invested for the Portfolio, thereby earning additional income. All or any
portion of interest earned on invested collateral may be paid to the borrower.
Loans are subject to termination by the Portfolio in the normal settlement time,
currently three business days after notice, or by the borrower on one day's
notice. Borrowed securities are returned when the loan is terminated. Any
appreciation or depreciation in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. Reasonable finders' and custodial fees may be paid in connection with
a loan. In addition, all facts and circumstances, including the creditworthiness
of the borrowing financial institution, are considered before a loan is made and
no loan is made in excess of one year. There is the risk that a borrowed
security may not be returned to the Portfolio. Securities are not loaned to
Brown Brothers Harriman & Co. or to any affiliate of the Corporation, the
Portfolio or Brown Brothers Harriman & Co.
Short-Term Investments
Although it is intended that the assets of the Portfolio stay invested
in the securities described above and in the Prospectus to the extent practical
in light of the Portfolio's investment objective and long-term investment
perspective, assets of the Portfolio may be invested in short-term instruments
to meet anticipated expenses or for day-to-day operating purposes and when, in
the Investment Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when the Portfolio experiences large cash inflows through
additional investments by its investors or the sale of portfolio securities, and
desirable equity securities that are consistent with its investment objective
are unavailable in sufficient quantities, assets may be held in short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of U.S. dollar denominated: (i) securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities; (ii)
commercial paper; (iii) bank obligations, including negotiable certificates of
deposit, fixed time deposits and bankers' acceptances; and (iv) repurchase
agreements. Time deposits with a maturity of more than seven days are treated as
not readily marketable (see clause (vi) under the caption "State and Federal
Restrictions"). At the time the Portfolio's assets are invested in commercial
paper, bank obligations or repurchase agreements, the issuer must have
outstanding debt rated A or higher by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("Standard & Poor's"); or the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's.
3
<PAGE>
Repurchase Agreements. Repurchase agreements may be entered into for
the Portfolio only with a "primary dealer" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities. This is an agreement in which
the seller (the "Lender") of a security agrees to repurchase from the Portfolio
the security sold at a mutually agreed upon time and price. As such, it is
viewed as the lending of money to the Lender. The resale price normally is in
excess of the purchase price, reflecting an agreed upon interest rate. The rate
is effective for the period of time assets of the Portfolio are invested in the
agreement and is not related to the coupon rate on the underlying security. The
period of these repurchase agreements is usually short, from overnight to one
week. The securities which are subject to repurchase agreements, however, may
have maturity dates in excess of one week from the effective date of the
repurchase agreement. The Portfolio always receives as collateral securities
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Collateral is marked to the market daily and has a market
value including accrued interest at least equal to 100% of the dollar amount
invested on behalf of the Portfolio in each agreement along with accrued
interest. Payment for such securities is made for the Portfolio only upon
physical delivery or evidence of book entry transfer to the account of State
Street Bank and Trust Company (the "Custodian"). If the Lender defaults, the
Portfolio might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the Lender, realization upon the collateral on behalf
of the Portfolio may be delayed or limited in certain circumstances.
INVESTMENT RESTRICTIONS
===============================================================================
The Fund and the Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Fund or the Portfolio, as the case may be
(see "Additional Information").
Except that the Corporation may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither the Portfolio nor the
Corporation, with respect to the Fund, may:
4
<PAGE>
(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 or the withdrawal of part or all of an interest in the Portfolio, as
the case may be, while effecting an orderly liquidation of portfolio securities
or to maintain liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations), provided that
collateral arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may be pledged to secure
letters of credit solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute;
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the purchase, ownership,
holding or sale of warrants where the grantor of the warrants is the issuer of
the underlying securities, or (ii) the purchase, ownership, holding or sale of
futures and options, other than the writing of put options;
(4) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933 as
amended in selling a portfolio security;
(5) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its net
assets (taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations and provided that not more than 10% of
its net assets is invested in repurchase agreements maturing in more than seven
days, or (c) by purchasing, subject to the limitation in paragraph (6) below, a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered
5
<PAGE>
the making of a loan;
(6) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities is reserved);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of its net
assets (taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (it is the
present intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes; such
sales would not be made of securities subject to outstanding options);
(9) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective, up to 25%
of its assets, at market value at the time of each investment, may be invested
in any one industry, except that positions in futures or option contracts shall
not be subject to this restriction;
(10) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction; or
(11) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than U.S. Government obligations) or more
than 10% of its total assets in the outstanding voting securities of any one
issuer; provided, however, that up to 25% of its total assets may be invested
without regard to this restriction.
Non-Fundamental Restrictions.
6
<PAGE>
The Portfolio or the Corporation, on behalf of 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) purchase securities of
any investment company if such purchase at the time thereof would cause more
than 10% of its total assets (taken at the greater of cost or market value) to
be invested in the securities of such issuers or would cause more than 3% of the
outstanding voting securities of any such issuer to be held for it; or (ii)
invest more than 10% of its net assets (taken at the greater of cost or market
value) in restricted securities
7
<PAGE>
These policies are not fundamental and may be changed without shareholder or
investor approval .
Percentage and Rating Restrictions. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy. If the Fund's and the
Portfolio's respective investment restrictions relating to any particular
investment practice or policy are not consistent, the Portfolio has agreed with
the Corporation, on behalf of the Fund, that the Portfolio will adhere to the
more restrictive limitation.
DIRECTORS, TRUSTEES AND OFFICERS
================================================================================
The Directors of the Corporation, Trustees of the Portfolio and
executive officers of the Corporation and the Portfolio, their principal
occupations during the past five years (although their titles may have varied
during the period) and business addresses are:
DIRECTORS OF THE CORPORATION
J.V. SHIELDS, JR.* -- Chairman of the Board and Director; Trustee of
The 59 Wall Street Trust; Managing Director, Chairman and Chief Executive
Officer of Shields & Company; Chairman and Chief Executive Officer of Capital
Management Associates, Inc.; Director of Flowers Industries, Inc.(1) His
business address is Shields & Company, 140 Broadway, New York, NY 10005.
EUGENE P. BEARD** -- Director; Trustee of The 59 Wall Street Trust
(since April 1993); Vice Chairman - Finance and Operations of The Interpublic
Group of Companies. His business address is The Interpublic Group of Companies,
Inc., 1271 Avenue of the Americas, New York, NY 10020.
DAVID P. FELDMAN** -- Director; Trustee of The 59 Wall Street Trust;
Retired; Chairman and Chief Executive Officer - AT&T Investment Management
Corporation (prior to October 1997); Director of Dreyfus Mutual Funds, Equity
Fund of Latin America, New World Balanced Fund, India Magnum Fund, and U.S.
Prime Properties Inc.; Trustee of Corporate Property Investors. His business
address 3 Tall Oaks Drive, Warren, NJ 07059.
8
<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; Director of Vought Aircraft
Corporation (prior to September 1994), Caterair International (prior to April
1994); Member of Advisory Committee of Carlyle Group and Pittsburgh Seed Fund
and Valuation Committee of Morgenthaler Venture Funds(2). His business address
is Richard K. Mellon and Sons, P.O. Box RKM, Ligonier, PA 15658.
TRUSTEES OF THE PORTFOLIO
H.B. ALVORD** -- Chairman of the Board and Trustee; Retired; Trustee of
the Trust (from September 1990 to October 1994); Director of The 59 Wall Street
Fund, Inc. (from September 1990 to October 1994); Trustee of Landmark Funds III,
Landmark Tax Free Reserves, Landmark Multi-State Tax Free Funds, Landmark Tax
Free Income Funds, Landmark Fixed Income Funds, Landmark Funds I, Landmark Funds
II, and Landmark International Equity Fund (from September 1990 to May 1997).
His business address is P.O. Box 5203, Carmel, CA 93921.
RICHARD L. CARPENTER** -- Trustee; Retired; Director of
Internal Investments, Public School Employees' Retirement System
(prior to December 1995). His business address is 61 Cliff
Street, Burlington, VT 05401.
CLIFFORD A. CLARK** -- Trustee; Retired; Director of Schmid,
Inc. (prior to July 1993); Managing Director of the Smith-Denison
Foundation. His business address is 42 Clowes Drive, Falmouth,
MA 02540.
DAVID M. SEITZMAN** -- Trustee; Retired;
Physician with Seitzman, Shuman, Kwart and Phillips(prior to
October 1997); Director of the National Capital Underwriting
Company, Commonwealth Medical Liability Insurance Co. and
National Capital Insurance Brokerage, Limited. His business
address is 7117 Nevis Road, Bethesda, MD 20817.
OFFICERS OF THE CORPORATION AND THE PORTFOLIO
PHILIP W. COOLIDGE -- President; Chief Executive Officer and
President of Signature Financial Group, Inc. ("SFG"), 59 Wall
Street Distributors, Inc. ("59 Wall Street Distributors") and 59
Wall Street Administrators, Inc. ("59 Wall Street
Administrators") (since June 1993).
JAMES E. HOOLAHAN -- Vice President; Senior Vice President
of SFG.
9
<PAGE>
JOHN R. ELDER -- Treasurer; Vice President of SFG (since
April 1995); Treasurer of Phoenix Family of Mutual Funds (prior
to April 1995).
LINDA T. GIBSON -- Secretary, Vice President and Assistant Secretary of
SFG (since June 1991); Assistant Secretary of 59 Wall Street Distributors and 59
Wall Street Administrators (since June 1993) .
SUSAN JAKUBOSKI*** -- Assistant Treasurer and Assistant Secretary of
the Portfolio; Assistant Secretary, Assistant Treasurer and Vice President of
Signature Financial Group (Grand Cayman) Limited (since August 1994); Fund
Compliance Administrator of Concord Financial Group, Inc. (from November 1990 to
August 1994). Her business address is Signature Financial Group (Grand Cayman)
Limited, Elizabethan Square, George Town, Grand Cayman, Cayman Islands, B.W.I.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and
Assistant Secretary of SFG; Assistant Secretary of 59 Wall Street
Distributors and 59 Wall Street Administrators (since June 1993).
CHRISTINE A. DRAPEAU -- Assistant Secretary; Assistant Vice President
of SFG (since January 1996); Paralegal and Compliance Officer, various financial
companies (July 1992 to January 1996); Graduate Student, Bentley College (prior
to December 1994).
- -------------------------
* Mr. Shields is an "interested person" of the Corporation and
the Portfolio because of his affiliation with a registered
broker-dealer.
** These Directors and Trustees are members of the Audit
Committee of the Corporation or the Portfolio, as the case
may be.
*** Ms. Jakuboski is an officer of the Portfolio but is not an
officer of the Corporation.
(1) Shields & Company, Capital Management Associates, Inc. and
Flowers Industries, Inc., with which Mr. Shields is
associated, are a registered broker-dealer and a member of
the New York Stock Exchange, a registered investment
adviser, and a diversified food company, respectively.
(2) Richard K. Mellon and Sons, Richard King Mellon Foundation, Vought
Aircraft Corporation, Caterair International, The Carlyle Group and
Morgenthaler Venture Funds, with which Mr. Miltenberger is or has been
associated, are a private foundation, a private foundation, a business
development firm, an aircraft manufacturer, an airline food services
company, a merchant bank, and a venture capital partnership,
respectively.
10
<PAGE>
Each Director and officer of the Corporation listed above holds the
equivalent position with The 59 Wall Street Trust. The address of each officer
of the Corporation is 6 St. James Avenue, Boston, Massachusetts 02116. Messrs.
Coolidge, Hoolahan and Elder and Mss. Gibson, Jakuboski , Mugler and Drapeau
also hold similar positions with other investment companies for which affiliates
of 59 Wall Street Distributors serves as the principal underwriter.
Except for Mr. Shields, no Director is an "interested
person" of the Corporation or the Portfolio as that term is
defined in the 1940 Act.
Directors of the Corporation
The Directors of the Corporation receive a base annual fee of $15,000
(except the Chairman who receives a base annual fee of $20,000) which is paid
jointly by all series of the Corporation and The 59 Wall Street Trust and
allocated among the series based upon their respective net assets. In addition,
each series which has commenced operations pays an annual fee to each Director
of $1,000.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the Corporation
Name of Person, Compensation as Part of Benefits upon and Fund Complex*
POSITION FROM THE CORPORATION FUND EXPENSES RETIREMENT PAID TO DIRECTORS
J.V. Shields, Jr., $10,822 none none $28,500
Trustee
Eugene P. Beard, $ 9,492 none none 23,500
Trustee
David P. Feldman, $ 9,492 none none 23,500
Trustee
Alan G. Lowy, $ 9,492 none none 23,500
Trustee
Arthur D. Miltenberger, $ 9,492 none none 23,500
Trustee
</TABLE>
12
<PAGE>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series .
Portfolio Trustees
The Trustees of the Portfolio receive a base annual fee of $12,000
(except the Chairman who receives a base annual fee of $17,000) which is paid
jointly by the U.S. Money Market Portfolio, International Equity Portfolio
Emerging Markets Portfolio and U.S Mid-Cap Portfolio together with the Portfolio
(the "Portfolios") and allocated among the Portfolios based upon their
respective net assets. In addition, each Portfolio which has commenced
operations pays an annual fee to each Trustee of $1,000.
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the
Name of Person, Compensation as Part of Benefits upon Portfolio Complex*
POSITION FROM THE PORTFOLIO PORTFOLIO EXPENSES RETIREMENT PAID TO TRUSTEES
H.B. Alvord, $3,705 none none $19,950
Trustee
Richard L. Carpenter, 3,489 none none 15,250
Trustee
Clifford A. Clark, 3,489 none none 15,250
Trustee
David M. Seitzman, 3,489 none none 15,250
Trustee
</TABLE>
*The Portfolio Complex consists of the Portfolio, U.S. Money Market
Portfolio, International Equity Portfolio, Emerging Markets Portfolio and
U.S. Mid-Cap Portfolio.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with the Portfolio and the
Administration Agreement with the Corporation, and by Brown Brothers Harriman
Trust Company (Cayman) Limited under the Administration Agreement with the
Portfolio (see "Investment Adviser" and "Administrators"), neither the
Corporation nor the Portfolio requires employees other than its officers, and
none of its officers devote full time to the affairs of the Corporation or the
Portfolio, as the case may be, or, other than the
14
<PAGE>
Chairmen, receive any compensation from the Fund or the Portfolio.
As of January 31, 1998, the Directors of the Corporation, Trustees of
the Portfolio and officers of the Corporation and the Portfolio as a group
beneficially owned less than 1% of the outstanding shares of the Corporation and
less than 1% of the aggregate beneficial interests in the Portfolio. At the
close of business on that date, no person, to the knowledge of the management,
owned beneficially more than 5% of the outstanding shares of the Fund nor more
than 5% of the aggregate beneficial interests in the Portfolio except that The
Atlantic Energy Corp. owned 121,550 (5.6%) 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 the partners of Brown Brothers
Harriman & Co. and their immediate families owned 267,035 (12.3%) shares of the
Fund. Also, Brown Brothers Harriman & Co. Employees Pension Plan on that date
held 330,337 (15.2%) of the Fund. Brown Brothers Harriman & Co. and its
affiliates separately are able to direct the disposition of an additional
955,154 (43.9%) shares of the Fund, as to which shares Brown Brothers Harriman &
Co. disclaims beneficial ownership.
INVESTMENT ADVISER
==============================================================================
Under its Investment Advisory Agreement with the Portfolio, subject to
the general supervision of the Portfolio's Trustees and in conformance with the
stated policies of the Portfolio, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Portfolio. In this
regard, it is the responsibility of Brown Brothers Harriman & Co. to make the
day-to-day investment decisions for the Portfolio, to place the purchase and
sale orders for portfolio transactions and to manage, generally, the Portfolio's
investments.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Portfolio is dated December 15, 1993 and remains in effect for two years
from such date and thereafter, but only so long as the agreement is specifically
approved at least annually (i) by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio, or
by the Portfolio's Trustees, and (ii) by a vote of a majority of the Trustees of
the Portfolio who are not parties to the Investment Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of the Portfolio ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreement was most recently approved by the
Independent Trustees on December 4, 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 Trustees of the Portfolio or by a vote of
the holders of a "majority of the outstanding voting securities" (as defined in
the 1940 Act) of the Portfolio on 60 days' written notice to Brown Brothers
Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written notice
to the Portfolio (see "Additional Information").
With respect to the Portfolio, the investment advisory fee paid to the
Investment Adviser is calculated daily and paid monthly at an annual rate
15
<PAGE>
equal to 0.65% of the Portfolio's average daily net assets. The advisory fee is
the same as the fee paid by the Fund from November 1, 1993 to January 16, 1995,
at which time the Corporation began to seek to achieve the Fund's investment
objective by investing all of the Fund's investable assets in the Portfolio. For
the period November 1, 1994 through January 16, 1995, the Fund incurred $49,267
for advisory services. For the period January 17, 1995 through October 31, 1995,
the Portfolio incurred $283,032 for advisory services. For the fiscal years
ended October 31, 1996 and 1997, the Portfolio incurred $360,578 and $319,096,
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 the investment advisory,
administrative or shareholder servicing/eligible institution functions described
above. If Brown Brothers Harriman & Co. were to terminate its Investment
Advisory Agreement with the Portfolio, or were prohibited from acting in such
capacity, it is expected that the Trustees of the Portfolio would recommend to
the investors that they approve a new investment advisory agreement for the
Portfolio with another qualified adviser. If Brown Brothers Harriman & Co. were
to terminate its Shareholder Servicing Agreement, Eligible Institution Agreement
or Administration Agreement with the Corporation or were prohibited from acting
in any such capacity, its customers would be permitted to remain shareholders of
the Fund and alternative means for providing shareholder services or
administrative services, as the case may be, would be sought. In such event,
although the operation of the Corporation might change, it is not expected that
any shareholders would suffer any adverse financial consequences. However, an
alternative means of providing shareholder services might afford less
convenience to shareholders.
ADMINISTRATORS
==============================================================================
The Administration Agreements between the Corporation and Brown
Brothers Harriman & Co. (dated November 1, 1993) and between the Portfolio and
Brown Brothers Harriman Trust Company (Cayman) Limited (dated December 15, 1993)
will remain in effect for two years from such respective date and thereafter,
but only so long as each such agreement is specifically approved at least
annually in the same manner as the Portfolio's Investment Advisory Agreement
(see "Investment Adviser"). The Independent Directors/Trustees most recently
approved the Corporation's Administration Agreement and the Portfolio's
Administration Agreement on December 17, 1997 and December 4, 1997,
respectively. Each agreement will terminate automatically if assigned by either
party thereto and is terminable by the Corporation or the Portfolio at any time
without penalty by a vote of a majority of the Directors of the Corporation or
the Trustees of the Portfolio, as the case may be, or by a vote of the holders
of a "majority of the outstanding voting securities" (as defined in the 1940
Act) of the Corporation or the Portfolio, as the case may be (see
16
<PAGE>
"Additional Information"). The Corporation's Administration Agreement is
terminable by the Directors of the Corporation or shareholders of the
Corporation on 60 days' written notice to Brown Brothers Harriman & Co. The
Portfolio's Administration Agreement is terminable by the Trustees of the
Portfolio or by the Fund and other investors in the Portfolio on 60 days'
written notice to Brown Brothers Harriman Trust Company (Cayman) Limited. Each
agreement is terminable by the respective Administrator on 90 days' written
notice to the Corporation or the Portfolio, as the case may be.
The administrative fee payable to Brown Brothers Harriman & Co. from
the Fund is calculated daily and payable monthly at an annual rate equal to
0.125% of the Fund's average daily net assets. From November, 1993 to January
16, 1995, Brown Brothers Harriman & Co. was paid at an annual rate equal to
0.15% of the Fund's average daily net assets. For the fiscal years ended October
31, 1995 , 1996 and 1997, the Fund incurred $41,328 , $41,210 and $46,488,
respectively, for administrative services.
The administrative fee paid to Brown Brothers Harriman Trust Company
(Cayman) Limited by the Portfolio is calculated and paid monthly at an annual
rate equal to 0.035% of the Portfolio's average daily net assets. Brown Brothers
Harriman Trust Company (Cayman) Limited is a wholly-owned subsidiary of Brown
Brothers Harriman Trust Company of New York, which is a wholly-owned subsidiary
of Brown Brothers Harriman & Co. For the period January 17, 1995 through October
31, 1995, the Portfolio incurred $15,240 for administrative services. For the
fiscal years ended October 31, 1996 and 1997, the Portfolio incurred $19,416 and
$17,182, respectively, for administrative services.
DISTRIBUTOR
==============================================================================
The Distribution Agreement (dated September 5, 1990, as amended and
restated February 12, 1991) between the Corporation and 59 Wall Street
Distributors remains in effect indefinitely, but only so long as such agreement
is specifically approved at least annually in the same manner as the Portfolio's
Investment Advisory Agreement (see "Investment Adviser"). The Distribution
Agreement was most recently approved by the Independent Directors of the
Corporation on February 24, 1998. The agreement terminates automatically if
assigned by either party thereto and is terminable with respect to the Fund at
any time without penalty by a vote of a majority of the Directors of the
Corporation or by a vote of the holders of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Fund (see "Additional
Information"). The Distribution Agreement is terminable with respect to the Fund
by the Corporation's Directors or shareholders of the Fund on 60 days' written
notice to 59 Wall Street Distributors. The agreement is terminable by 59 Wall
Street Distributors on 90 days' written notice to the Corporation.
17
<PAGE>
FINANCIAL INTERMEDIARIES
===============================================================================
18
<PAGE>
One or more brokers which serve as Financial Intermediaries have been
authorized by the Corporation to accept purchase and redemption orders for Fund
shares on its behalf and are authorized to designate other intermediaries to
accept purchase and redemption orders for Fund shares on the Corporation's
behalf. The Corporation will be deemed to have received a purchase or redemption
order for Fund shares when an authorized broker or, if applicable, such broker's
authorized designee, accepts the order and such an order will be executed at the
net asset value per share next determined after such acceptance.
NET ASSET VALUE; REDEMPTION IN KIND
==============================================================================
The net asset value of each of the Fund's shares is determined each day
the New York Stock Exchange is open for regular trading. (As of the date of this
Statement of Additional Information, such Exchange is so open every weekday
except for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) This determination of net asset value of each
share of the Fund is made once during each such day as of the close of regular
trading on such Exchange by subtracting from the value of the Fund's total
assets (i.e., the value of its investment in the Portfolio and other assets) the
amount of its liabilities, including expenses payable or accrued, and dividing
the difference by the number of shares of the Fund outstanding at the time the
determination is made.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the Fund is determined. The value of the Fund's investment in
the Portfolio is determined by multiplying the value of the Portfolio's net
assets by the percentage, effective for that day, which represents the Fund's
share of the aggregate beneficial interests in the Portfolio.
The value of investments listed on a domestic securities exchange is
based on the last sale prices as of the regular close of the New York Stock
Exchange (which is currently 4:00 p.m., New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Portfolio's
Trustees. Such procedures include the use of independent pricing services, which
use prices based upon yields or prices of
19
<PAGE>
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments which
mature in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original maturity when acquired was more than 60 days,
unless this is determined not to represent fair value by the Trustees of the
Portfolio.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
a Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Corporation is obligated with
respect to any one investor during any 90 day period to redeem shares of a Fund
solely in cash up to the lesser of $250,000 or 1% of that Fund's net assets at
the beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
==============================================================================
The average annual total return of the Fund is calculated for any
period by (a) dividing (i) the sum of the aggregate net asset value per share on
the last day of the period of shares purchased with a $1,000 payment on the
first day of the period and the aggregate net asset value per share on the last
day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period, and
(c) subtracting 1 from the result.
The total rate of return of the Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
The annualized average rate of return for the Fund for the period April
23, 1991 (commencement of operations) to October 31, 1997 was 11.42%. The
average annual rate of return for the Fund for the fiscal year ended October 31,
1997 was 24.65%. The average annual rate of return for the Fund for the
five-year period ended October 31, 1997 was 13.60%.
20
<PAGE>
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 Portfolio and the Fund's and
the Portfolio's expenses during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time, the Fund's
total rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
FEDERAL TAXES
==============================================================================
Each year, the Corporation intends to continue to qualify the Fund and
elect that the Fund be treated as a separate "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Subchapter M of the Code the Fund is not subject to federal
income taxes on amounts distributed to shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities, foreign
currencies or other income derived with respect to its business of investing in
such securities; (b) less than 30% of the Fund's annual gross income be derived
from gains (without offset for losses) from the sale or other disposition of
securities held for less than three months; and (c) the holdings of the Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of the Fund's assets be represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Fund's assets be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other investment companies). In
addition, in order not to be subject to federal income tax, at least 90% of the
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's shareholders.
Gains or losses on sales of securities are treated as long-term capital
gains or losses if the securities have been held for more than one year except
in certain cases where a put has been acquired or a call has been written
thereon. Other gains or losses on the sale of securities are treated as
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities are generally treated as gains and losses
from the sale of securities. If an option written for the Portfolio lapses or is
terminated through a closing
21
<PAGE>
transaction, such as a repurchase of the option from its holder, the Portfolio
may realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid in the closing transaction. If
securities are sold pursuant to the exercise of a call option written for them,
the premium received would be added to the sale price of the securities
delivered in determining the amount of gain or loss on the sale. The requirement
that less than 30% of the Fund's gross income be derived from gains from the
sale of securities held for less than three months may limit the Portfolio's
ability to write options and engage in transactions involving stock index
futures.
Certain options contracts held for the Portfolio at the end of each
fiscal year are required to be "marked to market" for federal income tax
purposes; that is, treated as having been sold at market value. Sixty percent of
any gain or loss recognized on these deemed sales and on actual dispositions are
treated as long-term capital gain or loss, and the remainder are treated as
short-term capital gain or loss regardless of how long the Portfolio has held
such options. The Portfolio may be required to defer the recognition of losses
on stock or securities to the extent of any unrecognized gain on offsetting
positions held for it.
Return of Capital. If the net asset value of shares is reduced below a
shareholder's cost as a result of a dividend or capital gains distribution from
the Fund, such dividend or capital gains distribution would be taxable even
though it represents a return of invested capital.
Redemption of Shares. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities is treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
DESCRIPTION OF SHARES
==============================================================================
The Corporation is an open-end management investment company organized
as a Maryland corporation on July 16, 1990. The Articles of Incorporation
currently permit the Corporation to issue 2,500,000,000 shares of common stock,
par value $0.001 per share, of which 25,000,000 shares have been classified as
shares of The 59 Wall Street Small Company Fund. The Corporation currently
consists of eight portfolios.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Corporation do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Corporation may elect all of the Directors of the
22
<PAGE>
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.
Interests in the Portfolio have no preference, preemptive, conversion
or similar rights, and are fully paid and non-assessable. The Portfolio is not
required to hold annual meetings of investors, but will hold special meetings of
investors when, in the judgment of its Trustees, it is necessary or desirable to
submit matters for an investor vote. Each investor is entitled to a vote in
proportion to the share of its investment in the Portfolio.
PORTFOLIO TRANSACTIONS
==============================================================================
In effecting securities transactions for the Portfolio, the Investment
Adviser seeks to obtain the best price and execution of orders. In selecting a
broker, the Investment Adviser considers a number of factors including: the
broker's ability to execute orders without disturbing the market price; the
broker's reliability for prompt, accurate confirmations and on-time delivery of
securities; the research and other investment
23
<PAGE>
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.
For the period January 17, 1995 through October 31, 1995, the aggregate
commissions paid from the Portfolio was $149,500. For the fiscal years ended
October 31, 1996 and 1997, the aggregate commissions paid from the Portfolio
were $79,546 and $123,358, 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 Portfolio uses Brown Brothers Harriman & Co. as one of its principal
brokers when, in the judgment of the Investment Adviser, that firm will be able
to obtain a price and execution at least as favorable as other qualified
brokers. As one of the Portfolio's principal brokers, Brown Brothers Harriman &
Co. receives brokerage commissions from the Portfolio.
The use of Brown Brothers Harriman & Co. as a broker for the Portfolio
is subject to the provisions of Rule 11a2-2(T) under the
Securities Exchange Act of 1934 which permits the Portfolio to use Brown
Brothers Harriman & Co. as a broker provided that certain conditions are
met.
In addition, under the 1940 Act, commissions paid by the Portfolio to
Brown Brothers Harriman & Co. in connection with a purchase or sale of
securities offered on a securities exchange may not exceed the usual and
customary broker's commission.
The Trustees of the Portfolio from time to time review, among other
things, information relating to the commissions charged by Brown Brothers
Harriman & Co. to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other qualified
brokers. In addition, the procedures pursuant to which Brown Brothers Harriman &
Co. effects brokerage transactions for the Portfolio are reviewed and approved
no less often than annually by a majority of the non-interested Trustees of the
Portfolio.
For the fiscal year ended October 31, 1994, total transactions with a
principal value of $103,904,986 were effected for the Fund of which transactions
with a principal value of $29,101,223 were effected by Brown Brothers Harriman &
Co. which involved payments of commissions to Brown Brothers Harriman & Co. of
$94,500 from the Fund.
For the period November 1, 1994 through January 16, 1995, total
transactions with a principal value of $10,830,197 were effected for the
24
<PAGE>
Fund of which transactions with a principal value of $3,683,925 were effected by
Brown Brothers Harriman & Co. which involved payments of commissions to Brown
Brothers Harriman & Co. of $12,132 from the Fund.
For the period January 17, 1995 through October 31, 1995, total
transactions with a principal value of $87,637,894 were effected for the
Portfolio of which transactions with a principal value of $20,656,501 were
effected by Brown Brothers Harriman & Co. which involved payments of commissions
to Brown Brothers Harriman & Co. of $75,463 from the Portfolio.
For the fiscal year ended October 31, 1996, total transactions with a
principal value of $49,619,514 were effected for the Portfolio of which
transactions with a principal value of $13,569,026 were effected by Brown
Brothers Harriman & Co. which involved payments of commissions to Brown Brothers
Harriman & Co. of $43,787.
For the fiscal year ended October 31, 1997, total transactions with a
principal value of $44,404,234 were effected for the Portfolio of which
transactions with a principal value of $18,399,202were effected by Brown
Brothers Harriman & Co. which involved payments of commissions to Brown Brothers
Harriman & Co. of $55,627.
A portion of the transactions for the Portfolio are executed through
qualified brokers other than Brown Brothers Harriman & Co. In selecting such
brokers, the Investment Adviser may consider the research and other investment
information provided by such brokers. Research services provided by brokers to
which Brown Brothers Harriman & Co. has allocated brokerage business in the past
include economic statistics and forecasting services, industry and company
analyses, portfolio strategy services, quantitative data, and consulting
services from economists and political analysts. Research services furnished by
brokers are used for the benefit of all the Investment Adviser's clients and not
solely or necessarily for the benefit of the Portfolio. The Investment Adviser
believes that the value of research services received is not determinable nor
does such research significantly reduce its expenses. The Portfolio does not
reduce the fee paid to the Investment Adviser by any amount that might be
attributable to the value of such services.
The Investment Adviser may direct a portion of the Portfolio's
securities transactions to certain unaffiliated brokers which in turn use a
portion of the commissions they receive from the Portfolio to pay other
unaffiliated service providers on behalf of the Portfolio for services provided
for which the Portfolio would otherwise be obligated to pay. Such commissions
paid by the Portfolio are at the same rate paid to other brokers for effecting
similar transactions in listed equity securities.
A committee, comprised of officers and partners of Brown Brothers
Harriman & Co. who are portfolio managers of some of Brown Brothers Harriman &
Co.'s managed accounts (the "Managed Accounts"), evaluates semi-annually the
nature and quality of the brokerage and research services provided by brokers,
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative
25
<PAGE>
amounts of brokerage commissions paid to the brokers on the list may vary
substantially from the projected rankings.
The Trustees of the Portfolio review regularly the reasonableness of
commissions and other transaction costs incurred for the Portfolio in light of
facts and circumstances deemed relevant from time to time and, in that
connection, receive reports from the Investment Adviser and published data
concerning transaction costs incurred by institutional investors generally.
Over-the-counter purchases and sales are transacted directly with
principal market makers, except in those circumstances in which, in the judgment
of the Investment Adviser, better prices and execution of orders can otherwise
be obtained. If the Portfolio effects a closing transaction with respect to a
futures or option contract, such transaction normally would be executed by the
same broker-dealer who executed the opening transaction. The writing of options
by the Portfolio may be subject to limitations established by each of the
exchanges governing the maximum number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are written on the same or different exchanges or are
held or written in one or more accounts or through one or more brokers. The
number of options which the Portfolio may write may be affected by options
written by the Investment Adviser for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
ADDITIONAL INFORMATION
==============================================================================
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" (as defined in the 1940
Act) currently means the vote of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
A shareholder's right to receive payment with respect to any
26
<PAGE>
redemption may be suspended or the payment of the redemption proceeds postponed:
(i) during periods when the New York Stock Exchange is closed for other than
weekends and holidays or when regular trading on such Exchange is restricted as
determined by the Securities and Exchange Commission by rule or regulation, (ii)
during periods in which an emergency exists which causes disposal of, or
evaluation of the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
With respect to the securities offered by the Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
=============================================================================
The Annual Report of the Fund dated October 31, 1997 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.
WS5128K
27
<PAGE>
<PAGE>
[LOGO]
European Equity Fund
Pacific Basin Equity Fund
PROSPECTUS
February 27, 1998
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street European Equity Fund
The 59 Wall Street Pacific Basin Equity Fund
21 Milk Street, Boston, Massachusetts 02109
================================================================================
The 59 Wall Street European Equity Fund and The 59 Wall Street Pacific
Basin Equity Fund are separate portfolios of The 59 Wall Street Fund, Inc.
Shares of each Fund are offered by this Prospectus.
The European Equity Fund and the Pacific Basin Equity Fund are each
designed to enable investors to participate in the opportunities available in
foreign equity markets. The investment objective of each Fund is to provide
investors with long-term maximization of total return, primarily through capital
appreciation. There can be no assurance that a Fund's investment objective will
be achieved.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government. Shares of the Funds are not deposits or obligations of, or
guaranteed by, Brown Brothers Harriman & Co. or any other bank, and the shares
are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other federal, state or other governmental agency.
Brown Brothers Harriman & Co. is the investment adviser to, the
administrator of and the shareholder servicing agent for each Fund. Shares of
the Funds are offered at net asset value without a sales charge.
This Prospectus, which investors are advised to read and retain for future
reference, sets forth concisely the information about each Fund that a
prospective investor ought to know before investing. Additional information
about each Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated February 27, 1998. This information
is incorporated herein by reference and is available without charge upon request
from the Funds' distributor, 59 Wall Street Distributors, Inc., 21 Milk Street,
Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
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 27, 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Table............................................................ 3
Financial Highlights..................................................... 4
Investment Objective and Policies........................................ 6
Investment Restrictions.................................................. 11
Purchase of Shares....................................................... 12
Redemption of Shares..................................................... 12
Management of the Corporation............................................ 13
Net Asset Value.......................................................... 17
Dividends and Distributions.............................................. 17
Taxes.................................................................... 18
Description of Shares.................................................... 19
Additional Information .................................................. 20
Appendix................................................................. 21
TERMS USED IN THIS PROSPECTUS
Corporation................... The 59 Wall Street Fund, Inc.
Funds......................... The 59 Wall Street European Equity Fund
(the "European Equity Fund")
The 59 Wall Street Pacific Basin Equity Fund
(the "Pacific Basin Equity Fund")
Investment Adviser
and 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 each Fund, and the aggregate annual
operating expenses of each Fund, as a percentage of average net assets of that
Fund, and (ii) an example illustrating the dollar cost of such estimated
expenses on a $1,000 investment in each Fund.
SHAREHOLDER TRANSACTION EXPENSES
European Pacific Basin
Equity Fund Equity Fund
----------- -----------
Sales Load Imposed on Purchases............... None None
Sales Loan Imposed on Reinvested Dividends.... None None
Deferred Sales Load........................... None None
Redemption Fee................................ None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
European Pacific Basin
Equity Fund Equity Fund
----------- -----------
Investment Advisory Fee....................... 0.65% 0.65%
12b-1 Fee..................................... None None
Other Expenses
Administration Fee ........................ 0.15% 0.15%
Shareholder Servicing/Eligible
Institution Fee........................... 0.25 0.25
Other Expenses ............................. 0.25 0.67 0.14 0.54
---- ---- ---- ----
Total Operating Expenses Paid by Fund......... 1.32% 1.19%
Expenses paid by commissions/expense offset
arrangements................................ 0.04 0.07
---- ----
Total Fund Operating Expenses................. 1.36% 1.26%
==== ====
Example 1 year 3 years 5 years 10 years
------- ------ ------- ------- --------
European Equity Fund: A shareholder of the
Fund would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return, and (2) redemption at the end of
each time period:............................. $14 $43 $74 $164
--- --- --- ----
Pacific Basin Equity Fund: A shareholder
of the Fund would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return, and (2) redemption
at the end of each time period:............... $13 $40 $69 $152
--- --- --- ----
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than each Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of each Fund
bear directly or indirectly.
For more information with respect to the expenses of each Fund 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>
European Equity Fund
---------------------------------------------------------------
For the years ended October 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $35.02 $31.95 $31.82 $31.17 $27.15 $25.35 $25.00
Income from investment operations:
Net investment income....................... 0.39 0.38(1) 0.45 0.39 0.21 0.29 0.31
Net realized and unrealized gain............ 5.29 4.08 2.09 1.80 6.09 1.74 0.04
Less dividends and distributions:
From net investment income.................. (0.41) -- -- (0.25) (0.36) (0.23) --
From net realized gains..................... (2.27) (1.39) (2.41) (1.29) (1.91) -- --
In excess of net realized gains............. -- -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year................... $38.02 $35.02 $31.95 $31.82 $31.17 $27.15 $25.35
====== ====== ====== ====== ====== ====== ======
Total return................................... 17.28% 14.63% 9.42% 7.35% 24.82% 7.87% 1.60%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)..... $154,179 $146,350 $116,955 $110,632 $88,860 $27,426 $14,231
Expenses as a percentage of average net assets:
Expenses paid by Fund........................ 1.32% 1.23% 1.24% 1.37% 1.50% 1.50% 1.50%
Expenses paid by commissions(2).............. 0.01% 0.01% 0.05% n/a n/a n/a n/a
Expense offset arrangements.................. 1.03% 0.09% 0.14% n/a n/a n/a n/a
------ ------ ------ ------ ------ ------ ------
Total expenses............................ 1.36% 1.33% 1.43% 1.37% 1.50% 1.50% 1.50%
Ratio of net investment income to average
net assets.................................. 1.02% 1.16% 1.55% 1.30% 1.28% 1.71% 1.54%
Portfolio turnover rate........................ 82% 42% 72% 124% 37% 50% 58%
Average commission rate paid per share(3)...... $0.0062 $0.0212 $0.0216 -- -- -- --
</TABLE>
- ----------
(1) Calculated using average shares outstanding for the year.
(2) A portion of the Fund's securities transactions are directed 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.
(3) Most foreign securities markets do not charge commissions based on a rate
per share but as a percentage of the principal value of the transaction.
As a result, the above rate is not indicative of the commission
arrangements currently in effect.
Further information about performance of the Funds is contained in the
Funds' annual report to shareholders which may be obtained without charge.
4
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Pacific Basin Equity Fund
---------------------------------------------------------------
For the years ended October 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $30.19 $29.88 $39.85 $39.87 $27.53 $27.65 $25.00
Income from investment operations:
Net investment income....................... 0.00(1,2) 0.051 0.11 0.14 0.14 0.12 0.10
Net realized and unrealized gain (loss)..... (4.69) 1.62 (4.50) 1.26 13.18 0.33 2.55
Less dividends and distributions:
From net investment income.................. (0.00)(2) (0.86) (0,00)2 (0.14) (0.02) (0.18) --
In excess of net investment income.......... (0.25) (0.50) -- -- -- -- --
From net realized gains..................... (0.28) -- (5.58) (1.28) (0.96) (0.39) --
In excess of net realized gains............. (0.45) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year................... $24.52 $30.19 $29.88 $39.85 $39.87 $27.53 $27.65
====== ====== ====== ====== ====== ====== ======
Total return................................... (16.03)% 5.65% (10.62)% 3.48% 50.02% 1.68% 10.68%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)..... $102,306 $150,685 $114,932 $120,469 $92,863 $31,250 $20,492
Expenses as a percentage of average net assets:
Expenses paid by Fund........................ 1.19% 1.13% 1.24% 1.29% 1.50% 1.50% 1.50%
Expenses paid by commissions(4).............. 0.01% 0.01% 0.05% n/a n/a n/a n/a
Expense offset arrangements.................. 0.06% 0.16% 0.14% n/a n/a n/a n/a
------ ------ ------ ------ ------ ------ ------
Total expenses............................ 1.26% 1.30% 1.43% 1.29% 1.50% 1.50% 1.50%
Ratio of net investment income to
average net assets.......................... 0.00%(2) 0.16% 0.53% 0.39% 0.62% 0.43% 0.64%
Portfolio turnover rate........................ 63% 58% 82% 86% 79% 84% 56%
Average commission rate paid per share(3)...... $0.0195 $0.0149 $0.0092 -- -- -- --
</TABLE>
- ----------
(1) Calculated using average shares outstanding for the year.
(2) Less than $0.01 per share.
(3) Most foreign securities markets do not charge commissions based on a rate
per share but as a percentage of the principal value of the transaction.
As a result, the above rate is not indicative of the commission
arrangements currently in effect.
(4) A portion of the Fund's securities transactions are directed 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.
Further information about performance of each Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The investment objective of each Fund is to provide investors with
long-term maximization of total return, primarily through capital appreciation.
The investment objective of each Fund is a fundamental policy and may be
changed only with the approval of the holders of a "majority of that Fund's
outstanding voting securities" (as defined in the 1940 Act). (See "Additional
Information" in this Prospectus.) However, the investment policies of each Fund
as described below are not fundamental and may be changed without such approval.
The assets of the European Equity Fund under normal circumstances are
fully invested in equity securities of companies based in the European Economic
Community (Germany, France, Italy, United Kingdom, Spain, Netherlands, Belgium,
Denmark, Greece, Portugal, Ireland, Luxembourg), as well as Switzerland,
Austria, Norway, Sweden, Finland, Turkey, the Czech Republic, Slovakia, Hungary,
Poland and Romania. The following table is a comparison of market
capitalization, Gross Domestic Product (GDP) and population of European
countries.
EUROPEAN STATISTICS
<TABLE>
<CAPTION>
Market Gross Domestic
Capitalization Product Population
---------------------- -------------------- -----------------
Dollars % of Dollars % of % of
(Billions) Total* (Billions) Total* (Millions) Total*
------- ----- -------- ----- -------- -----
EUROPEAN UNION
- --------------
<S> <C> <C> <C> <C> <C> <C>
UNITED KINGDOM ................. 1,936 33.7 856 9.3 58.3 11.0
GERMANY......................... 770 13.4 2,353 25.7 81.6 15.5
FRANCE ......................... 623 10.8 1,539 16.8 58.4 11.0
NETHERLANDS .................... 506 8.8 393 4.3 15.5 2.9
ITALY .......................... 317 5.5 1,249 13.6 57.4 10.9
SWEDEN ......................... 226 3.9 250 2.7 8.8 1.7
SPAIN .......................... 226 3.9 581 6.3 39.3 7.4
BELGIUM ........................ 140 2.4 269 2.9 10.1 1.9
DENMARK......................... 83 1.4 174 1.9 5.3 1.0
FINLAND......................... 67 1.2 124 1.4 5.1 1.0
PORTUGAL........................ 31 0.5 216 2.4 8.5 1.6
IRELAND......................... 43 0.7 64 0.7 3.3 0.6
AUSTRIA......................... 51 0.9 107 1.2 9.9 1.9
GREECE.......................... 28 0.5 108 1.2 10.5 2.0
LUXEMBOURG...................... 8 0.1 17 0.2 0.4 0.1
----- ----- ----- ----- ----- -----
SUBTOTAL...................... 5,055 88.0 8,300 90.6 372.7 70.5
OTHER WESTERN EUROPE
- --------------------
SWITZERLAND..................... 555 9.7 295 3.2 7.1 1.3
NORWAY.......................... 54 0.9 158 1.7 4.4 0.8
TURKEY......................... 50 0.9 176 1.9 62.7 11.9
----- ----- ----- ----- ----- -----
SUBTOTAL...................... 659 11.5 629 6.9 74.2 14.0
----- ----- ----- ----- ----- -----
WESTERN EUROPE TOTAL.............. 5,714 99.5 8,929 97.8 447.0 85.5
EASTERN EUROPE
- --------------
CZECH REPUBLIC.................. 14 0.2 52 0.6 10.3 1.9
HUNGARY......................... 9 0.2 36 0.4 10.2 1.9
POLAND.......................... 7 0.1 106 1.2 38.6 7.3
ROMANIA......................... 1 0.0 36 0.4 22.6 4.3
----- ----- ----- ----- ----- -----
SUBTOTAL...................... 31 0.5 230 2.5 82 15.5
----- ----- ----- ----- ----- -----
EUROPE TOTAL...................... 5,745 100.0 9,159 100.0 528.6 100.0
===== ===== ===== ===== ===== =====
Sources: Market Capitalization: Datastream (as of December 1997) and
International Finance Corporation (November 1997)
GDP/Population: International Monetary Fund: International Financial
Statistics (February 1998).
</TABLE>
- ----------
* Figures may not add due to rounding differences.
6
<PAGE>
The assets of the Pacific Basin Equity Fund under normal circumstances are
fully invested in equity securities of companies based in Pacific Basin
countries, including Japan, Hong Kong, Australia, Malaysia, Singapore, South
Korea, Taiwan, Thailand, India, Philippines, Indonesia, New Zealand, China,
Pakistan, Sri Lanka and Bangladesh. The following table is a comparison of
market capitalization, GDP and population of Pacific Basin countries.
PACIFIC BASIN STATISTICS
<TABLE>
<CAPTION>
Market Gross Domestic
Capitalization Product Population
---------------------- -------------------- -----------------
Dollars % of Dollars % of % of
(Billions) Total* (Billions) Total* (Millions) Total*
------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
JAPAN............................. 2,217 64.3 4,600 57.1 125.8 4.2
HONG KONG......................... 326 9.5 154 1.9 6.3 0.2
AUSTRALIA......................... 246 7.1 638 7.9 18.3 0.6
TAIWAN............................ 178 5.2 261 3.2 21.3 0.7
INDIA............................. 132 3.8 310 3.8 935.7 31.3
SINGAPORE......................... 92 2.7 94 1.2 3.0 0.1
MALAYSIA ......................... 61 1.8 99 1.2 20.7 0.7
THAILAND.......................... 55 1.6 165 2.0 59.4 2.0
INDONESIA......................... 40 1.2 227 2.8 193.8 6.5
NEW ZEALAND....................... 29 0.8 139 1.7 3.6 0.1
KOREA............................. 27 0.8 484 6.0 45.5 1.5
PHILLIPINES....................... 23 0.7 84 1.0 70.3 2.3
PAKISTAN.......................... 14 0.4 60 0.7 129.8 4.3
CHINA............................. 5 0.1 701 8.7 1,211.5 40.8
BANGLADESH........................ 1 0.0 31 0.4 120.4 4.0
SRI LANKA......................... 2 0.1 14 0.2 18.4 0.6
----- ----- ----- ----- ------- -----
TOTAL........................... 3,448 100.0 8,061 100.0 2,993.8 100.0
===== ===== ===== ===== ======= =====
</TABLE>
Sources: Market Capitalization: Datastream (as of December 1997) and
International Finance Corporation (November 1997).
GDP/Population: International Monetary Fund: International Financial
Statistics (February 1998).
- ----------
* Figures may not add due to rounding differences.
Although the assets of each of the Funds are expected to be invested
primarily in common stocks, other securities with equity characteristics may be
purchased, including securities convertible into common stock, rights and
warrants. These equity securities may be purchased directly or in the form of
American Depository Receipts, Global Depository Receipts or other similar
securities representing securities of foreign-based companies. Although each of
the Funds invests primarily in equity securities which are traded on national
securities exchanges, those which are traded in over-the-counter markets may
also be purchased for each of the Funds. (See "Investment Restrictions".) The
Funds may invest in securities of appropriate investment companies in order to
obtain participation in markets which restrict foreign investment or to obtain
more favorable investment terms for the Funds.
7
<PAGE>
The Investment Adviser allocates investments among various countries based
upon the economic environment, liquidity conditions, valuation levels, expected
earnings growth, government policies and political stability. In response to
changes or anticipated changes in these criteria, a particular country's
representation in a Fund's portfolio is increased, decreased or eliminated. As a
result of applying these criteria a Fund's assets are allocated among countries
in a manner which does not reflect the relative size or valuation of a country's
capital market or a country's relative GDP or population.
In constructing the portfolio of securities of each Fund, emphasis is
placed on the equity securities of larger companies with strong longer term
fundamentals such as leading industry position, effective management,
competitive products and services, high or improving return on investment and a
sound financial structure. Selection of individual equities is the product of a
disciplined process which systematically evaluates growth expectations relative
to price levels.
The Corporation may, in the future, seek to achieve each 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.
Risk Factors
Foreign Investments. Investing in equity securities of foreign-based
companies involves risks not typically associated with investing in equity
securities of companies organized and operated in the United States.
The value of the investments of the Funds may be adversely affected by
changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations.
Changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of
portfolio securities and could favorably or unfavorably affect a Fund's
operations. The economies of individual foreign nations differ from the U.S.
economy, whether favorably or unfavorably, in areas such as growth of GDP, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. It may be more difficult to obtain and enforce a judgment
against a foreign company. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
on foreign investments as compared to dividends and interest paid to the Funds
by domestic companies.
In general, less information is publicly available with respect to
foreign-based companies than is available with respect to U.S. companies. Most
foreign-based companies are also not subject to the uniform accounting and
financial reporting requirements applicable to companies based in the United
States.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the investments of each
Fund are less liquid and their prices are more volatile than comparable
investments in securities of U.S. companies. Moreover, the settlement periods
for foreign securities, which are often longer than those for securities of U.S.
companies, may affect portfolio liquidity. In buying and selling securities on
foreign exchanges, fixed commissions are normally paid that are generally higher
than the negotiated commissions charged in the United States. In addition, there
is generally less government supervision and regulation of securities exchanges,
brokers and companies in foreign countries than in the United States.
The foreign investments made for either Fund are made in compliance with
the currency regulations and tax laws of the United States and foreign
governments. There may also be foreign government regulations and laws which
restrict the amounts and types of foreign investments.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and each Fund holds various foreign currencies
from time to time, the value of the net
8
<PAGE>
assets of each Fund as measured in U.S. dollars is affected favorably or
unfavorably by changes in exchange rates. Each Fund also incurs costs in
connection with conversion between various currencies.
Special Risks Concerning Eastern Europe and Developing Countries. The
European Equity Fund may invest in securities of issuers based in Eastern Europe
and in developing countries. The Pacific Basin Equity Fund may invest a
substantial portion of its assets in the securities of issuers based in
developing countries.
Investments in securities of issuers in developing countries may involve a
high degree of risk and many may be considered speculative. These investments
carry all of the risks of investing in securities of foreign issuers outlined in
this section to a heightened degree. These heightened risks include (i) greater
risks of expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (ii) the small current size of the markets for
securities of issuers in developing countries and the currently low or
non-existent volume of trading, resulting in lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the Funds'
investment opportunities including restrictions on investing in issuers or
industries deemed sensitive to relevant national interests; and (iv) the absence
of developed legal structures governing private or foreign investment and
private property.
Hedging Strategies
Subject to applicable laws and regulations and solely as a hedge against
changes in the market value of portfolio securities or securities intended to be
purchased, futures contracts on stock indexes may be entered into for a Fund.
(See Appendix on page 22 for more details.) For the same purpose, put and call
options on stocks, stock indexes and currencies may be purchased for a Fund,
although the current intention is not to do so in such a manner that each put
and call option type would put more than 5% of a Fund's net assets at risk.
Over-the-counter options ("OTC Options") purchased are treated as not
readily marketable. (See "Investment Restrictions".)
The Investment Adviser may, on behalf of each Fund, enter into forward
foreign exchange contracts in order to protect the dollar value of all
investments in securities denominated in foreign currencies. The precise
matching of the forward contract amounts and the value of the securities
involved is not always possible because the future value of such securities in
foreign currencies changes as a consequence of market movements in the value of
such securities between the date the forward contract is entered into and the
date it matures.
Portfolio Brokerage
The portfolio of each of the Funds is managed actively in pursuit of its
investment objective. Securities are not traded for short-term profits but, when
circumstances warrant, securities are sold without regard to the length of time
held. A 100% annual turnover rate would occur, for example, if all securities in
a Fund's portfolio (excluding short-term obligations) were replaced once in a
period of one year. The portfolio turnover rate for the European Equity Fund was
42% and 82% for the fiscal years ended October 31, 1996 and 1997, respectively.
For the same time periods, the portfolio turnover rate for the Pacific Basin
Equity Fund was 58% and 63%, respectively. The amount of brokerage commissions
and taxes on realized capital gains to be borne by the shareholders of a Fund
tend to increase as the level of portfolio activity increases.
In effecting securities transactions for a Fund, the Investment Adviser
seeks to obtain the best price and execution of orders. In selecting a broker,
the Investment Adviser considers a number of factors including: the broker's
ability to execute orders without disturbing the market price; the broker's
reliability for prompt, accurate confirmations and on-time delivery of
securities; the broker's financial condition and responsibility; the research
and other 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.
9
<PAGE>
The Investment Adviser may direct a portion of a Fund's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from that Fund to pay other unaffiliated service
providers on behalf of that Fund for services provided for which that Fund would
otherwise be obligated to pay. Such commissions paid by a Fund are at the same
rate paid to other brokers for effecting similar transactions in listed equity
securities.
On those occasions when Brown Brothers Harriman & Co. deems the purchase
or sale of a security to be in the best interests of a 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 that 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
Funds. In some instances, this procedure might adversely affect a Fund.
Other Investment Techniques
Short-Term Investments. The assets of each Fund may be invested in
non-U.S. dollar denominated and U.S. dollar denominated bank deposits and
short-term instruments. Cash is held for each Fund in demand deposit accounts
with the Funds' custodian bank.
Government Securities. The assets of each Fund may be invested in
securities issued by the U.S. Government or sovereign foreign governments, their
agencies or instrumentalities. These securities include notes and bonds, zero
coupon bonds and stripped principal and interest securities.
Restricted Securities. Securities that have legal or contractual
restrictions on their resale may be acquired for a 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 for a Fund 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 a Fund are permitted. These loans must be secured continuously by
cash or equivalent collateral or by an irrevocable letter of credit in favor of
a 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 a Fund, that Fund's
income can be increased by that Fund's continuing to receive income on the
loaned securities as well as by the opportunity for that 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
that Fund and its shareholders.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for a 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 a Fund until delivery and payment take
place. At the time the commitment to purchase securities for a Fund on a
when-issued or delayed delivery basis is made, the transaction is recorded and
thereafter the value of such securities is reflected each day in determining
that 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, a Fund could,
as with the disposition of any other portfolio obligation, incur a
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<PAGE>
gain or loss due to market fluctuation. When-issued or delayed delivery
commitments for a Fund may not be entered into if such commitments exceed in the
aggregate 15% of the market value of that Fund's total assets, less liabilities
other than the obligations created by when-issued or delayed delivery
commitments.
Foreign Currency Exchange Transactions. Because securities denominated in
currencies other than the U.S. dollar are bought and sold for the Funds, and
interest, dividends and sale proceeds are received by the Funds in currencies
other than the U.S. dollar, foreign currency exchange transactions from time to
time are entered into for the Funds to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar.
Foreign currency exchange transactions are agreements to exchange currencies at
a specific rate either for settlement two days thereafter (i.e., spot market or
spot contracts) or for settlement on a future date (i.e., forward contracts).
Investment Company Securities. Subject to applicable statutory and
regulatory limitations, the assets of each Fund may be invested in shares of
other investment companies. Under the 1940 Act, assets of either Fund may be
invested in shares of other investment companies in connection with a merger,
consolidation, acquisition or reorganization or if immediately after such
investment (i) 10% or less of the market value of that Fund's total assets would
be so invested, (ii) 5% or less of the market value of that Fund's total assets
would be invested in the shares of any one such company, and (iii) 3% or less of
the total outstanding voting stock of any other investment company would be
owned by that Fund. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Funds includes a listing
of the specific investment restrictions which govern each 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 a Fund's outstanding voting securities" (as defined in the 1940 Act) (see
"Additional Information" in this Prospectus).
As a fundamental policy, money is not borrowed for a Fund in an amount in
excess of 33 1/3% of the assets of that 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.
As a non-fundamental policy, under normal circumstances, at least 65% of
the value of the total assets of each Fund is invested in equity securities of
companies based in countries in which that Fund may invest. For these purposes,
equity securities are defined as common stock, securities convertible into
common stock, rights and warrants, and include securities purchased directly and
in the form of American Depository Receipts, Global Depository Receipts or other
similar securities representing common stock of foreign-based companies.
The European Equity Fund and the Pacific Basin Equity Fund are each
classified as "non-diversified" under the 1940 Act, which means that neither of
these Funds is limited by the 1940 Act with respect to the portion of its assets
which may be invested in securities of a single issuer (although certain
diversification requirements are imposed by the Internal Revenue Code of 1986,
as amended). The possible assumption of large positions in the securities of a
small number of issuers may cause the performance of each of these Funds to
fluctuate to a greater extent than that of a diversified investment company as a
result of changes in the financial condition or in the market's assessment of
the issuers.
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<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 16)
or a Financial Intermediary (see page 15) may place purchase orders for Fund
shares with the Corporation through that Eligible Institution or Financial
Intermediary which holds such shares in its name on behalf of that customer
pursuant to arrangements made between that customer and that Eligible
Institution or Financial Intermediary. Each Eligible Institution and each
Financial Intermediary may establish and amend from time to time a minimum
initial and a minimum subsequent purchase requirement for its customers. Each
Eligible Institution or Financial Intermediary arranges payment for Fund shares
on behalf of its customers. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the purchase of Fund shares.
An investor who does not have an account with an Eligible Institution or a
Financial Intermediary must place purchase orders for Fund shares with the
Corporation through the 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 on a date established by the 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
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<PAGE>
are paid by the Corporation directly to the shareholder in "available" funds
generally on the next business day after the redemption request is executed, and
in any event within seven days.
Redemptions By the Corporation
The Funds' Shareholder Servicing Agent (see page 16), each Eligible
Institution and each Financial Intermediary (see page 16) may establish and
amend from time to time for their respective customers a minimum account size.
If the value of a shareholder's holdings in a Fund falls below that amount
because of a redemption of shares, the shareholder's remaining shares may be
redeemed. If such remaining shares are to be redeemed, the shareholder is so
notified and is allowed 60 days to make an additional investment to enable the
shareholder to meet the minimum requirement before the redemption is processed.
Brown Brothers Harriman & Co. as the Funds' Shareholder Servicing Agent, has
established a minimum account size of $25,000.
Further Redemption Information
In the event a shareholder redeems all shares held in a Fund, future
purchases of shares of that Fund by such shareholder would be subject to that
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares. Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
An investor should be aware that redemptions from a Fund may not be
processed if a completed account application with a certified taxpayer
identification number has not been received.
The Corporation has reserved the right to pay the amount of a redemption
from a Fund, either totally or partially, by a distribution in kind of
securities (instead of cash) from that Fund. (See "Net Asset Value; Redemption
in Kind" in the Statement of Additional Information.)
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed for up to
seven days and for such other periods as the 1940 Act may permit. (See
"Additional Information" in the Statement of Additional Information.)
MANAGEMENT OF THE CORPORATION
================================================================================
Directors and Officers
The Directors, in addition to supervising the actions of the
Administrator, Investment Adviser and Distributor of each Fund, as set forth
below, decide upon matters of general policy. Because of the services rendered
to the Corporation 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 Funds 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
Retired, 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 each Fund is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The
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<PAGE>
firm is subject to examination and regulation by the Superintendent of Banks of
the State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to each Fund. Subject to the general supervision of the
Corporation's Directors, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions for each Fund, places the purchase and sale orders for the
portfolio transactions of each Fund, and generally manages each 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,
1997, it managed total assets of approximately $25 billion.
Each Fund's portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. John A. Nielsen, Ms. Camille M. Kelleher, Mr. A.
Edward Allinson, Mr. G. Scott Clemons, Mr. Paul J. Fraker and Mr. Ben Kottler.
Mr. Nielsen holds a B.A. from Bucknell University, a M.B.A. from Columbia
University and is a Chartered Financial Analyst. He joined Brown Brothers
Harriman & Co. in 1968. Ms. Kelleher holds a B.A. from Barnard College and a
M.B.A. from Columbia University. She joined Brown Brothers Harriman & Co. in
1984. Mr. Allinson holds a B.A. and a M.B.A. from the University of
Pennsylvania. He joined Brown Brothers Harriman & Co. in 1991. Mr. Clemons holds
a A.B. from Princeton University. He joined Brown Brothers Harriman & Co. in
1990. Mr Fraker holds a B.A. from Carleton College and a M.A. from Johns Hopkins
University. He joined Brown Brothers Harriman & Co. in 1996. Mr. Kottler holds a
B.A. from Durham University. He joined Brown Brothers Harriman & Co. in 1996.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreements, Brown Brothers Harriman & Co. receives from each
Fund an annual fee, computed daily and payable monthly, equal to 0.65% of the
average daily net assets of each Fund. Brown Brothers Harriman & Co. also
receives an annual administration fee from each Fund equal to 0.15% of each
Fund's average daily net assets and an annual shareholder servicing/eligible
institution fee from each Fund equal to 0.25% of the average daily net assets of
each Fund represented by shares owned during the period by customers for whom
Brown Brothers Harriman & Co. is the holder or agent of record.
The investment advisory services of Brown Brothers Harriman & Co. to each
Fund are not exclusive under the terms of the Investment Advisory Agreements.
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 Corporation or any investment company in which a
series of the Corporation invests all of its assets and Brown Brothers Harriman
& Co. Termination of the agreement would require the Corporation to change its
name and the name of each Fund to eliminate all reference to "59 Wall Street".
Pursuant to license agreements between Brown Brothers Harriman & Co. and
each of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
"Licensee"), dated June 22, 1993 and June 8, 1990, respectively, each Licensee
may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co.
does not terminate the respective license agreement, which would require the
Licensee to change its name to eliminate all reference to "59 Wall Street".
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<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 Funds' Custodian, Transfer
and Dividend Disbursing Agent; (iii) provides the Corporation with adequate
office space and communications and other facilities; and (iv) prepares and/or
arranges for the preparation, but does not pay for, the periodic updating of the
Corporation's registration statement and each Fund's prospectus, the printing of
such documents for the purpose of filings with the Securities and Exchange
Commission and state securities administrators, and the preparation of tax
returns for each Fund and reports to each Fund's shareholders and the Securities
and Exchange Commission.
For the services rendered to the Corporation and related expenses borne by
Brown Brothers Harriman & Co., as Administrator of the Corporation, Brown
Brothers Harriman & Co. receives from each Fund an annual fee, computed daily
and payable monthly, equal to 0.15% of that 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 21 Milk Street,
Boston, Massachusetts 02109. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Corporation, participation in
the preparation of documents required for compliance by the Corporation with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Directors and shareholders of the Corporation, and other
functions that would otherwise be performed by the Administrator as set forth
above. For performing such subadministrative services, 59 Wall Street
Administrators receives such compensation as is from time to time agreed upon
but not in excess of the amount paid to the Administrator from the Funds.
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 Funds, among other things: answers inquiries from shareholders
of and prospective investors in the Funds regarding account status and history,
the manner in which purchases and redemptions of Fund shares may be effected and
certain other matters pertaining to the Funds; assists shareholders of and
prospective investors in the Funds in designating and changing dividend options,
account designations and addresses; and provides such other related services as
the Corporation or a shareholder of or prospective investor in a Fund may
reasonably request. For these services, Brown Brothers Harriman & Co. receives
from each Fund an annual fee, computed daily and payable monthly, equal to 0.25%
of that Fund's average daily net assets represented by shares owned during the
period for which payment was being made by shareholders who did not hold their
shares with an Eligible Institution.
Financial Intermediaries
From time to time, the Funds' Shareholder Servicing Agent enters into
contracts with banks, brokers
15
<PAGE>
and other financial intermediaries ("Financial Intermediaries") pursuant to
which a customer of the Financial Intermediary may place purchase orders for
Fund shares through that Financial Intermediary which holds such shares in its
name on behalf of that customer. Pursuant to such contract, each Financial
Intermediary as agent with respect to shareholders of and prospective investors
in the Funds who are customers of that Financial Intermediary, among other
things: provides necessary personnel and facilities to establish and maintain
certain shareholder accounts and records enabling it to hold, as agent, its
customers' shares in its name or its nominee name on the shareholder records of
the Corporation; assists in processing purchase and redemption transactions;
arranges for the wiring of funds; transmits and receives funds in connection
with customer orders to purchase or redeem shares of the Funds; provides
periodic statements showing a customer's account balance and, to the extent
practicable, integrates such information with information concerning other
customer transactions otherwise effected with or through it; furnishes, either
separately or on an integrated basis with other reports sent to a customer,
monthly and annual statements and confirmations of all purchases and redemptions
of Fund shares in a customer's account; transmits proxy statements, annual
reports, updated prospectuses and other communications from the Corporation to
its customers; and receives, tabulates and transmits to the Corporation proxies
executed by its customers with respect to meetings of shareholders of the Funds.
For these services, the Financial Intermediary receives such fees from the
Shareholder Servicing Agent as may be agreed upon from time to time between the
Shareholder Servicing Agent and such Financial Intermediary.
Eligible Institutions
The Corporation enters into eligible institution agreements with banks,
brokers and other financial institutions pursuant to which each financial
institution, as agent for the Corporation with respect to shareholders of and
prospective investors in the Funds who are customers with that financial
institution, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Funds; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Funds. For these services, each financial institution
receives from each Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of that Funds average daily net assets represented by shares owned
during the period for which payment was being made by customers for whom the
financial institution was the holder or agent of record.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Fund. Its office is located at 21 Milk Street, Boston, Massachusetts 02109. 59
Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
each Fund's prospectus as required under federal and state securities laws. See
"Distributor" in the Statement of Additional Information.
59 Wall Street Distributors holds itself available to receive purchase
orders for Fund shares.
16
<PAGE>
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 each Fund.
As Custodian, it is responsible for maintaining books and records of each
Fund's portfolio transactions and holding each Fund's portfolio securities and
cash pursuant to a custodian agreement with the Corporation. Cash is held for
each Fund in demand deposit accounts at the Custodian. State Street employs
subcustodians, each of which has been approved by the Board of Directors in
accordance with the regulations of the Securities and Exchange Commission, for
the purpose of providing custodial services for foreign assets held outside the
United States for each Fund. The Board of Directors monitors the activities of
the Custodian and each subcustodian. Subject to the supervision of the
Administrator, the Custodian maintains each Fund's accounting and portfolio
transaction records and for each day computes each Fund's net asset value. As
Transfer and Dividend Disbursing Agent it is responsible for maintaining the
books and records detailing the ownership of each Fund's shares.
Independent Auditors
Deloitte & Touche LLP are the independent auditors for the Funds.
NET ASSET VALUE
================================================================================
Each Fund's net asset value per share is determined once daily at 4:00
P.M., New York time on each day the New York Stock Exchange is open for regular
trading.
The determination of each Fund's net asset value per share is made by
subtracting from the value of the total assets of a Fund the amount of its
liabilities and dividing the difference by the number of shares of that Fund
outstanding at the time the determination is made.
Values of assets in each 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 each Fund's net investment income and realized net
short-term capital gains in excess of net long-term capital losses ("Net
Income") is declared and paid to shareholders at least annually as a dividend,
and substantially all of each Fund's realized net long-term capital gains in
excess of net short-term capital losses is 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 in a given year to the extent necessary
to avoid the imposition of federal excise tax on a 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.
17
<PAGE>
TAXES
================================================================================
Each year, the Corporation intends to continue to qualify each Fund and
elect that each Fund be treated as a separate "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
the Funds are not subject to federal income taxes on its net income and realized
net long-term capital gains in excess of net short-term capital losses that are
distributed to its shareholders. A 4% non-deductible excise tax is imposed on a
Fund to the extent that certain distribution requirements for that Fund for each
calendar year are not met. The Corporation intends to continue to meet such
requirements.
Dividends are taxable to shareholders of a Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Dividends paid from the Funds are not eligible for the dividends-received
deduction allowed to corporate shareholders because the income of the Funds does
not consist of dividends paid by domestic corporations. Capital gains
distributions are taxable to shareholders as long-term capital gains, whether
paid in cash or reinvested in additional shares and regardless of the length of
time a particular shareholder has held Fund shares.
Any dividend or capital gains distribution has the effect of reducing the
net asset value of Fund shares held by a shareholder by the same amount as the
dividend or capital gains distribution. If the net asset value of the shares
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 a Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
The Funds may be subject to foreign withholding taxes with respect to
income received from sources within foreign countries. So long as more than 50%
in value of a Fund's total assets at the close of any fiscal year consists of
stock or securities of foreign corporations, at the election of the Corporation
any such foreign income taxes paid by a Fund may be treated as paid directly by
its shareholders. The Corporation makes such an election only if it deems it to
be in the best interest of that Fund's shareholders and notifies shareholders in
writing each year if it makes the election and of the amount of foreign income
taxes, if any, to be treated as paid by the shareholders. If the Corporation
makes the election, each Fund shareholder would be required in computing federal
income tax liability to include in income that shareholder's proportionate share
of the amount of foreign income taxes paid by that Fund and would be entitled to
claim either a credit (which is subject to certain limitations), or, if
deductions are itemized, a deduction for that shareholder's share of the foreign
income taxes paid by that Fund. (No deduction is permitted in computing
alternative minimum tax liability.) Certain entities, including Corporations
formed as part of corporate pension or profit-sharing plans and certain
charitable and other organizations described in Section 501 (c) of the Code,
that are generally exempt from federal income taxes may not receive any benefit
from the election by the Corporation to "pass through" foreign income taxes to a
Fund's shareholders.
Under U.S. Treasury regulations, the Corporation and each Eligible
Institution are required to withhold and remit to the U.S. Treasury a portion
(31%) of dividends and capital gains distributions on the accounts of those
shareholders who fail to provide a correct taxpayer identification number
(Social Security Number for individuals) or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
18
<PAGE>
State and Local Taxes
The treatment of each Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
Each Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in a Fund
since alternative investments are available which would not be subject to United
States withholding tax.
Other Information
Annual notification as to the tax status of capital gains distributions,
if any, is provided to shareholders shortly after October 31, the end of each
Fund's fiscal year. Additional tax information is mailed to shareholders in
January.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
================================================================================
The Corporation is an open-end management investment company organized on
July 16, 1990, as a corporation under the laws of the State of Maryland. Its
offices are located at 21 Milk Street, Boston, Massachusetts 02109; 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 as shares of the European Equity Fund and 25,000,000 as shares of the
Pacific Basin Equity 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 Funds.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of each Fund are entitled to a full vote for each full share
held and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
The rights of redemption are described elsewhere herein. Shares are fully paid
and nonassessable by the Corporation. It is the intention of the Corporation not
to hold meetings of shareholders annually. The Directors 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 a Fund outstanding
19
<PAGE>
and entitled to vote thereat shall constitute a quorum at all meetings of
shareholders of that Fund, except as otherwise required by applicable law. The
By-laws further provide that all questions shall be decided by a majority of the
votes cast at any such meeting at which a quorum is present, except as otherwise
required by applicable law.
The Corporation's Articles of Incorporation provide that, at any meeting
of shareholders of a Fund, each Eligible Institution may vote any shares as to
which that Eligible Institution is the agent of record and which are otherwise
not represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by holders of all shares otherwise represented at
the meeting in person or by proxy as to which that Eligible Institution is the
agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of a Fund's outstanding
voting securities" (as defined in the 1940 Act) currently means the vote of (i)
67% or more of that Fund's shares present at a meeting, if the holders of more
than 50% of the outstanding voting securities of that Fund are present in person
or represented by proxy; or (ii) more than 50% of that 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.
Each Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include a Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the MSCI-Europe and MSCI-Pacific) 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. A Fund's investment results as used in such communications are calculated
on a total rate of return basis in the manner set forth below. From time to
time, fund rankings from various sources, such as Micropal, may be quoted.
Period and average annualized "total rates of return" may be provided in
such communications. The "total rate of return" refers to the change in the
value of an investment in a Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
of return may be annualized. An annualized total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a one year period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return is slightly
higher than a period total rate of return if the period is shorter than one
year, because of the assumed reinvestment.
This Prospectus omits certain of the information contained in the
Statement of Additional Information and the Registration Statement filed with
the Securities and Exchange Commission. The Statement of Additional Information
may be obtained from 59 Wall Street Distributors without charge and the
Registration Statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed by the Rules and Regulations of
the Commission.
20
<PAGE>
APPENDIX--FUTURES CONTRACTS
================================================================================
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 a Fund. Futures
contracts on foreign currencies may also be entered into for each Fund, although
in each case the current intention is not to do so.
In order to assure that a Fund is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that each 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 Funds'
assets.
Futures Contracts provided for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for a Fund
or adversely affect the prices of securities which are intended to be purchased
at a later date for a 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 position taken for a Fund would rise in value by an
amount which approximately offsets the decline in value of the portion of that
Fund's investments that is being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized. There is also the risk of a potential lack
of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging
technique depends upon the extent to which price movements in the portion of the
securities portfolio of a Fund 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 for a 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. The incorrect
choice of an index or an incorrect assessment of future price movements over the
shore term in the overall stock market may result in poorer overall performance
than if a Futures Contract had not been purchased. Brokerage costs are incurred
in entering into and maintaining Futures Contracts.
When a Fund enters into a Futures Contract, it is initially required to
deposit with that Fund's 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. Initially margin requirements are established by the
exchanges on which Futures Contracts trade and may, from time to time, change.
In addition, brokers may establish margin deposit requirements in excess of
those required by the exchanges. Initial margin in futures transactions is
different from margin in securities transactions in that initial margin does not
involve the borrowing of funds by a broker's client but is, rather, a good faith
deposit on the Futures Contract which will be returned upon the proper
termination of the Futures Contract. The margin deposits made are marked to
market daily and a Fund may be required to make subsequent deposits of cash or
eligible securities called "variation margin", with that Fund's futures contract
clearing broker, which are reflective of price fluctuations in the Futures
Contract.
Currently, investments in Futures Contracts on non-U.S. stock indexes by
U.S. investors, such as the Funds, can be purchased on such non-U.S. stock
indexes as the Osaka Stock Exchange (OSE), Tokyo Stock
21
<PAGE>
Exchange (TSE), Hong Kong Futures Exchange (HKFE), Singapore International
Monetary Exchange (SIMEX), London International Financial Futures and Options
Exchange (LIFFE), Marche a Terme International de France (MATIF), Sydney Futures
Exchange Ltd. (SFE), Meff Sociedad Rectora de Productos Financieros Derivados de
Renta Variable, S.A. (MEFF RENTA VARIABLE), Deutsche Terminborse (DTB), Italian
Stock Exchange (ISE), The Amsterdam Exchanges (AE), and London
Securities and Derivatives Exchange, Ltd. (OMLX).
Exchanges may limit the amount by which the price of a Futures Contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
Another risk which may arise in employing Futures Contracts to protect
against the price volatility of portfolio securities is that the prices of an
index subject to Futures Contracts (and thereby the Futures Contract prices) may
correlate imperfectly with the behavior of the cash prices of a Fund's portfolio
securities. Another such risk is that the price of the Futures Contract may not
move in tandem with the change in overall stock market prices against which that
Fund seeks a hedge.
22
<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.
21 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been authorized to give
any information or to make any representations, other than those
contained in this Prospectus and the Statement of Additional
Information, in connection with the offer contained in this
Prospectus, and if given or made, such other information or
representations must not be relied upon as having been authorized by
the Corporation or the Distributor. This Prospectus does not
constitute an offer by the Corporation or by the Distributor to sell
or the solicitation of an 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 EUROPEAN EQUITY FUND
THE 59 WALL STREET PACIFIC BASIN EQUITY FUND
6 St. James Avenue, Boston, Massachusetts 02116
===============================================================================
The 59 Wall Street European Equity Fund (the "European Equity Fund")
and The 59 Wall Street Pacific Basin Equity Fund (the "Pacific Basin Equity
Fund") (each a "Fund" and collectively the "Funds") are separate portfolios of
The 59 Wall Street Fund, Inc. (the "Corporation"), a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Each Fund is designed to enable investors to participate in the
opportunities available in foreign equity markets. The investment objective of
each Fund is to provide investors with long-term maximization of total return,
primarily through capital appreciation. There can be no assurance that a Fund's
investment objective will be achieved.
Brown Brothers Harriman & Co. is each Fund's investment adviser (the
"Investment Adviser"). This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated February
27, 1998, a copy of which may be obtained from the Corporation at the address
noted above.
Table of Contents
Cross-Reference to
Page in
Page Prospectus
Investment Objective and Policies . . . . . 2 6-11
Investment Restrictions . . . . . . . . 5 11
Directors and Officers . . . . . . . . . 8 14
Investment Adviser . . . . . . . . . . 11 14-15
Administrator . . . . . . . . . . . . 12 15-16
Distributor . . . . . . . . . . . . 12 17
Financial Intermediaries . . . . . . . . 15 15
Net Asset Value; Redemption in Kind . . . . 13 17-18
Computation of Performance . . . . . . . 14 20-21
Federal Taxes . . . . . . . . . . . . 15 18-19
Description of Shares . . . . . . . . . 18 19-20
Portfolio Transactions . . . . . . . . . 19 9-10
<PAGE>
Additional Information . . . . . . . . . 21 20-21
Financial Statements . . . . . . . . . 21 4-5
The date of this Statement of Additional Information is February
27, 1998.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of each 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.
Domestic Investments
The assets of the Funds are not invested in domestic securities (other
than short-term instruments), except temporarily when extraordinary
circumstances prevailing at the same time in a significant number of foreign
countries render investments in such countries inadvisable.
Options Contracts
Options on Stock. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for a Fund, although in each case the current
intention is not to do so in such a manner that more than 5% of a 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 a Fund at any time prior to the expiration of the
option which involves selling the option previously purchased.
Covered call options may also be sold (written) on stocks for a Fund,
although in each case the current intention is not to
4
<PAGE>
do so. A call option is "covered" if the writer owns the
underlying security.
Options on Stock Indexes. A stock index fluctuates with
changes in the market values of the stocks included in the index.
Examples of stock indexes are the Standard & Poor's 500 Stock Index (Chicago
Board of Options Exchange), the New York Stock Exchange Composite Index (New
York Stock Exchange), The Financial Times-Stock Exchange 100 (London Traded
Options Market), the Nikkei 225 Stock Average (Osaka Securities Exchange) and
Tokyo Stock Price Index (Tokyo Stock Exchange).
Options on stock indexes are generally similar to options on stock
except that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a fixed price ("strike price"), an option
on a stock index gives the holder the right to receive a cash "exercise
settlement amount" equal to (a) the amount, if any, by which the strike price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier". Receipt of this cash amount
depends upon the closing level of the stock index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the price of the option. The amount of cash received is equal to such difference
between the closing price of the index and the strike price of the option
expressed in U.S. dollars or a foreign currency, as the case may be, times a
specified multiple.
The effectiveness of purchasing stock index options as a hedging
technique depends upon the extent to which price movements in the portion of the
securities portfolio of a 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 a 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.
Options on Currencies. A call option on a currency gives the purchaser
of the option the right to buy the underlying currency at a fixed price, either
at any time during the option period (American style) or on the expiration date
(European style). Similarly, a put option gives the purchaser of the option the
right to sell the underlying currency at a fixed price, either at any time
during the option period or on the expiration date. To liquidate a put or call
option position, a "closing sale transaction" may be made for a Fund at any time
prior to the expiration of the option, such a transaction
5
<PAGE>
involves selling the option previously purchased. Options on currencies are
traded both on recognized exchanges (such as the Philadelphia Options Exchange)
and over-the counter.
The value of a currency option purchased for a Fund depends upon future
changes in the value of that currency before the expiration of the option.
Accordingly, the successful use of options on currencies for a Fund is subject
to the Investments Adviser's ability to predict future changes in the value of
currencies over the short term. Brokerage costs are incurred in the purchase of
currency options and an incorrect assessment of future changes in the value of
currencies may result in a poorer overall performance than if such a currency
had not been purchased.
Loans of Portfolio Securities
Securities of a Fund may be loaned if such loans are secured
continuously by cash or equivalent liquid short term securities as collateral or
by an irrevocable letter of credit in favor of that 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 a Fund any income accruing
thereon, and cash collateral may be invested for that 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 a Fund. Securities of a Fund are not
loaned to Brown Brothers Harriman & Co. or to any affiliate of the Corporation
or Brown Brothers Harriman & Co.
Short-Term Investments
Although it is intended that the assets of each Fund stay invested in
the securities described above and in the Prospectus to the extent practical in
light of that Fund's investment objective and long-term investment perspective,
a Fund's assets may be invested in short-term instruments to meet anticipated
expenses or for day-to-day operating purposes and when, in the
6
<PAGE>
Investment Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when a Fund experiences large cash inflows through issuance of new
shares or the sale of portfolio securities, and desirable equity securities that
are consistent with that Fund's investment objective are unavailable in
sufficient quantities, assets of that Fund may be held in short-term investments
for a limited time pending availability of such equity securities. Short-term
instruments consist of foreign and domestic: (i) short-term obligations of
sovereign governments, their agencies, instrumentalities, authorities or
political subdivisions; (ii) other short-term debt securities rated A or higher
by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("Standard & Poor's"), or if unrated are of comparable quality in the opinion of
the Investment Adviser; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. Time deposits with a maturity of more than seven days
are treated as not readily marketable. (See clause (vi) under the caption "State
and Federal Restrictions".) At the time a Fund's assets are invested in
commercial paper, bank obligations or repurchase agreements, the issuer must
have outstanding debt rated A or higher by Moody's or Standard & Poor's; the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of the
Investment Adviser. The assets may be invested in non-U.S. dollar denominated
and U.S. dollar denominated short-term instruments, including U.S. dollar
denominated repurchase agreements.
Repurchase Agreements. Repurchase agreements may be entered into for a
Fund only with a "primary dealer" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities. This is an agreement in which the
seller (the "Lender") of a security agrees to repurchase from a 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 a 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. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one week from the effective date of the repurchase
agreement. A 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 that
Fund in each agreement along with accrued interest. Payment for such
7
<PAGE>
securities is made for that Fund only upon physical delivery or evidence of book
entry transfer to the account of State Street Bank and Trust Company (the
"Custodian"). If the Lender defaults, a 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 a Fund may be delayed or limited in certain
circumstances.
INVESTMENT RESTRICTIONS
===============================================================================
Each 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 that Fund's outstanding voting securities" (as defined
in the 1940 Act). (See "Additional Information".)
Except that the Corporation may invest all of each Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, the Corporation, with respect to the
Funds, 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), provided that
collateral arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may be pledged to secure
letters of credit solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute;
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase,
8
<PAGE>
ownership, holding or sale of futures;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the purchase, ownership,
holding or sale of warrants where the grantor of the warrants is the issuer of
the underlying securities, or (ii) the purchase, ownership, holding or sale of
futures and options, other than the writing of put options;
(4) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;
(5) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its net
assets (taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations and provided that not more than 10% of
its net assets is invested in repurchase agreements maturing in more than seven
days, or (c) by purchasing, subject to the limitation in paragraph (6) below, a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan;
(6) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities is reserved);
(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
9
<PAGE>
purposes; such sales would not be made of securities subject to
outstanding options);
(9) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective, up to 25%
of its assets, at market value at the time of each investment, may be invested
in any one industry, except that positions in futures or option contracts shall
not be subject to this restriction;
(10) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction; or
(11) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than U.S. Government obligations) or more
than 10% of its total assets in the outstanding voting securities of any one
issuer; provided, however, that up to 25% of its total assets may be invested
without regard to this restriction, and provided further, that neither Fund
shall be subject to this restriction.
Non-Fundamental Restrictions. The Corporation, on behalf of each Fund,
may not as a matter of operating policy (except that the Corporation may invest
all of each Fund's assets in an open-end investment company with substantially
the same investment objective, policies and restrictions as the Fund): (i)
purchase securities of any investment company if such purchase at the time
thereof would cause more than 10% of its total assets (taken at the greater of
cost or market value) to be invested in the securities of such issuers or would
cause more than 3% of the outstanding voting securities of any such issuer to be
held for it; or (ii) invest more than 10% of its net assets (taken at
10
<PAGE>
the greater of cost or market value) in restricted securities . These policies
are not fundamental and may be changed for a Fund 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
11
<PAGE>
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;
Retired; Chairman and Chief Executive Officer - AT&T Investment Management
Corporation (prior to October 1997); Director of Dreyfus Mutual Funds, Equity
Fund of Latin America, New World Balanced Fund, India Magnum Fund, and U.S.
Prime Properties Inc.; Trustee of Corporate Property Investors. His business
address is 3 Tall Oaks Drive, Warren, NJ 07059.
ALAN G. LOWY** -- Director; Trustee of The 59 Wall Street Trust (since
April 1993); Secretary of the Los Angeles County Board of Investments (prior to
March 1995). His business address is 4111 Clear Valley Drive, Encino, CA 91436.
ARTHUR D. MILTENBERGER** -- Director; Trustee of The 59 Wall Street
Trust; Vice President and Chief Financial Officer of Richard K. Mellon and Sons;
Treasurer of Richard King Mellon Foundation; Director of Vought Aircraft
Corporation (prior to September 1994), Caterair International (prior to April
1994); Member of Advisory Committee of Carlyle Group and Pittsburgh Seed Fund
and Valuation Committee of Morgenthaler Venture Funds(2). His business address
is Richard K. Mellon and Sons, P.O. Box RKM, Ligonier, PA 15658.
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).
12
<PAGE>
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) .
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and
Assistant Secretary of SFG; Assistant Secretary of 59 Wall Street
Distributors and 59 Wall Street Administrators (since June 1993).
CHRISTINE A. DRAPEAU - Assistant Secretary; Assistant Vice President of
SFG (since January 1996); Paralegal and Compliance Officer, various financial
companies (July 1992 to January 1996); Graduate Student, Bentley College (prior
to December 1994).
- -------------------------
* Mr. Shields is an "interested person" of the 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, 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 , Mugler and Drapeau also hold similar positions with other
investment companies for which affiliates of 59 Wall Street Distributors serve
as the principal underwriter.
Except for Mr. Shields, no Director is an "interested
person" of the Corporation as that term is defined in the
1940 Act.
Directors of the Corporation
The Directors of the Corporation receive a base annual fee of $15,000
(except the Chairman who receives a base annual fee of $20,000) which is paid
jointly by all series of the Corporation
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from the Corporation
Name of Person, Compensation as Part of Benefits upon and Fund Complex*
POSITION FROM THE CORPORATION FUND EXPENSES RETIREMENT PAID TO DIRECTORS
J.V. Shields, Jr., $10,822 none none $28,500
Trustee
Eugene P. Beard, $ 9,492 none none 23,500
Trustee
David P. Feldman, $ 9,492 none none 23,500
Trustee
Alan G. Lowy, $ 9,492 none none 23,500
Trustee
Arthur D. Miltenberger, $ 9,492 none none 23,500
Trustee
</TABLE>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series .
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.
14
<PAGE>
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 itself requires
no 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 a Fund.
As of January 31, 1998, 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 the management,
15
<PAGE>
owned beneficially more than 5% of the outstanding shares of a Fund except that
Moose International owned 102,735 (2.5%) shares of the Pacific Basin Equity
Fund. However, as of that date, partners of Brown Brothers Harriman & Co. and
their immediate families owned 80,894 (2.0%) and 50,856 (1.2%) shares,
respectively, of the European Equity Fund and the Pacific Basin Equity Fund.
Also, Brown Brothers Harriman & Co. Employee Pension Plan on that date held
362,611 (8.9%) and 214,047 (5.1%) shares, respectively, of the European Equity
Fund and the Pacific Basin Equity Fund. Brown Brothers Harriman & Co. and its
affiliates separately are able to direct the disposition of an additional
2,175,696 (53.6%) and 1,190,499 (28.5%) shares, respectively, of the European
Equity Fund and the Pacific Basin Equity Fund, as to which shares Brown Brothers
Harriman & Co. disclaims beneficial ownership.
INVESTMENT ADVISER
================================================================================
Under its Investment Advisory Agreement with the Corporation, subject
to the general supervision of the Corporation's Directors and in conformance
with the stated policies of each Fund, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to each Fund.
In this regard, it is the responsibility of Brown Brothers Harriman & Co. to
make the day-to-day investment decisions for each Fund, to place the purchase
and sale orders for the portfolio transactions of each Fund and to manage,
generally, each Fund's investments.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Corporation is dated September 5, 1990 as amended and restated November
1, 1993. The agreement remains in effect for two years from its date and
thereafter, but only so long as such agreement is specifically approved with
respect to each Fund at least annually (i) by a vote of the holders of a
"majority of that 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 that 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 17, 1997. The
Investment Advisory Agreement terminates automatically if assigned and is
terminable with respect to each Fund at any time without penalty by a vote of a
majority of the Directors of the Corporation or by a vote of the holders of a
"majority of that Fund's outstanding voting securities" (as defined in the 1940
Act) on 60 days' written notice to Brown Brothers Harriman &
16
<PAGE>
Co. and by Brown Brothers Harriman & Co. on 90 days' written
notice to the Corporation. (See "Additional Information".)
With respect to the European Equity Fund, the investment advisory fee
paid to the Investment Adviser is calculated daily and paid monthly at an annual
rate equal to 0.65% of that Fund's average daily net assets. For the fiscal
years ended October 31, 1995, 1996 and 1997, the Fund incurred $715,205 ,
$847,451 and $1,012,388, respectively, for advisory services.
With respect to the Pacific Basin Equity Fund, the investment advisory
fee paid to the Investment Adviser is calculated daily and paid monthly at an
annual rate equal to 0.65% of that Fund's average daily net assets. For the
fiscal years ended October 31, 1995, 1996 and 1997, the Fund incurred $695,032 ,
$924,243 and $931,879, 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 Funds.
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 to the shareholders that they approve a new
investment advisory agreement for each 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
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
17
<PAGE>
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 17, 1997. The agreement
will terminate automatically if assigned by either party thereto and is
terminable with respect to each Fund at any time without penalty by a vote of a
majority of the Directors of the Corporation or by a vote of the holders of a
"majority of the Corporation's outstanding voting securities" (as defined in the
1940 Act). (See "Additional Information".) The Administration Agreement is
terminable by the Corporation's Directors 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
each Fund is calculated daily and payable monthly at an annual rate equal to
0.15% of each Fund's average daily net assets. Prior to November 1, 1993, 59
Wall Street Distributors served as administrator for the Corporation and was
paid monthly at an annual rate equal to 0.05% of each Fund's average daily net
assets. For the fiscal years ended October 31, 1995, 1996 and 1997, the European
Equity Fund incurred $165,044, $195,566 and $233,628, respectively, for
administrative services. For the fiscal years ended October 31, 1995 , 1996 and
1997, the Pacific Basin Equity Fund incurred $160,392, $213,287 and $215,035,
respectively, for administrative services.
DISTRIBUTOR
================================================================================
The Distribution Agreement (dated September 5, 1990, as amended and
restated February 12, 1991) between the Corporation and 59 Wall Street
Distributors remains in effect indefinitely, but only so long as such agreement
is specifically approved at least annually in the same manner as the Investment
Advisory Agreement. (See "Investment Adviser".) The Distribution Agreement was
most recently approved by the Independent Directors of the Corporation on
February 24, 1998. The agreement terminates automatically if assigned by either
party thereto and is terminable with respect to each Fund at any time without
penalty by a vote of a majority of the Directors of the Corporation or by a vote
of the holders of a "majority of each Fund's outstanding voting securities" (as
defined in the 1940 Act). (See "Additional Information".) The Distribution
Agreement is terminable with respect to each Fund by the Corporation's Directors
or shareholders of the Fund on 60 days' written notice to 59 Wall Street
Distributors. The agreement is
18
<PAGE>
terminable by 59 Wall Street Distributors on 90 days' written notice to the
Corporation.
FINANCIAL INTERMEDIARIES
================================================================================
One or more brokers which serve as Financial Intermediaries have been
authorized by the Corporation to accept purchase and redemption orders for Fund
shares on its behalf and are authorized to designate other intermediaries to
accept purchase and redemption orders for Fund shares on the Corporation's
behalf. The Corporation will be deemed to have received a purchase or redemption
order for Fund shares when an authorized broker or, if applicable, such broker's
authorized designee, accepts the order and such an order will be executed at the
net asset value per share next determined after such acceptance.
NET ASSET VALUE; REDEMPTION IN KIND
================================================================================
The net asset value of each of a Fund's shares is determined each day
the New York Stock Exchange is open for regular trading and New York banks are
open for business. (As of the date of this Statement of Additional Information,
such Exchange and banks are so open every weekday except for the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas.) This determination of net asset value of each share of a 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 that
Fund outstanding at the time the determination is made.
The value of investments listed on a domestic securities exchange is
based on the last sale prices as of the regular close of the New York Stock
Exchange (which is currently 4:00 P.M., New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange. Securities listed on a foreign exchange are valued at the last
quoted sale price available before the time at which net assets are valued.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security. For purposes of
calculating net asset value per share, all assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the
prevailing market rates available at the time of valuation.
19
<PAGE>
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Corporation's
Directors. Such procedures include the use of independent pricing services,
which use prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers; and
general market conditions. Short-term investments which mature in 60 days or
less are valued at amortized cost if their original maturity was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if their
original maturity when acquired for a Fund was more than 60 days, unless this is
determined not to represent fair value by the Directors.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when a Fund's net
asset value is calculated, such securities would be valued at fair value in
accordance with procedures established by and under the general supervision of
the Corporation's Directors.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
a Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Corporation is obligated with
respect to any one investor during any 90 day period to redeem shares of a Fund
solely in cash up to the lesser of $250,000 or 1% of that Fund's net assets at
the beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
================================================================================
The average annual total return of a 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
20
<PAGE>
shares purchased with such dividends and capital gains distributions, by (ii)
$1,000, (b) raising the quotient to a power equal to 1 divided by the number of
years in the period, and (c) subtracting 1 from the result.
The total rate of return of a Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
The annualized average rate of return for the European Equity Fund
and the Pacific Basin Equity Fund for the period November 1, 1990 (commencement
of operations) to October 31, 1997 was 11.63% and 4.77%, respectively. The
average annual rate of return for the European Equity Fund and the Pacific Basin
Equity Fund for the fiscal year ended October 31, 1997 was 17.28% and -16.03%,
respectively. The average annual rate of return for the European Equity Fund and
the Pacific Basin Equity Fund for the five-year period ended October 31, 1997
was 14.54% and 4.24%, respectively.
Performance calculations should not be considered a representation of
the average annual or total rate of return of a Fund in the future since the
rates of return are not fixed. Actual total rates of return and average annual
rates of return depend on changes in the market value of, and dividends and
interest received from, the investments held by a Fund and that Fund's expenses
during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of a 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, a Fund's total
rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
FEDERAL TAXES
===============================================================================
Each year, the Corporation intends to continue to qualify each Fund and
elect that each Fund be treated as a separate "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Subchapter M of the Code a Fund is not subject to federal income
21
<PAGE>
taxes on amounts distributed to shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of a Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities, foreign
currencies or other income derived with respect to its business of investing in
such securities; (b) less than 30% of a 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 a Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of a Fund's assets be represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of that Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of a Fund's assets be invested in the securities of any one issuer (other
than U.S. Government securities). Foreign currency gains that are not directly
related to a Fund's business of investing in stock or securities is included in
the income that counts toward the 30% gross income requirement described above
but may be excluded by Treasury Regulations from income that counts toward the
90% of gross income requirement described above. In addition, in order not to be
subject to federal income tax, at least 90% of a Fund's net investment income
and net short-term capital gains earned in each year must be distributed to that
Fund's shareholders.
Under the Code, gains or losses attributable to foreign currency
contracts, or to fluctuations in exchange rates between the time a Fund accrues
income or receivables or expenses or other liabilities denominated in a foreign
currency and the time that Fund actually collects such income or pays such
liabilities, are treated as ordinary income or ordinary loss. Similarly, gains
or losses on the disposition of debt securities held by a Fund, if any,
denominated in foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition dates are also treated as
ordinary income or loss.
Gains or losses on sales of securities for a 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 that 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 a Fund lapses or is terminated through a closing transaction, such
as a repurchase for that Fund of the option from its holder, that Fund
22
<PAGE>
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 a Fund pursuant to the exercise of a call option written
for it, the premium received would be added to the sale price of the securities
delivered in determining the amount of gain or loss on the sale. The requirement
that less than 30% of a Fund's gross income be derived from gains from the sale
of securities held for less than three months may limit the ability to write
options and engage in transactions involving stock index futures for a Fund.
Certain options contracts held for a 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 that Fund has held such options. A
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.
If shares are purchased for a Fund in certain foreign investment
entities, referred to as "passive foreign investment companies", that Fund
itself may be subject to U.S. federal income tax, and an additional charge in
the nature of interest, on a portion of any "excess distribution" from such
company or gain from the disposition of such shares, even if the distribution or
gain is paid by that Fund as a dividend to its shareholders. If a Fund were able
and elected to treat a passive foreign investment company as a "qualified
electing fund", in lieu of the treatment described above, that Fund would be
required each year to include in income, and distribute to shareholders in
accordance with the distribution requirements set forth above, that Fund's pro
rata share of the ordinary earnings and net capital gains of the company,
whether or not distributed to that Fund.
23
<PAGE>
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 a
Fund, such dividend or capital gains distribution would be taxable even though
it represents a return of invested capital.
Redemption of Shares. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities 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
24
<PAGE>
of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
Foreign Taxes. If the Corporation elects to treat foreign income taxes
paid from a Fund as paid directly by that Fund's shareholders, each Fund
shareholder would be required to include in income such shareholder's
proportionate share of the amount of foreign income taxes paid by that Fund and
would be entitled to claim either a credit or a deduction in such amount.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes are subject to the limitation that the credit may not exceed the
shareholder's U.S. tax (determined without regard to the availability of the
credit) attributable to that shareholder's total foreign source taxable income.
For this purpose, the portion of dividends and capital gains distributions paid
from a Fund from its foreign source income is treated as foreign source income.
A Fund's gains and losses from the sale of securities are generally treated as
derived from U.S. sources, however, and certain foreign currency gains and
losses likewise are treated as derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source "passive income",
such as the portion of dividends received from a Fund which qualifies as foreign
source income. In addition, the foreign tax credit is allowed to offset only 90%
of the alternative minimum tax imposed on corporations and individuals. Because
of these limitations, a shareholder may be unable to claim a credit for the full
amount of such shareholder's proportionate share of the foreign income taxes
paid from a Fund.
In certain circumstances foreign taxes imposed with respect to a Fund's
income may not be treated as income taxes imposed on that Fund. Any such taxes
would not be included in that Fund's income, would not be eligible to be "passed
through" to Fund shareholders, and would not be eligible to be claimed as a
foreign tax credit or deduction by Fund shareholders. In particular, in certain
circumstances it may not be clear whether certain amounts of taxes deducted from
gross dividends paid to a Fund would, for U.S. federal income tax purposes, be
treated as imposed on the issuing corporation rather than that Fund.
Other Taxes. A 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 a Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws. Shareholders
should consult their own tax advisors with respect to any state or local taxes.
DESCRIPTION OF SHARES
================================================================================
The Corporation is an open-end management investment company
organized as a Maryland corporation on July 16, 1990. The
25
<PAGE>
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 European Equity Fund and
25,000,000 as shares of Pacific Basin Equity Fund. The Corporation currently
consists of eight portfolios.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Corporation do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Corporation may elect all of the Directors of the
Corporation if they choose to do so and in such event the other shareholders in
the Corporation would not be able to elect any Director. The Corporation is not
required and has no current intention to hold meetings of shareholders annually
but the Corporation will hold special meetings of shareholders when in the
judgment of the Corporation's Directors it is necessary or desirable to submit
matters for a shareholder vote. Shareholders have under certain circumstances
(e.g., upon application and submission of certain specified documents to the
Directors by a specified number of shareholders) the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Directors. Shareholders also have the right
to remove one or more Directors without a meeting by a declaration in writing by
a specified number of shareholders. Shares have no preference, pre-emptive,
conversion or similar rights. Shares, when issued, are fully paid and
non-assessable.
Stock certificates are not issued by the Corporation.
The Articles of Incorporation of the Corporation contain a provision
permitted under Maryland Corporation Law which under certain circumstances
eliminates the personal liability of the Corporation's Directors to the
Corporation or its shareholders.
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 each Fund's
investment objective by investing all of the Fund's investable assets in a
no-load, open-end management investment
26
<PAGE>
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, each Fund's shareholders
approved changes to the investment restrictions to authorize such an investment.
Such an investment would be made only if the Directors believe that the
aggregate per share expenses of each 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 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 each 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 a 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 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 year ended October 31,
27
<PAGE>
1995, the aggregate commissions paid by the European Equity Fund and the Pacific
Basin Equity Fund were $315,790 and $533,000, respectively. For the fiscal year
ended October 31, 1996, the aggregate commissions paid by the European Equity
Fund and the Pacific Basin Equity Fund were $262,804 and $542,629, respectively.
For the fiscal year ended October 31, 1997, the aggregate commissions paid by
the European Equity Fund and the Pacific Basin Equity Fund were $625,439 and
$669,481, 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.
All of the transactions for the Funds 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 Funds. 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 a 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 Funds 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.
28
<PAGE>
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.
ADDITIONAL INFORMATION
================================================================================
As used in this Statement of Additional Information and the Prospectus,
the term "majority of a Fund's outstanding voting securities" (as defined in the
1940 Act) currently means the vote of (i) 67% or more of that Fund's shares
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of that Fund are present in person or represented by proxy; or (ii)
more than 50% of that 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, a 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
29
<PAGE>
the Securities Act of 1933. Pursuant to the rules and regulations of the
Securities and Exchange Commission, certain portions have been omitted. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the Securities and Exchange Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement.
Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
================================================================================
The Annual Report of the Funds dated October 31, 1997 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.
WS5306D
30
<PAGE>
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 EUROPEAN EQUITY FUND AND
THE 59 WALL STREET PACIFIC BASIN EQUITY FUND:
Financial Highlights for the fiscal years ended October 31,
1991, 1992, 1993, 1994, 1995, 1996 and 1997.
FOR THE 59 WALL STREET SMALL COMPANY FUND:
Financial Highlights for the period April 23, 1991 to October 31,
1991 and the fiscal years ended October 31, 1992, 1993, 1994, 1995,
1996 and 1997.
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 EUROPEAN EQUITY FUND AND
THE 59 WALL STREET PACIFIC BASIN EQUITY FUND:
Portfolio of Investments at October 31, 1997.
Statement of Assets and Liabilities at October 31, 1997.
Statement of Operations for the year ended October 31, 1997.
Statement of Changes in Net Assets for the years ended October 31,
1996 and October 31, 1997.
Financial Highlights for the fiscal years ended October 31,
1993, 1994, 1995, 1996 and 1997.
Notes to Financial Statements.
Independent Auditors' Report
Management's Discussion of Fund Performance
FOR THE 59 WALL STREET SMALL COMPANY FUND:
Statement of Assets and Liabilities at October 31, 1997.
Statement of Operations for the year ended October 31, 1997.
Statement of Changes in Net Assets for the years ended October 31,
1996 and October 31, 1997.
Financial Highlights for the fiscal years ended October 31,
1993, 1994, 1995, 1996 and 1997.
Notes to Financial Statements.
Independent Auditors' Report
Management's Discussion of Fund Performance
FOR U.S. SMALL COMPANY PORTFOLIO:
Portfolio of Investments at October 31, 1997.
Statement of Assets and Liabilities at October 31, 1997.
Statement of Operations for the fiscal year ended
October 31, 1997.
Statement of Changes in Net Assets for the fiscal years
ended October 31, 1996 and October 31, 1997.
Financial Highlights for the period January 17, 1995
(commencement of operations) to October 31, 1995 and the
fiscal years ended October 31, 1996 and 1997.
Notes to Financial Statements.
Independent Auditors' Report.
(B) EXHIBITS:
C-1
<PAGE>
1 -- (a) Restated Articles of Incorporation of
the Registrant.(7)
(b) Designation of Series of The 59 Wall Street
Small Company Fund.(7)
(c) Designation of Series of The 59 Wall Street
Short/Intermediate Fixed Income Fund. (7)
(d) Designation of Series of The 59 Wall Street
U.S. Equity Fund.(7)
(e) Designation of Series of The 59 Wall Street
International Equity Fund.(7)
(f) Designation of Series of The 59 Wall Street
Short Term Fund. (7)
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 European Equity Fund
and The 59 Wall Street Pacific Basin
Equity Fund.(7)
(b) Advisory Agreement with respect to The 59
Wall Street Small Company Fund.(5)
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.(5)
(b) Subadministrative Services Agreement.(5)
(c) Form of License Agreement.(1)
(d) Amended and Restated Shareholder Servicing
Agreement.(5)
(e) Amended and Restated Eligible Institution
Agreement.(5)
(f) Expense Reimbursement Agreement with respect
to The 59 Wall Street Small Company
Fund.(5)
(g) Expense Reimbursement Agreement with respect
to The 59 Wall Street European Equity
Fund.(5)
C-2
<PAGE>
(h) Expense Reimbursement Agreement with respect
to The 59 Wall Street Pacific Basin Equity
Fund.(5)
10 -- Opinion of Counsel (including consent).(2)
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.(4)
17 -- Financial Data Schedule.(8)
18 -- Powers of Attorney.(6)
(1) Filed with the initial Registration Statement on July 16, 1990.
(2) Filed with Pre-Effective Amendment No. 1 to this Registration
Statement on October 9, 1990.
(3) Filed with Post-Effective Amendment No. 1 to this Registration
Statement on February 14, 1991.
(4) Filed with Post-Effective Amendment No. 2 to this Registration
Statement on March 1, 1992.
(5) Filed with Post-Effective Amendment No. 5 to this Registration
Statement on December 30, 1993.
(6) Filed with Post-Effective Amendment No. 14 to this Registration
Statement on January 17, 1995.
(7) Filed with Post-Effective Amendment No. 17 to this Registration
Statement on February 27, 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.
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
COMMON STOCK (as of January 31, 1998)
The 59 Wall Street Small Company Fund 445
The 59 Wall Street European Equity Fund 1,226
The 59 Wall Street Pacific Basin Equity Fund 678
The 59 Wall Street Inflation-Indexed Securities Fund 82
The 59 Wall Street U.S. Equity Fund 537
The 59 Wall Street International Equity Fund 165
The 59 Wall Street Emerging Markets Fund 99
The 59 Wall Street Mid-Cap Fund 35
ITEM 27. INDEMNIFICATION
Reference is made to Article VII of Registrant's By-Laws and to Section
5 of the Distribution Agreement between the Registrant and 59 Wall Street
Distributors, Inc.
Registrant, its Directors and officers, and persons affiliated with
them are insured against certain expenses in connection with the defense of
actions suits or proceedings, and certain liabilities that might be imposed as a
result of such actions, suits or proceedings.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Registrant's investment adviser, Brown Brothers
Harriman & Co. ("BBH & Co."), is a New York limited partnership.
BBH & Co. conducts a general banking business and is a member of
the New York Stock Exchange, Inc.
To the knowledge of the Registrant, none of the general partners or
officers of BBH & Co. is engaged in any other business, profession, vocation or
employment of a substantial nature.
C-4
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
1. (a) 59 Wall Street Distributors, Inc. ("59 Wall Street
Distributors") and its affiliates, also serves as
administrator and/or distributor to other
registered investment companies.
(b) Set forth below are the names, principal business
addresses and positions of each Director and
officer of 59 Wall Street Distributors. The
principal business address of these individuals is
c/o 59 Wall Street Distributors, Inc., 6 St. James
Avenue, Boston, MA 02116. Unless otherwise
specified, no officer or Director of 59 Wall
Street Distributors serves as an officer or
Director of the Registrant.
Position and Offices with Position and Offices
Name 59 Wall Street Distributors with the Registrant
- ------------- --------------------------- --------------------
Philip W. Coolidge Chief Executive President
Officer, President
and Director
John R. Elder Assistant Treasurer Treasurer
Linda T. Gibson Assistant Secretary Secretary
Molly S. Mugler Assistant Secretary Assistant Secretary
Christine A. Drapeau -- Assistant Secretary
Linwood C. Downs Treasurer --
Robert Davidoff Director --
CMNY Capital, L.P.
135 East 57th Street
New York, NY 10022
Donald Chadwick Director --
Scarborough & Company
110 East 42nd Street
New York, NY 10017
C-5
<PAGE>
Leeds Hackett Director --
National Credit
Management Corporation
10155 York Road
Cockeysville, MD 21030
Laurence E. Levine Director --
First International
Capital Ltd.
130 Sunrise Avenue
Palm Beach, FL 33480
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of:
The 59 Wall Street Fund, Inc.
6 St. James Avenue
Boston, MA 02116
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
(investment adviser, administrator, 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)
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<PAGE>
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-7
<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 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 amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and State of New York on the
27th day of February, 1998.
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
Executive (Philip W. Coolidge) 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
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in London, England on the 13th day of February, 1998.
U.S. SMALL COMPANY PORTFOLIO
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
PHILIP W. COOLIDGE President of the Portfolio
(Philip W. Coolidge)
H.B. ALVORD* Trustee and Chairman of the Board
(H.B. Alvord)
RICHARD L. CARPENTER* Trustee
(Richard L. Carpenter)
CLIFFORD A. CLARK* Trustee
(Clifford A. Clark)
DAVID M. SEITZMAN* Trustee
(David M. Seitzman)
JOHN R. ELDER* Treasurer of the Portfolio
(John R. Elder)
*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to
Powers of Attorney filed previously.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-99.B11(i) Consent of Deloitte & Touche LLP
EX-99.B11.(ii) Consent of Deloitte & Touche (Grand Cayman)
EX-99.B27 Financial Data Schedules
EXHIBIT 11(i)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 19 to Registration Statement (No. 33-35827) of The 59 Wall Street
Fund, Inc. on behalf of The 59 Wall Street European Equity Fund, The 59 Wall
Street Pacific Basin Equity Fund, and The 59 Wall Street Small Company Fund
(three of the series constituting The 59 Wall Street Fund, Inc.) of our
reports dated December 12, 1997 in the Statement of Additional Information,
which is part of such Registration Statement, and to the reference to us
under the heading "Financial Highlights", appearing in the Prospectus, which
is also a part of such Registration Statement.
/S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 27, 1998
EXHIBIT 11(ii)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 19 to Registration Statement (No. 33-35827) of The 59 Wall Street
Fund, Inc. on behalf of The 59 Wall Street Small Company Fund (one of the
series constituting The 59 Wall Street Fund, Inc.) of our report dated
December 12, 1997, relating to U.S. Small Company Portfolio, in the Statement
of Additional Information, which is part of such Registration Statement, and to
the reference to us under the heading "Financial Highlights", appearing in the
Prospectus, which is also a part of such Registration Statement.
/S/DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
February 27, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information ectracted from the 59 Wall
Street European Equity Fund Annual Report dated October 31, 1997, and is
qualified in its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> THE 59 WALL STREET EUROPEAN EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 130,233,674
<INVESTMENTS-AT-VALUE> 152,396,645
<RECEIVABLES> 445,268
<ASSETS-OTHER> 1,783,754
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,624,842
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 446,167
<TOTAL-LIABILITIES> 446,167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,780,014
<SHARES-COMMON-STOCK> 4,055,462
<SHARES-COMMON-PRIOR> 4,179,145
<ACCUMULATED-NII-CURRENT> 543,447
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,683,808
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,171,406
<NET-ASSETS> 154,178,675
<DIVIDEND-INCOME> 3,638,687
<INTEREST-INCOME> 8,533
<OTHER-INCOME> 0
<EXPENSES-NET> 2,060,200
<NET-INVESTMENT-INCOME> 1,587,020
<REALIZED-GAINS-CURRENT> 18,918,927
<APPREC-INCREASE-CURRENT> 3,865,165
<NET-CHANGE-FROM-OPS> 24,371,112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,711,429
<DISTRIBUTIONS-OF-GAINS> 9,446,042
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 727,395
<NUMBER-OF-SHARES-REDEEMED> 872,257
<SHARES-REINVESTED> 21,179
<NET-CHANGE-IN-ASSETS> 7,828,652
<ACCUMULATED-NII-PRIOR> 1,056,298
<ACCUMULATED-GAINS-PRIOR> 9,446,043
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,012,388
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,130,718
<AVERAGE-NET-ASSETS> 156,751,956
<PER-SHARE-NAV-BEGIN> 35.02
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 5.29
<PER-SHARE-DIVIDEND> 0.41
<PER-SHARE-DISTRIBUTIONS> 2.27
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 38.02
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information ectracted from the 59 Wall
Street Pacific Basin Equity Fund Annual Report dated October 31, 1997, and is
qualified in its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> THE 59 WALL STREET PACIFIC BASIN EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 113,849,582
<INVESTMENTS-AT-VALUE> 94,827,347
<RECEIVABLES> 6,124,206
<ASSETS-OTHER> 2,911,653
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 103,863,206
<PAYABLE-FOR-SECURITIES> 814,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 742,465
<TOTAL-LIABILITIES> 1,556,715
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132,250,481
<SHARES-COMMON-STOCK> 4,172,270
<SHARES-COMMON-PRIOR> 4,990,856
<ACCUMULATED-NII-CURRENT> 1,344,152
<OVERDISTRIBUTION-NII> (14,360,902)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,927,240)
<NET-ASSETS> 102,306,491
<DIVIDEND-INCOME> 1,708,429
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,706,573
<NET-INVESTMENT-INCOME> 1,856
<REALIZED-GAINS-CURRENT> (9,573,901)
<APPREC-INCREASE-CURRENT> (11,759,012)
<NET-CHANGE-FROM-OPS> (21,331,057)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,856
<DISTRIBUTIONS-OF-GAINS> 1,393,227
<DISTRIBUTIONS-OTHER> 3,499,313
<NUMBER-OF-SHARES-SOLD> 1,257,815
<NUMBER-OF-SHARES-REDEEMED> 2,077,900
<SHARES-REINVESTED> 1,499
<NET-CHANGE-IN-ASSETS> (48,378,456)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (245,188)
<OVERDIST-NET-GAINS-PRIOR> (1,393,227)
<GROSS-ADVISORY-FEES> 931,879
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,811,815
<AVERAGE-NET-ASSETS> 143,366,044
<PER-SHARE-NAV-BEGIN> 30.19
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (4.69)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.28
<RETURNS-OF-CAPITAL> 0.70
<PER-SHARE-NAV-END> 24.52
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the 59 Wall
Street Small Company Fund Annual Report dated October 31, 1997, and is qualified
in its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> THE 59 WALL STREET SMALL COMPANY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 27,660,473
<INVESTMENTS-AT-VALUE> 38,716,120
<RECEIVABLES> 65,506
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,781,626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 113,765
<TOTAL-LIABILITIES> 113,765
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,959,476
<SHARES-COMMON-STOCK> 2,174,129
<SHARES-COMMON-PRIOR> 2,363,961
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,652,738
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,055,647
<NET-ASSETS> 38,667,861
<DIVIDEND-INCOME> 296,976
<INTEREST-INCOME> 33,887
<OTHER-INCOME> 0
<EXPENSES-NET> 415,706
<NET-INVESTMENT-INCOME> (84,843)
<REALIZED-GAINS-CURRENT> 3,703,598
<APPREC-INCREASE-CURRENT> 4,169,782
<NET-CHANGE-FROM-OPS> 7,788,537
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,283
<DISTRIBUTIONS-OF-GAINS> 1,445,257
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 329,831
<NUMBER-OF-SHARES-REDEEMED> 526,782
<SHARES-REINVESTED> 7,119
<NET-CHANGE-IN-ASSETS> 3,566,037
<ACCUMULATED-NII-PRIOR> 7,370
<ACCUMULATED-GAINS-PRIOR> 1,408,824
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,706
<AVERAGE-NET-ASSETS> 37,190,365
<PER-SHARE-NAV-BEGIN> 14.85
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 3.60
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0.61
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.79
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
