As filed with the Securities and Exchange Commission on December 30, 1998
Registration Nos. 33-35827 and 811-06139
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 20
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 41
THE 59 WALL STREET FUND, INC.
(Exact Name of Registrant as Specified in Charter)
21 Milk Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Philip W. Coolidge
21 Milk Street, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[X] 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.
Title of Securities Being Registered: Shares of Beneficial Interest
(par value $.001)
<PAGE>
PROSPECTUS
The 59 Wall Street European Equity Fund
The 59 Wall Street Pacific Basin Equity Fund
The European Equity Fund and the Pacific Basin Equity Fund are separate
portfolios of The 59 Wall Street Fund, Inc. Shares of each Fund are offered by
this Prospectus. Each of these Funds is each designed to enable investors to
participate in the opportunities available in foreign equity markets.
Brown Brothers Harriman & Co. is the Investment Adviser for each Fund.
Shares of each Fund are offered at net asset value without a sales charge.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 26, 1999.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of each Fund is to provide investors with
long-term maximization of total return, primarily through capital appreciation.
Under normal circumstances the Investment Adviser fully invests the assets
of the European Equity Fund 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.
Under normal circumstances the Investment Adviser fully invests the assets
of the Pacific Basin Equity Fund 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.
Although the Investment Adviser expects to invest the assets of each of
the Funds primarily in common stocks, it may also purchase other securities with
equity characteristics, including securities convertible into common stock,
rights and warrants. The Investment Adviser may purchase these equity securities
directly or in the form of American Depository Receipts, Global Depository
Receipts or other similar securities representing securities of foreign-based
companies. Although the Investment Adviser invests the assets of each of the
Funds primarily in equity securities which are traded on national securities
exchanges, the Investment Adviser may also purchase equity securities which are
traded in over-the-counter markets for each of the Funds. The Investment Adviser
may invest the assets of each of the Funds 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.
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, the Investment Adviser
increases, decreases or eliminates a particular country's representation in a
Fund's portfolio. As a result of applying these criteria the Investment Adviser
allocates a Fund's assets 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
gross domestic product or population.
In constructing the portfolio of securities of each Fund, the Investment
Adviser places emphasis 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. The Investment Adviser selects
individual equities through a disciplined process which systematically evaluates
growth expectations relative to price levels.
Because the Investment Adviser buys and sells securities denominated in
currencies other than the U.S. dollar, and interest, dividends and sale proceeds
are received by the Funds in currencies other than the U.S. dollar, the
Investment Adviser enters into foreign currency exchange transactions from time
to time for the Funds to convert to and from different foreign currencies and to
convert foreign currencies to and from the U.S.dollar.
The Investment Adviser may, on behalf of each Fund, enter into forward
foreign exchange contracts in order to protect the dollar value of securities
denominated in foreign currencies that are held or intended to be purchased.
In response to adverse market, economic, political or other conditions,
the Investment Adviser may make temporary investments for the Funds that are not
consistent with the investment objective and principal investment strategies of
the Funds.
2
<PAGE>
PRINCIPAL RISK FACTORS
The principal risks of investing in the Funds and the circumstances
reasonably likely to adversely affect an investment are described below. As with
any fund other than a money market mutual fund, the share price of each Fund
changes daily based on market conditions and other factors. A shareholder may
lose money by investing in the Funds.
The principal risks of investing in the Funds are:
o Market Risk:
This is the risk that the price of a security will rise or fall due to
changing economic, political or market conditions, or due to a company's
individual situation.
o 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.
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 may adversely affect the value of the investments of the Funds.
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 gross
domestic product, 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 other 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 of each 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 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.
o Eastern Europe and Developing Countries:
The Investment Adviser may invest the assets of the European Equity Fund
in securities of issuers based in Eastern Europe and in developing countries.
The Investment Adviser may invest a substantial portion of the
3
<PAGE>
assets of the Pacific Basin Equity Fund 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.
o Forward Exchange Contracts:
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.
o Diversification Risk:
Each Fund is classified as "non-diversified", which means that each of
these Funds is limited with respect to the portion of its assets which may be
invested in securities of a single issuer only by certain requirements of
federal tax law. 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. o 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.
4
<PAGE>
FUND PERFORMANCE
The charts and tables below give an indication of the Funds' risks and
performance. The charts show changes in the Funds' performance from year to
year. The tables show how the Funds' average annual returns for the periods
indicated compare to those of a broad measure of market performance.
When you consider this information, please remember that a Fund's
performance in past years is not necessarily an indication of how a Fund will do
in the future.
[The following table was depicted as bar chart in the printed material]
EUROPEAN EQUITY FUND
Total Return (% per calendar year)
1991 9.25%
1992 7.53%
1993 27.12%
1994 -3.93%
1995 16.49%
1996 19.25%
1997 15.28%
1998 []%
Highest and Lowest Return
(Quarterly 1991-1998)
Quarter Ending
Highest [ ]% [ ]
Lowest [ ]% [ ]
Average Annual Total Returns
(through December 31, 1998)
1 Year 5 Years Life of Fund
(Since 10/31/90)
European Equity Fund [ ] [ ] [ ]
MSCI-Europe [ ] [ ] [ ]*
* (Since [ ])
5
<PAGE>
[The following table was depicted as bar chart in the printed material]
PACIFIC BASIN EQUITY FUND
Total Return (% per calendar year)
1993 74.90%
1994 -21.50%
1995 3.49%
1996 -0.71%
1997 -20.13%
1998 []%
Highest and Lowest Return
(Quarterly 1993-1998)
Quarter Ending
Highest [ ]% [ ]
Lowest [ ]% [ ]
Average Annual Total Returns
(through December 31, 1998)
1 Year 5 Years Life of Fund
(Since 10/31/90)
Pacific Basin Equity Fund [ ] [ ] [ ]
MSCI-Pacific [ ] [ ] [ ]*
* (Since [ ])
6
<PAGE>
FEES AND EXPENSES OF THE FUNDS
The tables below describe the fees and expenses that an investor may pay
if that investor buys and holds shares of the Funds.
SHAREHOLDER FEES
(Fees paid directly from an investor's account)
European Pacific Basin
Equity Fund Equity Fund
Maximum Sales Charge (Load) None None
Imposed on Purchases
Maximum Deferred Sales Charge (Load) None None
Maximum Sales Charge (Load) None None
Imposed on Reinvested Dividends
Redemption Fee None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets as a percentage of average
net assets)
European Pacific Basin
Equity Fund Equity Fund
Management Fees 0.65% .65%
Distribution (12b-1) Fees None None
Other Expenses
Administration Fee 0.15% 0.15%
Shareholder Servicing/
Eligible Institution Fees 0.25 0.25
Other Expenses 0.27 0.67 0.14 0.54
----- ------ ------ -----
Total Operating Expenses
Paid by Fund 1.32% 1.19%
Expenses Paid by Commission/Expense
Offset Arrangements 0.04 0.07
------ -----
Total Annual Fund Operating Expenses 1.36% 1.26%
====== =====
7
<PAGE>
EXAMPLE
This example is intended to help an investor compare the cost of investing
in the Funds to the cost of investing in other mutual funds. The example assumes
that an investor invests $10,000 in a Fund for the time periods indicated and
then sells all of his shares at the end of those periods. The example also
assumes that an investment has a 5% return each year and that the Funds'
operating expenses remain the same as shown in the table above. Although actual
costs and the return on an investor's investment may be higher or lower, based
on these assumptions the investor's costs would be:
European Pacific Basin
Equity Fund Equity Fund
1 year [ ] [ ]
3 years [ ] [ ]
5 years [ ] [ ]
10 years [ ] [ ]
8
<PAGE>
INVESTMENT ADVISER
The Investment Adviser to each Fund is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts. The Investment
Adviser is located at 59 Wall Street, New York, NY 10005.
The Investment Adviser provides investment advice and portfolio management
services to each Fund. Subject to the general supervision of the Corporation's
Directors, the Investment Adviser 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. The Investment Adviser
provides a broad range of investment management services for customers in the
United States and abroad. At June 30, 1998, it managed total assets of
approximately $[25] billion.
A team of individuals manages each Fund's portfolio on a day-to-day
basis. This team includes 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
and is a Chartered Financial Analyst. He joined Brown Brothers Harriman & Co. in
1991. Mr. Clemons holds a A.B. from Princeton University and is a Chartered
Financial Analyst. 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 and is a Chartered Financial Analyst. 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 the Investment Adviser
under the Investment Advisory Agreements, each Fund pays the Investment Adviser
an annual fee, computed daily and payable monthly, equal to 0.65% of the average
daily net assets of each Fund.
SHAREHOLDER INFORMATION
NET ASSET VALUE
The Corporation determines each Fund's net asset value per share once
daily at 4:00 P.M., New York time on each day the New York Stock Exchange is
open for regular trading.
The Corporation values the assets in each Fund's portfolio on the basis of
their market or other fair value.
PURCHASE OF SHARES
The Corporation offers shares of each Fund on a continuous basis at its
net asset value without a sales charge. The Corporation reserves the right to
determine the purchase orders for Fund shares that it will accept. Investors may
purchase shares on any day the net asset value is calculated if the Corporation
receives the purchase order and acceptable payment for such order prior to such
calculation. The Corporation then executes purchases of Fund shares 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 the Corporation executes the purchase order on the books of the Corporation.
An investor who has an account with an Eligible Institution or a Financial
Intermediary may place purchase orders for Fund shares through that Eligible
Institution or Financial Intermediary which holds such
8
<PAGE>
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. Currently, such minimum purchase requirements
range from $500 to $5,000. Each Eligible Institution or Financial Intermediary
arranges payment for Fund shares on behalf of its customers. An Eligible
Institution or a Financial Intermediary may charge a transaction fee 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 Brown Brothers Harriman & Co., the Funds' Shareholder
Servicing Agent. Such an investor has such shares held directly in the
investor's name on the books of the Corporation and is responsible for arranging
for the payment of the purchase price of Fund shares. The Corporation executes
all purchase orders for initial and subsequent purchases 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. The
Shareholder Servicing Agent has established a minimum initial purchase
requirement for each Fund of $100,000 and a minimum subsequent purchase
requirement for each Fund of $25,000. The Shareholder Servicing Agent may amend
these minimum purchase requirements from time to time.
REDEMPTION OF SHARES
If the Corporation receives a redemption request prior to the net asset
value determination on that day, the Corporation will execute such a redemption
at the net asset value per share then determined. Shares continue to earn
dividends declared, if any, through the business day that the Corporation
executes the redemption request on the books of the Corporation.
Shareholders must redeem shares held by an Eligible Institution or a
Financial Intermediary on behalf of such shareholder pursuant to arrangements
made between that shareholder and that Eligible Institution or Financial
Intermediary. The Corporation pays proceeds of a redemption to that
shareholder's account at that Eligible Institution or Financial Intermediary on
a date established by the Eligible Institution or Financial Intermediary. An
Eligible Institution or a Financial Intermediary may charge a transaction fee on
the redemption of Fund shares.
Shareholders may redeem shares held directly in the name of a shareholder
on the books of the Corporation by submitting a redemption request in good order
to the Corporation through the Shareholder Servicing Agent. The Corporation pays
proceeds resulting from such redemption directly to the shareholder generally on
the next business day after the redemption request is executed, and in any event
within seven days.
Redemptions by the Corporation
The Shareholder Servicing Agent has established a minimum account size of
$25,000, which may be amended from time to time. If the value of a shareholder's
holdings in the Fund falls below that amount because of a redemption of shares,
the Corporation may redeem the shareholder's remaining shares. If such remaining
shares are to be redeemed, the Corporation notifies the shareholder and allows
the shareholder 60 days to make an additional investment to meet the minimum
requirement before the redemption is processed. Each Eligible Institution and
each Financial Intermediary may establish and amend from time to time for their
respective customers a minimum account size, each of which is currently lower
than that established by the Shareholder Servicing Agent.
10
<PAGE>
Further Redemption Information
Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
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.
The Corporation may suspend a shareholder's right to receive payment
with respect to any redemption or postpone the payment of the redemption
proceeds for up to seven days and for such other periods as applicable law may
permit.
DIVIDENDS AND DISTRIBUTIONS
The Corporation declares and pays to shareholders substantially all of each
Fund's net income and realized net short-term capital gains at least annually as
a dividend, and substantially all of each Fund's realized net long-term capital
gains annually as a capital gains distribution. The Corporation may make an
additional dividend and/or capital gains distribution in a given year to the
extent necessary to avoid the imposition of federal excise tax on a Fund. The
Corporation pays dividends and capital gains distributions 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, the Corporation automatically reinvests dividends
and capital gains distributions in additional Fund shares without reference to
the minimum subsequent purchase requirement.
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
Dividends are taxable to shareholders of a Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Capital gains may be taxable at different rates depending on the length of time
a Fund holds its assets. 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.
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.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help an investor understand
the Funds' financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
each Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Funds' financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
EUROPEAN EQUITY FUND
For the years ended October 31
- -------------------------------------- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Net asset value, beginning of year...........$38.02 $35.02 $31.95 $31.82 $31.17
Income from investment operations:
Net investment income .......................0.42 0.39 0.38(1) 0.45 0.39
Net gains or losses on securities
(both realized and unrealized)...............6.06 5.29 4.08 2.09 1.80
Total from investment operations 6.48 5.68 4.46 2.54 2.19
------------ ------------ ------------- -------------- -------------
Distributions:
Dividends (from net investment income) (0.31) (0.41) - -- (0.25)
Distributions (from capital gains) .......(5.14) ( 2.27) (1.39) (2.41) (1.29)
Total Distributions .........................(5.45) (2.68) (1.39) (2.41) (1.54)
Net asset value, end of period ..............$39.05 $38.02 $35.02 $31.95 $31.82
============ ============ ============= ============== =============
Total return ................................19.34% 17.28% 14.63% 9.42% 7.35%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) .$155,557 $154,179 $146,350 $116,95 5 $110,632
Ratio of expenses to average net assets 1.21% 1.36%(2) 1.33%(2) 1.43%(2) 1.37%
Ratio of net income to average net
assets .....................................0.60% 1.02% 1.16% 1.55% 1.30%
Portfolio turnover rate ......................56% 82% 42% 72% 124%
Average commission rate paid per share $0.0446 $0.0062 $0.0212 $0.0216 --
<FN>
(1) Calculated using average shares outstanding for the year.
(2) Ratio reflects fees paid with brokerage commission (years ended October 31,
1995, 1996 and 1997) and fees reduced in connection with certain offset
arrangements (years ended October 31, 1996, 1997 and 1998).
</FN>
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PACIFIC BASIN EQUITY FUND
For the years ended October 31
- ---------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Net asset value, beginning of year.............$24.52 $30.19 $29.88 $39.85 $39.87
Income from investment operations:
Net investment income........................(0.20) 0.00(1)(2) 0.051(1) 0.11 0.14
Net gains or losses on securities
(both realized and unrealized) ..............(2.39) (4.69) 1.62 (4.50) 1.26
Total from investment operations (2.59) (4.69) 1.67 (4.39) 1.40
------------ ----------- ------------ ------------- -------------
Distributions:
Dividends (from net investment income)......(0.52) (0.00) (0.86) (0.00)2 (0.14)
Distributions (from capital gains) ......... -- (0.28) -- (5.58) (1.28)
Returns of capital .........................(1.10) (0.70) (0.50) -- --
Total Distributions ...........................(1.62) (0.98) (1.36) (5.58) 1.42
Net asset value, end of period ................$20.31 $24.52 $30.19 $29.88 $39.85
============ =========== ============ ============= =============
Total return.................................(10.78)% (16.03)% 5.65% (10.62)% 3.48%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) ..$32,630 $102,306 $150,685 $114,932 $120,469
Ratio of expenses to average net assets(3)...1.62% 1.26% 1.30% 1.43% 1.29%
Ratio of net income to average net
assets ....................................(0.73%) 0.00%(2) 0.16% 0.53% 0.39%
Portfolio turnover rate .......................91% 63% 58% 82% 86%
<FN>
(1) Calculated using average shares outstanding for the year.
(2) Less than $0.01 per share.
(3) Ratio reflects fees paid with brokerage commission (years ended October 31,
1995, 1996 and 1997) and fees reduced in connection with certain offset
arrangements (years ended October 31, 1996, 1997 and 1998).
</FN>
</TABLE>
15
<PAGE>
The 59 Wall Street
Pacific Basin Equity Fund
SEC file number: 811-06139
The 59 Wall Street
European Equity Fund
SEC file number: 811-06139
More information on the Funds is available free upon request, including the
following:
Annual/Semiannual Report
Describes the Funds' performance, lists portfolio holdings and contains a
letter from the Funds' manager discussing recent market conditions, economic
trends and Fund strategies.
Statement of Additional Information (SAI)
Provides more details about each Fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
By telephone
Call 1-800-625-5759
By mail write to the Funds' Shareholder Servicing Agent:
Brown Brothers Harriman & Co.
69 Wall Street
New York, New York 10005
By E-mail send your request to:
info@ [ ]
On the Internet:
Text-only versions of Fund documents can be viewed online or downloaded from:
SEC
http://www.sec.gov
The 59 Wall Street Fund, Inc.
http://www. [ ]
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1- 800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC 20549-6009
<PAGE>
European Equity Fund
Pacific Basin Equity Fund
PROSPECTUS
February 26, 1999
<PAGE>
PROSPECTUS
The 59 Wall Street Small Company Fund
The Small Company Fund is a separate 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 Fund invests all of its assets in the U.S. Small Company Portfolio.
Brown Brothers Harriman & Co. is the Investment Adviser for the Portfolio.
Shares of the Fund are offered at net asset value without a sales charge.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is February 26, 1999.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Fund and the Portfolio is to provide
investors with long-term maximization of total return, primarily through capital
appreciation.
Under normal circumstances the Investment Adviser fully invests the assets
of the Portfolio 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 Investment Adviser
expects to invest the assets of the Portfolio primarily in common stocks, it may
also purchase other securities with equity characteristics, including securities
convertible into common stock, trust or limited partnership interests, rights
and warrants.
The Investment Adviser 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.
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.
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.
2
<PAGE>
<TABLE>
<CAPTION>
RELATIVE PERFORMANCE CYCLE
<S> <C> <C> <C> <C> <C> <C> <C>
Jan. 1, Jan. 1, Jan. 1, July 1, Aug. 1, Nov. 1, July 1,
1951 1958 1969 1973 1983 1990 1994
to to to to to to to
Dec, 31 Dec. 31. June 30, July 31, Oct. 31, June 30, Dec. 31,
1957 1968 1973 1983 1990 1994 1997
- ------------------------------------ ---------- ---------- ---------- ----------- ---------- ---------- ----------
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)
- ------------------------------------ ---------- ---------- ---------- ----------- ---------- ---------- ----------
<FN>
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.
</FN>
</TABLE>
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
In response to adverse market, economic, political or other conditions,
the Investment Adviser may make temporary investments for the Portfolio that are
not consistent with the investment objective and principal investment strategies
of the Portfolio.
Other mutual funds or institutional investors may invest in the Portfolio
on the same terms and conditions as the Fund. However, these other investors may
have different operating expenses which may generate different aggregate
performance results. The Corporation may withdraw the Fund's investment in the
Portfolio at any time as a result of changes in the Portfolio's investment
objective, policies or restrictions or if the Board of Directors determines that
it is otherwise in the best interests of the Fund to do so.
3
<PAGE>
PRINCIPAL RISK FACTORS
The principal risks of investing in the Fund and the Portfolio and the
circumstances reasonably likely to adversely affect an investment are described
below. As with any fund other than a money market mutual fund, the share price
of the Fund changes daily based on market conditions and other factors. A
shareholder may lose money by investing in the Fund.
The principal risks of investing in the Fund are:
o Market Risk:
This is the risk that the price of a security will rise or fall due to
changing economic, political or market conditions, or due to a company's
individual situation.
o Small Company Investments:
Investing in equity securities of small companies involves risks not
typically associated with investing in comparable securities of large companies.
The Investment Adviser invests the assets of the Portfolio 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. o Investments in the Fund
are neither insured nor guaranteed by the U.S. Government. Shares of the Fund
are not deposits or obligations of, or guaranteed by, Brown Brothers Harriman &
Co. or any other bank, and the shares are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other federal, state or
other governmental agency.
4
<PAGE>
FUND PERFORMANCE
The chart and table below give an indication of the Fund's risks and
performance. The chart shows changes in the Fund's performance from year to
year. The table shows how the Fund's average annual returns for the
periods indicated compare to those of a broad measure of market performance.
When you consider this information, please remember that the Fund's
performance in past years is not necessarily an indication of how the Fund will
do in the future.
[The following table was depicted as bar chart in the printed material]
Total Return (% per calendar year)
1992 10.64%
1993 12.19%
1994 -10.49%
1995 21.95%
1996 19.11%
1997 19.85%
1998 []%
Highest and Lowest Return
(Quarterly 1992-1998)
Quarter Ending
Highest [ ]% [ ]
Lowest [ ]% [ ]
Average Annual Total Returns
(through December 31, 1998)
1 Year 5 Years Life of Fund
(Since 4/23/91)
Small Company Fund [ ] [ ] [ ]
Russell 2000 [ ] [ ] [ ]*
* (Since [ ])
5
<PAGE>
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that an investor may pay
if that investor buys and holds shares of the Fund.
SHAREHOLDER FEES
(Fees paid directly from an investor's account)
Maximum Sales Charge (Load) None
Imposed on Purchases
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) None
Imposed on Reinvested Dividends
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets as a percentage of average
net assets)
Management Fees 0.65%
Distribution (12b-1) Fees None
Other Expenses
Administration Fee 0.16%
Shareholder Servicing/Eligible
Institution Fees 0.25
Other Expenses 0.27 0.68
------ -----
Total Annual Fund Operating Expenses 1.33%
=====
6
<PAGE>
EXAMPLE
This example is intended to help an investor compare the cost of investing
in the Fund to the cost of investing in other mutual funds. The example assumes
that an investor invests $10,000 in the Fund for the time periods indicated and
then sells all of his shares at the end of those periods. The example also
assumes that an investment has a 5% return each year and that the Fund's
operating expenses remain the same as shown in the table above. Although actual
costs and the return on an investor's investment may be higher or lower, based
on these assumptions the investor's costs would be:
1 year [ ]
3 years [ ]
5 years [ ]
10 years [ ]
The table and example above reflect the expenses of both the Fund and the
Portfolio.
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. The Investment
Adviser is located at 59 Wall Street, New York, NY 10005.
The Investment Adviser provides investment advice and portfolio management
services to the Portfolio. Subject to the general supervision of the Trustees of
the Portfolio, the Investment Adviser makes the day-to-day investment decisions
for the Portfolio, places the purchase and sale orders for the portfolio
transactions of the Portfolio, and generally manages the Portfolio's
investments. The Investment Adviser also analyzes economic trends and identifies
stocks appropriate for investment in the Fund. Investment decisions are the
result of a disciplined process which systematically evaluates future growth
expectations and asset valuations in relation to prevailing price levels. The
Investment Adviser provides a broad range of investment management services for
customers in the United States and abroad. At June 30, 1998, it managed total
assets of approximately $[25] billion.
A team of individuals manages the Portfolio on a day-to-day basis. This
team includes 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 the Investment Adviser under the
Investment Advisory Agreement, the Portfolio pays the Investment Adviser an
annual fee, computed daily and payable monthly, equal to 0.65% of the average
daily net assets of the Portfolio.
6
<PAGE>
SHAREHOLDER INFORMATION
NET ASSET VALUE
The Corporation determines the Fund's net asset value per share once daily
at 4:00 P.M., New York time on each day the New York Stock Exchange is open for
regular trading.
The Portfolio values its assets on the basis of their market or other fair
value.
PURCHASE OF SHARES
The Corporation offers shares of the Fund on a continuous basis at its net
asset value without a sales charge. The Corporation reserves the right to
determine the purchase orders for Fund shares that it will accept. Investors may
purchase shares on any day the net asset value is calculated if the Corporation
receives the purchase order and acceptable payment for such order prior to such
calculation. The Corporation then executes purchases of Fund shares 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 the Corporation executes the purchase order on the books of the Corporation.
An investor who has an account with an Eligible Institution or a Financial
Intermediary may place purchase orders for Fund shares 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.
Currently, such minimum purchase requirements range from $500 to $5,000. Each
Eligible Institution or Financial Intermediary arranges payment for Fund shares
on behalf of its customers. An Eligible Institution or a Financial Intermediary
may charge a transaction fee 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 Brown Brothers Harriman & Co., 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. The Corporation executes
all purchase orders for initial and subsequent purchases 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. The
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. The Shareholder Servicing Agent may amend
these minimum purchase requirements from time to time.
REDEMPTION OF SHARES
If the Corporation receives a redemption request prior to the net asset
value determination on that day, the Corporation will execute such a redemption
at the net asset value per share then determined. Shares continue to earn
dividends declared, if any, through the business day that the Corporation
executes the redemption request on the books of the Corporation.
Shareholders must redeem shares held by an Eligible Institution or a
Financial Intermediary on behalf of such shareholder pursuant to arrangements
made between that shareholder and that Eligible Institution or Financial
Intermediary. The Corporation pays proceeds of a redemption to that
shareholder's account at that Eligible Institution or Financial Intermediary on
a date established by the Eligible Institution or Financial Intermediary. An
Eligible Institution or a Financial Intermediary may charge a transaction fee on
the redemption of Fund shares.
10
<PAGE>
Shareholders may redeem shares held directly in the name of a shareholder
on the books of the Corporation by submitting a redemption request in good order
to the Corporation through the Shareholder Servicing Agent. The Corporation pays
proceeds resulting from such redemption directly to the shareholder generally on
the next business day after the redemption request is executed, and in any event
within seven days.
Redemptions by the Corporation
The Shareholder Servicing Agent has established a minimum account size of
$25,000, which may be amended from time to time. If the value of a shareholder's
holdings in the Fund falls below that amount because of a redemption of shares,
the Corporation may redeem the shareholder's remaining shares. If such remaining
shares are to be redeemed, the Corporation notifies the shareholder and allows
the shareholder 60 days to make an additional investment to meet the minimum
requirement before the redemption is processed. Each Eligible Institution and
each Financial Intermediary may establish and amend from time to time for their
respective customers a minimum account size, each of which is currently lower
than that established by the Shareholder Servicing Agent.
Further Redemption Information
Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
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.
The Corporation may suspend a shareholder's right to receive payment
with respect to any redemption or postpone the payment of the redemption
proceeds for up to seven days and for such other periods as applicable law may
permit.
DIVIDENDS AND DISTRIBUTIONS
The Corporation declares and pays to shareholders substantially all of the
Fund's net income and realized net short-term capital gains annually as a
dividend, and substantially all of the Fund's realized net long-term capital
gains annually as a capital gains distribution. The Corporation may make an
additional dividend and/or capital gains distribution in a given year to the
extent necessary to avoid the imposition of federal excise tax on the Fund. The
Corporation pays dividends and capital gains distributions to shareholders of
record on the record date. The Fund's net income and realized net capital gains
include the Fund's pro rata share of the Portfolio's net income and realized net
capital gains.
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, the Corporation automatically reinvests dividends
and capital gains distributions in additional Fund shares without reference to
the minimum subsequent purchase requirement.
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
Dividends are taxable to shareholders of the Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Capital gains may be taxable at different rates depending on the length of time
the Portfolio holds its assets. 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.
10
<PAGE>
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments are available which would not be subject to United
States withholding tax.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help an investor understand
the Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
For the years ended October 31
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of year............17.79 $14.85 $12.81 $11.54 $12.92
Income from investment operations:
Net investment income .....................(0.09) (0.04) 0.01 0.03 0.05
Net gains or losses on securities (both
realized and unrealized)..... (2.35) 3.60 2.05 1.31 (1.04)
Total from investment operations (2.44) 3.56 2.06 1.34 (0.99)
----------- ------------ ------------- -------------- -------------
Distributions:
Dividends (from net investment income) -- -- (0.02) (0.07) (0.01)
Distributions (from capital gains) .......(1.51) (0.61) -- -- (0.38)
Returns of capital ..................... -- (0.01) -- -- --
Total Distributions ..................... (1.51) (0.62) (0.02) (0.07) (0.39)
----------- ------------ ------------- -------------- -------------
Net asset value, end of period ........ $13.84 $17.79 $14.85 $12.81 $11.54
=========== ============ ============= ============== =============
Total return(1)....................... (14.94)% 24.65% 16.10% 11.69% (7.81)%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) 29,842 $38,668 $35,102 $29,408 $39,401
Ratio of expenses to average net assets(1) 1.41% 1.12% 1.10% 1.10% 1.10%
Ratio of net income to average net assets (0.52) (0.23)% 0.08% 0.25% 0.40%
Portfolio turnover rate ................. n/a n/a n/a 16%(2) 140%
Average Commission rate paid per share .. n/a n/a n/a $0.08%(2) --
<FN>
(1) 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:
Ratio of expenses to average net assets ... n/a 1.33% 1.32% 1.27% 1.21%
Total Return ............................. n/a 24.44% 15.88% 11.52% (7.94)%
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 commission and fees reduced in
connection with specific agreements. Had these arrangements not been in place,
the ratio would have been 1.39%.
(2) 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.
</FN>
</TABLE>
14
<PAGE>
The 59 Wall Street
Small Company Fund
SEC file number: 811-06139
More information on the Fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the Fund's performance, lists portfolio holdings and contains a
letter from the Fund's manager discussing recent market conditions, economic
trends and Fund strategies.
Statement of Additional Information (SAI)
Provides more details about each Fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
By telephone
Call 1-800-625-5759
By mail write to the Fund's Shareholder Servicing Agent:
Brown Brothers Harriman & Co.
69 Wall Street
New York, New York 10005
By E-mail send your request to:
info@ [ ]
On the Internet:
Text-only versions of Fund documents can be viewed online or downloaded from:
SEC
http://www.sec.gov
The 59 Wall Street Fund, Inc.
http://www. [ ]
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC 20549-6009
<PAGE>
Small Company Fund
PROSPECTUS
February 26, 1999
<PAGE>
===============================================================================
STATEMENT OF ADDITIONAL INFORMATION
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 (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
26, 1999, a copy of which may be obtained from the Corporation at the address
noted above.
Table of Contents
Cross-Reference to
Page Page in Prospectus
Investments
Investment Objective and Policies . 2 5-8
Investment Restrictions . . . . 4
Management
Directors, Trustees and Officers . 6
Investment Adviser . . . . . . 10 11-12
Administrators. . . . . . . . 11
Distributor . . . . . . . . 12
Shareholder Servicing Agent,
Financial Intermediaries and
Eligible Institutions . . . . . . . . 13
Custodian, Transfer and
Dividend Disbursing Agent . . . . . .[]
Independent Auditors . . . . . . . . .[]
Net Asset Value; Redemption in Kind . . . 13 15
Computation of Performance . . . . . . 14
Purchases and Redemptions . . . . . . . . []
Federal Taxes . . . . . . . . . . 15
Description of Shares . . . . . . . 16
Portfolio Brokerage Transactions . . . . 17
Additional Information . . . . . . . . . . []
Financial Statements . . . . . . . 20
Appendix . . . . . . . . . . . . . . . . . []
The date of this Statement of Additional Information is February 26, 1999.
<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. 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 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 do so. A call option is "covered"
if the writer owns the underlying security.
Over-the-counter options ("OTC Options") purchased are treated as not readily
marketable.
Options 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, put and call options on stock indexes may
be purchased for a Fund, although the current intention is not to do so in a
manner that more than 5% of a Fund's net assets would be at risk. 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.
<PAGE>
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. Subject to applicable laws and regulations and
solely as a hedge against Options on Currencies. 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 currencies may be purchased for a Fund, although the current
intention is not to do so in a manner that more than 5% of a Fund's net assets
would be at risk. 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
5
<PAGE>
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 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.
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 a Fund's
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
6
<PAGE>
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 may be 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 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 Terminbsrse (DTB), Italian Stock Exchange (ISE),
The Amsterdam Exchange (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.
Loans of Portfolio Securities
Loans up to 30% of the total value of the securities of a Fund are
permitted. 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 a Fund at least equal at all
times to 100% of the market value of the securities loaned plus accrued income.
By lending the securites 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 income on the collateral. All
7
<PAGE>
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 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. 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 bank deposits and short-term instruments, including
U.S. dollar denominated repurchase agreements.
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.
8
<PAGE>
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.
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 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.
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 gain or loss due to market fluctuation. When-issued or
delayed delivery commitments for a Fund may not be entered into if
9
<PAGE>
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.
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
================================================================================
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
10
<PAGE>
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 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);
11
<PAGE>
(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;
(ii) invest more than 10% of its net assets (taken at the greater of cost or
market value) in restricted securities; or (iii) invest less than 65% of the
value of the total assets of each Fund 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. These
policies are not fundamental and may be changed for a Fund without shareholder
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.
12
<PAGE>
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.
The Directors and executive officers of the Corporation, their principal
occupations during the past five years (although their titles may have varied
during the period) and business addresses are:
DIRECTORS OF THE CORPORATION
J.V. SHIELDS, JR.* -- Chairman of the Board and Director; Trustee of The 59
Wall Street Trust; Managing Director, Chairman and Chief Executive Officer of
Shields & Company; Chairman and Chief Executive Officer of Capital Management
Associates, Inc.; Director of Flowers Industries, Inc.(1) His business address
is Shields & Company, 140 Broadway, New York, NY 10005.
EUGENE P. BEARD** -- Director; Trustee of The 59 Wall Street Trust ; 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; President of
Lowy Industries (since August 1998); 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
13
<PAGE>
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").
JAMES E. HOOLAHAN -- Vice President; Senior Vice President of SFG.
JOHN R. ELDER -- Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON -- Secretary, Senior Vice President and Secretary of SFG;
Secretary of 59 Wall Street Distributors and 59 Wall Street Administrators.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall
Street Administrators.
CHRISTINE A. DRAPEAU - Assistant Secretary; 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.
14
<PAGE>
Each Director and officer listed above holds the equivalent position
with The 59 Wall Street Trust. The address of each officer is 21 Milk Street,
Boston, Massachusetts 02109. 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 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.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Compensation
Pension or from the
Retirement Corporation
Aggregate Benefits Accrued Estimated Annual and Fund
Name of Person, Compensation as Part of Benefits upon Complex*Paid
Position from the Corp. Fund Expenses Retirement to Directors
J.V. Shields, Jr., $[] none none $[]
Director
Eugene P. Beard, $[] none none $[]
Director
David P. Feldman, $[] none none $[]
Director
Alan G. Lowy, $[] none none $[]
Director
Arthur D.
Miltenberger, $[] none none $[]
Director
<FN>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series.
</FN>
</TABLE>
16
<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, 1999, 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, owned beneficially more than 5% of the outstanding shares of a Fund
except that [ ] owned [ ] shares of the Pacific Basin Equity Fund. However, as
of that date, partners of Brown Brothers Harriman & Co. and their immediate
families owned [ ] and [ ] 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 [ ] and [ ] 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 [
] and [ ] 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
17
<PAGE>
approved by the Independent Directors on November 10, 1998. 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 & 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, 1996, 1997 and 1998, the Fund incurred $847,451,
$1,012,388 and $[], 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, 1996, 1997 and 1998, the Fund incurred $924,243,
$931,879 and $[], respectively, for advisory services.
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".
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
18
<PAGE>
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
=============================================================================
Brown Brothers Harriman & Co. acts as Administrator for the Corporation. 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.
The Administration Agreement between the Corporation and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, but only so long as such agreement is specifically
approved at least annually in the same manner as the Investment Advisory
Agreement. (See "Investment Adviser".) The Independent Directors most recently
approved the Corporation's Administration Agreement on November 10, 1998. 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.
19
<PAGE>
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. For the fiscal years ended October 31,
1996, 1997 and 1998 the European Equity Fund incurred $195,566, $233,628 and
$[], respectively, for administrative services. For the fiscal years ended
October 31, 1996, 1997 and 1998, the Pacific Basin Equity Fund incurred
$213,287, $215,035 and $[], respectively, for administrative services.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the 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.
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.
59 Wall Street Distributors holds itself available to receive purchase orders
for Fund shares.
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 [], 1999. The
20
<PAGE>
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
terminable by 59 Wall Street Distributors on 90 days' written notice to the
Corporation.
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 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
21
<PAGE>
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.
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
22
<PAGE>
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; 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 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.
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.
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
23
<PAGE>
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 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, 1998 was []% and []%, respectively. The average
annual rate of return for the European Equity Fund and
24
<PAGE>
the Pacific Basin Equity Fund for the fiscal year ended October 31, 1998
was % and []%, 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, 1998 was []% and []%, 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.
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.
25
<PAGE>
PURCHASES AND REDEMPTIONS
===============================================================================
The Corporation reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
A shareholder's right to receive payment with respect to any redemption may
be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, a Fund's portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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.
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.
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"of 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.
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
26
<PAGE>
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.
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.
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 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
27
<PAGE>
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.
Return of Capital. 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
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 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. 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
28
<PAGE>
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 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. (No deduction is permitted in computing
alternative minimum tax liability). 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.
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.
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. Distributions to shareholders
may be subject to additional state and local taxes. Shareholders should consult
their own tax advisors with respect to any state or local taxes.
Other Information. Annual notification as to the tax status of capital
gains distributions, if any, is provided to shareholders shortly after October
31, the end of each Fund's fiscal year. Additional
29
<PAGE>
tax information is mailed to shareholders in January.
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.
This tax discussion is based on the tax laws and regulations in effect on the
date of the 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 as a
Maryland corporation on July 16, 1990. 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 $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 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. 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 as may be required by the
1940 Act or as may be
30
<PAGE>
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.
Shares have no preemptive or conversion rights. The rights of redemption are
described in the Prospectus.
Shares, when issued, are fully paid and non-assessable by the Corporation.
Stock certificates are not issued by the Corporation.
The By-laws of the Corporation provide that the presence in person or
by proxy of the holders of record of one third of the shares of a Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of shareholders of that Fund, except as otherwise required by
applicable law. The By-laws further provide that all questions shall be decided
by a majority of the votes cast at any such meeting at which a quorum is
present, except as otherwise required by applicable law.
The Corporation's Articles of Incorporation provide that, at any meeting of
shareholders of a Fund, each Eligible Institution may vote any shares as to
which that Eligible Institution is the agent of record and which are otherwise
not represented in person or by proxy at the meeting, proportionately in
accordance with the votes cast by holders of all shares otherwise represented at
the meeting in person or by proxy as to which that Eligible Institution is the
agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
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 company having
31
<PAGE>
substantially the same investment objective as a Fund. Shareholders will receive
30 days prior written notice with respect to any such investment. 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 BROKERAGE TRANSACTIONS
================================================================================
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 charge.
Accordingly, the commissions charged by any such broker may be greater than the
amount another firm might charge if the Investment Adviser determines in
32
<PAGE>
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 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.
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.
For the fiscal year ended October 31, 1998, the aggregate commissions paid
by the European Equity Fund and the Pacific Basin Equity Fund were $[] and $[] ,
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.
33
<PAGE>
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.
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.
34
<PAGE>
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 Funds dated October 31, 1998 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 which also contains performance information will be provided,
without charge, to each person receiving this Statement of Additional
Information.
35
<PAGE>
APPENDIX - EUROPEAN AND PACIFIC BASIN STATISTICS
================================================================================
The following table is a comparison of market capitalization, Gross Domestic
Product (GDP) and population of European countries:
<TABLE>
<CAPTION>
EUROPEAN STATISTICS
Market Gross Domestic
Capitalization Product Population
---------------------- ---------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Dollars % of Dollars % of
(Billions) Total* (Billions) Total* (Millions)* % of Total
------- ----- -------- ---- ------ --------
EUROPEAN UNION
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..................... 51 0.9 107 1.2 9.9 1.9
IRELAND...................... 43 0.7 64 0.7 3.3 0.6
AUSTRIA...................... 31 0.5 216 2.4 8.5 1.6
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
5,714 99.5 8,929 97.8 447.0 85.5
WESTERN EUROPE TOTAL...........
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 2.58 2.0 15.5
EUROPE TOTAL................... 5,745 100.0 9,159 100.0 528.6 100.0
<FN>
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.
</FN>
</TABLE>
36
<PAGE>
The following table is a comparison of market capitalization, GDP and
population of Pacific Basin countries:
<TABLE>
<CAPTION>
PACIFIC BASIN STATISTICS
Market Gross Domestic
Capitalization Product Population
<S> <C> <C> <C> <C> <C> <C>
Dollars % of Dollars % of % of
(Billions) Total* (Billions) Total* (Millions) Total*
JAPAN 2,217 63.3 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
<FN>
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.
</FN>
</TABLE>
WS5306E
37
<PAGE>
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET SMALL COMPANY FUND
21 Milk Street, Boston, Massachusetts 02109
================================================================================
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 26, 1999, a copy of which may be obtained from the Corporation at the
address noted above.
Table of Contents
Cross-Reference to
Page Page in Prospectus
Investments
Investment Objective and Policies . 2 5-8
Investment Restrictions . . . . 4
Management
Directors, Trustees and Officers . 6
Investment Adviser . . . . . . 10 11-12
Administrators. . . . . . . . 11
Distributor . . . . . . . . 12
Shareholder Servicing Agent,
Financial Intermediaries and
Eligible Institutions . . . . . . . . 13
Custodian, Transfer and
Dividend Disbursing Agent . . . . . .[]
Independent Auditors . . . . . . . . .[]
Net Asset Value; Redemption in Kind . . . 13 15
Computation of Performance . . . . . . 14
Purchases and Redemptions . . . . . . . . []
Federal Taxes . . . . . . . . . . 15
Description of Shares . . . . . . . 16
Portfolio Brokerage Transactions . . . . 17
Additional Information . . . . . . . . . . []
Financial Statements . . . . . . . 20
Appendix . . . . . . . . . . . . . . . . . []
The date of this Statement of Additional Information is February 26, 1999.
1
<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.
Hedging Strategies
Options on Stock Indexes. Subject to applicable laws and regulations and solely
as a hedge against changes in the market value of portfolio securities intended
to be purchased, put and call options on stock indexes may be purchased for the
Portfolio. 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
2
<PAGE>
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
3
<PAGE>
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.
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 may be 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
4
<PAGE>
liquidate a futures position until the daily limit moves have ceased.
Loans of Portfolio Securities
Loans of portfolio securities up to 30% of the total value of the Portfolio
are permitted. Securities of the Portfolio may be loaned if such loans are
secured continuously by cash or equivalent liquid securities as collateral or by
an irrevocable letter of credit in favor of the Portfolio at least equal at all
times to 100% of the market value of the securities loaned plus accrued income.
By lending the securities of the Portfolio, the Portfolio's income can be
increased by the Portfolio's continuing to receive income on the loaned
securities as well as by the opportunity for the Portfolio to receive income on
the collateral. 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. 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.
5
<PAGE>
The assets of the Portfolio may be invested in non-U.S. dollar denominated
and 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.
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.
7
<PAGE>
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 Fund and the Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Fund or the Portfolio, as the case may be
(see "Additional Information").
Except that the Corporation may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither the Portfolio nor the
Corporation, with respect to the Fund, may:
(1) borrow money or mortgage or hypothecate its assets, except that in an
amount not to exceed 1/3 of the current value of its net assets, it may borrow
money as a temporary measure for
8
<PAGE>
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 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);
9
<PAGE>
(7) purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts (except futures
and option contracts) in the ordinary course of business (the freedom of action
to hold and to sell real estate acquired as a result of the ownership of
securities is reserved);
(8) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of its net
assets (taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (it is the
present intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes; such
sales would not be made of securities subject to outstanding options);
(9) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of its investment objective, up to 25% of
its assets, at market value at the time of each investment, may be invested in
any one industry, except that positions in futures or option contracts shall not
be subject to this restriction;
(10) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction; 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. 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
10
<PAGE>
outstanding voting securities of any such issuer to be held for it; (ii) invest
more than 10% of its net assets (taken at the greater of cost or market value)
in restricted securities; or (iii) invest less than 65% of the value of the
total assets of the Portfolio 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. 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 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 Chairmen, receive no compensation from the Fund or the
Portfolio.
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:
11
<PAGE>
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; Vice
Chairman Finance and Operations of The Interpublic Group of Companies. His
business address is The Interpublic Group of Companies, Inc., 1271 Avenue of the
Americas, New York, NY 10020.
DAVID P. FELDMAN** -- Director; Trustee of The 59 Wall Street Trust; Retired;
Chairman and Chief Executive Officer - AT&T Investment Management Corporation
(prior to October 1997); Director of Dreyfus Mutual Funds, Equity Fund of Latin
America, New World Balanced Fund, India Magnum Fund, and U.S. Prime Properties
Inc.; Trustee of Corporate Property Investors. His business address 3 Tall Oaks
Drive, Warren, NJ 07059.
ALAN G. LOWY** -- Director; Trustee of The 59 Wall Street Trust; President of
Lowy Industries (since August 1998); 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 12664 Lazy Acres Court, Nevada City, CA 95959.
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.
12
<PAGE>
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").
JAMES E. HOOLAHAN -- Vice President; Senior Vice President of SFG.
JOHN R. ELDER -- Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON -- Secretary, Senior Vice President and Secretary of SFG ;
Secretary of 59 Wall Street Distributors and 59 Wall Street Administrators .
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; 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.
13
<PAGE>
**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.
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 21 Milk Street, Boston, Massachusetts 02109. 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.
14
<PAGE>
Directors of the Corporation
The Directors of the Corporation receive a base annual fee of $15,000
(except the Chairman who receives a base annual fee of $20,000) which is paid
jointly by all series of the Corporation and The 59 Wall Street Trust and
allocated among the series based upon their respective net assets. In addition,
each series which has commenced operations pays an annual fee to each Director
of $1,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Compensation
Pension or from the
Retirement Corporation
Aggregate Benefits Accrued Estimated Annual and Fund
Name of Person, Compensation as Part of Benefits upon Complex*Paid
Position from the Corp. Fund Expenses Retirement to Directors
J.V. Shields, Jr., $[] none none $[]
Director
Eugene P. Beard, $[] none none $[]
Director
David P. Feldman, $[] none none $[]
Director
Alan G. Lowy, $[] none none $[]
Director
Arthur D.
Miltenberger, $[] none none $[]
Director
<FN>
* The Fund Complex consists of the Corporation and The 59 Wall Street Trust
which currently consists of three series.
</FN>
</TABLE>
Portfolio Trustees
The Trustees of 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 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.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Compensation
Pension or from the
Retirement the Portfolio
Aggregate Benefits Accrued Estimated Annual Complex*
Name of Person, Compensation as Part of Benefits upon Paid
Position from the Port. Portfolio Expenses Retirement to Trustees
H.B. Alvord, $[] none none $[]
Trustee
Richard L. Carpenter$[] none none $[]
Trustee
Clifford A. Clark $[] none none $[]
Trustee
David M. Seitzman $[] none none $[]
Trustee
<FN>
*The Portfolio Complex consists of the Portfolio, U.S. Money Market
Portfolio, International Equity Portfolio and U.S. Mid-Cap Portfolio.
</FN>
</TABLE>
By virtue of the responsibilities assumed by Brown Brothers Harriman & Co.
under the Investment Advisory Agreement with the Portfolio and the
Administration Agreement with the Corporation, and by Brown Brothers Harriman
Trust Company (Cayman) Limited under the Administration Agreement with the
Portfolio (see "Investment Adviser" and "Administrators"), neither the
Corporation nor the Portfolio requires employees other than its officers, and
none of its officers devote full time to the affairs of the Corporation or the
Portfolio, as the case may be, or, other than the Chairmen, receive any
compensation from the Fund or the Portfolio.
As of January 31, 1999, 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 []([]%) 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[]([]%) shares of the Fund. Also, Brown
Brothers Harriman & Co. Employees Pension Plan on that date held []([]%) of the
Fund. Brown Brothers Harriman & Co. and its affiliates separately are able to
direct the disposition of an additional []([]%) shares of the Fund, as to which
shares Brown Brothers Harriman & Co. disclaims beneficial ownership.
16
<PAGE>
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 November 10, 1998. The Investment Advisory Agreement
terminates automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the Trustees of the Portfolio or by a vote of
the holders of a "majority of the outstanding voting securities" (as defined in
the 1940 Act) of the Portfolio on 60 days' written notice to Brown Brothers
Harriman & Co. and by Brown Brothers Harriman & Co. on 90 days' written notice
to the Portfolio (see "Additional Information").
With respect to the Portfolio, the investment advisory fee paid to the
Investment Adviser is calculated daily and paid monthly at an annual rate equal
to 0.65% of the Portfolio's average daily net assets. For the fiscal years ended
October 31, 1996, 1997 and 1998, the Portfolio incurred $360,578, $319,096 and
$[], respectively for advisory services.
The investment advisory services of Brown Brothers Harriman & Co. to the
Portfolio are not exclusive under the terms of the Investment Advisory
Agreement. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
17
<PAGE>
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 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".
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
==============================================================================
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.
18
<PAGE>
In its capacity as Administrator of the Corporation, Brown Brothers
Harriman & Co. administers allaspects 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. 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 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 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
19
<PAGE>
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.
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 November 10, 1998. Each agreement will terminate automatically if
assigned by either party thereto and is terminable by the Corporation or the
Portfolio at any time without penalty by a vote of a majority of the Directors
of the Corporation or the Trustees of the Portfolio, as the case may be, or by a
vote of the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Corporation or the Portfolio, as the case may be
(see "Additional Information"). The Corporation's Administration Agreement is
terminable by the Directors of the Corporation or shareholders of the
Corporation on 60 days' written notice to Brown Brothers Harriman & Co. The
Portfolio's Administration Agreement is terminable by the Trustees of the
Portfolio or by the Fund and other investors in the Portfolio on 60 days'
written notice to Brown Brothers Harriman Trust Company (Cayman) Limited. Each
agreement is terminable by the respective Administrator on 90 days' written
notice to the Corporation or the Portfolio, as the case may be.
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. For the fiscal years ended October 31,
1996, 1997 and 1998, the Fund incurred $41,210, $46,488 and $[], 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, 1997 and 1998, the Portfolio incurred $19,416,
$17,182 and $[], respectively, for administrative services.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the 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
20
<PAGE>
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.
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 statement and
the Fund's prospectus as required under federal and state securities laws.
59 Wall Street Distributors holds itself available to receive purchase orders
for Fund shares.
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 , 1999. 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.
21
<PAGE>
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 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
23
<PAGE>
and payable monthly, equal to 0.25% of the average daily net assets of the Fund
represented by shares owned during the period for which payment was being made
by customers for whom the financial institution was the holder or agent of
record.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
==============================================================================
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; 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
24
<PAGE>
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 the Fund's
investment in the Portfolio is determined once daily at 4:00 P.M., New York time
on each day the New York Stock Exchange is open for regular trading.
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 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.
25
<PAGE>
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, 1998 was []%. The average
annual rate of return for the Fund for the fiscal year ended October 31, 1998
was []%. The average annual rate of return for the Fund for the five-year period
ended October 31, 1998 was []%.
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.
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
26
<PAGE>
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.
PURCHASES AND REDEMPTIONS
==============================================================================
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.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
A shareholder's right to receive payment with respect to any redemption may
be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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.
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.
27
<PAGE>
FEDERAL TAXES
=============================================================================
Each year, the Corporation intends to continue to qualify the Fund and
elect that the Fund be treated as a separate "regulated investment company" of
the Internal Revenue Code of 1986, as amended (the "Code"). 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. 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.
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.
Gains or losses on sales of securities are treated as long-term capital gains
or losses if the securities have been held for more than one year except in
certain cases where a put has been acquired or a call has been written thereon.
Other gains or losses on the sale of securities are treated as short-term
capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities are generally treated as gains and losses
from the sale of securities. If an option written for the Portfolio lapses or is
terminated through a closing transaction, such as a repurchase of the option
from its holder, the Portfolio may realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than the amount paid
in the closing transaction. If securities are sold pursuant to the exercise of a
call option written
28
<PAGE>
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. 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
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.
Other Taxes. The Fund may be subject to state or local taxes in jurisdictions
in which it is deemed to be doing business. In addition, the treatment of the
Fund and its shareholders in those states which have income tax laws might
differ from treatment under federal income tax laws. Distributions to
shareholders may be subject to additional state and local taxes. Shareholders
should consult their own tax advisors with respect to any state or local taxes.
Other Information. Annual notification as to the tax status of capital gains
distributions, if any, is provided to shareholders shortly after October 31, the
end of the Fund's fiscal year. Additional tax information is mailed to
shareholders in January.
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
29
<PAGE>
Form W-9 to avoid such withholding.
This tax discussion is based on the tax laws and regulations in effect on the
date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
==============================================================================
The Corporation is an open-end management investment company organized as a
Maryland corporation on July 16, 1990. 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 $0.001 per share, of which
25,000,000 shares have been classified as shares of The 59 Wall Street Small
Company 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. 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 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. Shares have no preference, preemptive or conversion rights. The
rights of redemption are described in the Prospectus.
30
<PAGE>
Shares, when issued, are fully paid and non-assessable by the Corporation.
Stock certificates are not issued by the Corporation.
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 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.
31
<PAGE>
Whenever the Corporation is requested to vote on a matter pertaining to the
Portfolio, the Corporation willvote 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.
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
==============================================================================
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 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
32
<PAGE>
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, 1997 and 1998, the portfolio turnover
rate of the Portfolio was 63% and %, 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 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 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.
For the fiscal years ended October 31, 1996, 1997 and 1998, the aggregate
commissions paid from the Portfolio were $79,546, $123,358 and $[],
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. Brown
Brothers Harriman & Co. acts as one of the Portfolio's principal brokers in the
purchase and sale of 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 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,
33
<PAGE>
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, 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 $18,399,202 were effected by Brown
Brothers Harriman & Co. which involved payments of commissions to Brown Brothers
Harriman & Co. of $55,627.
For the fiscal year ended October 31, 1998, total transactions with a
principal value of $ were effected for the Portfolio of which transactions with
a principal value of $ were effected by Brown Brothers Harriman & Co. which
involved payments of commissions to Brown Brothers Harriman & Co. of $[].
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
34
<PAGE>
Portfolio. The Investment Adviser believes that the value of research services
received is not determinable nor does such research significantly reduce its
expenses. The Portfolio does not reduce the fee paid to the Investment Adviser
by any amount that might be attributable to the value of such services.
The Investment Adviser may direct a portion of the Portfolio's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from the Portfolio to pay other unaffiliated service
providers on behalf of the Portfolio for services provided for which the
Portfolio would otherwise be obligated to pay. Such commissions paid by the
Portfolio are at the same rate paid to other brokers for effecting similar
transactions in listed equity securities.
A committee, comprised of officers and partners of Brown Brothers Harriman
& Co. who are portfolio managers of some of Brown Brothers Harriman & Co.'s
managed accounts (the "Managed Accounts"), evaluates semi-annually the nature
and quality of the brokerage and research services provided by brokers, and,
based on this evaluation, establishes a list and projected ranking of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative amounts of brokerage commissions paid to
the brokers on the list may vary substantially from the projected rankings.
The Trustees of the Portfolio review regularly the reasonableness of
commissions and other transaction costs incurred for the Portfolio in light of
facts and circumstances deemed relevant from time to time and, in that
connection, receive reports from the Investment Adviser and published data
concerning transaction costs incurred by institutional investors generally.
Over-the-counter purchases and sales are transacted directly with principal
market makers, except in those circumstances in which, in the judgment of the
Investment Adviser, better prices and execution of orders can otherwise be
obtained. If the Portfolio effects a closing transaction with respect to a
futures or option contract, such transaction normally would be executed by the
same broker-dealer who executed the opening transaction. The writing of options
by the Portfolio may be subject to limitations established by each of the
exchanges governing the maximum number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are written on the same or different exchanges or are
held or written in one or more accounts or through one or more brokers. The
number of options which the Portfolio may write may be affected by options
written by the Investment Adviser for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
On those occasions when Brown Brothers Harriman & Co. deems the purchase or
sale of a security to be in the best interests of the Portfolio as well as other
customers, Brown 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
35
<PAGE>
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.
Other mutual funds or institutional investors may invest in the Portfolio
on the same terms and conditions as the Fund. However, these other investors may
have different 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.
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 In the event the Directors of the Corporation were unable to
accomplish either, the Directors will determine the best course of action.
With respect to the securities offered by the Prospectus, this Statement of
Additional Information and the Prospectus do not contain all the information
included in the Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
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, 1998 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 which also contains performance information will be provided
without charge to each person receiving this Statement of Additional
Information.
38
<PAGE>
APPENDIX
=============================================================================
<TABLE>
<CAPTION>
BREAKDOWN OF U.S. STOCKS
BY MARKET CAPITALIZATION
(as of December 31, 1998)
Total Market Capitalization
-----------------------
<S> <C> <C> <C>
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
</TABLE>
WS5128L
39
<PAGE>
PART C
ITEM 23. EXHIBITS.
(a) (i) Restated Articles of Incorporation of the Registrant.(7)
(ii) Establishment and Designation of Series of The 59 Wall
Street U.S. Equity Fund and The 59 Wall Street Short/
Intermediate Fixed Fund.(7)
(iii) Establishment and Designation of Series of The 59 Wall
Street Small Company Fund.(7)
(iv) Establishment and Designation of Series of The 59 Wall
Street International Equity Fund.(7)
(v) Establishment and Designation of Series of The 59 Wall
Street Short Term Fund. (7)
(vi) Redesignation of series of the The 59 Wall Street Short/
Intermediate Fixed Income Fund as The 59 Wall Street
Inflation-Indexed Securities Fund. (8)
(vi) Establishment and Designation of Series of The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(b) Amended and Restated By-Laws of the Registrant.(7)
(c) Not Applicable.
(d) (i) Advisory Agreement with respect to The 59 Wall Street
U.S. Equity Fund.(7)
(ii) Advisory Agreement with respect to The 59 Wall Street
Short/Intermediate Fixed Income Fund.(7)
(iii) Form of Advisory Agreement with respect to The 59 Wall
Street Inflation-Indexed Securities Fund.(8)
(iv) Form of Advisory Agreement with respect to The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(e) Form of Amended and Restated Distribution Agreement.(3)
(f) Not Applicable.
(g) (a) Form of Custody Agreement.(2)
(b) Form of Transfer Agency Agreement.(2)
(h) (i) Amended and Restated Administration Agreement.(6)
(ii) Subadministrative Services Agreement.(6)
(iii) Form of License Agreement.(1)
(iv) Amended and Restated Shareholder Servicing Agreement.(6)
(i) Appendix A to Amended and Restated Shareholder
Servicing Agreement.(9)
(v) Amended and Restated Eligible Institution Agreement.(6)
(ii) Appendix A to Amended and Restated Eligible
Institution Agreement.(9)
(vi) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street U.S. Equity Fund.(6)
(vii) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street Short/Intermediate Fixed
Fund.(6)
(viii) Form of Expense Payment Agreement with respect to
The 59 Wall Street Inflation-Indexed Securities Fund.(8)
(ix) Form of Expense Payment Agreement with respect to The
59 Wall Street Tax-Efficient U.S. Equity Fund. (9)
(x) Form of Expense Payment Agreement with respect to The
59 Wall Street International Equity Fund.(10)
(i) Opinion of Counsel (including consent).(2)
(j) Independent auditors' consent.(9)
(k) Not Applicable.
(l) Copies of investment representation letters from initial
shareholders.(2)
(m) Not Applicable.
(n) Financial Data Schedule.(11)
(o) Not Applicable.
<PAGE>
(1)Filed with the initial Registration Statement on July 16, 1990.
(2)Filed with Amendment No. 1 to this Registration Statement on October 9, 1990.
(3)Filed with Amendment No.2 to this Registration Statement on February 14,
1991.
(4)Filed with Amendment No. 5 to this Registration Statement on June 15, 1992.
(5)Filed with Amendment No. 7 to this Registration Statement on March 1, 1993.
(6)Filed with Amendment No.9 to this Registration Statement on
December 30, 1993.
(7)Filed with Amendment No. 24 to this Registration Statement on
February 28, 1996.
(8)Filed with Amendment No. 27 to this Registration Statement on
February 28, 1997.
(9)Filed with Amendment No. 38 to this Registration Statement on
September 21, 1998.
(10)Filed with Amendment No. 40 to this Registration Statement on
December 30, 1998.
(11)To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with Registrant.
See "Directors and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.
Item 25. 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 26. 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.
Item 27. 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., 21 Milk
Street, Boston, MA 02109. Unless otherwise
specified, no officer or Director of 59 Wall
Street Distributors serves as an officer or
Director of the Registrant.
<PAGE>
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 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
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 28. 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.
21 Milk Street
Boston, MA 02109
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
(investment adviser, eligible institution
and shareholder servicing agent)
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, MA 02109
(distributor)
59 Wall Street Administrators, Inc.
21 Milk Street
Boston, MA 02109
(subadministrator)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
(custodian and transfer agent)
<PAGE>
Item 29. 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 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in the City of Boston, and Commonwealth of Massachusetts on the 30th day of
December 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
(Philip W. Coolidge) Executive Officer)
/s/ EUGENE P. BEARD Director
(Eugene P. Beard)
/s/ DAVID P. FELDMAN Director
(David P. Feldman)
/s/ ARTHUR D. MILTENBERGER Director
(Arthur D. Miltenberger)
/s/ ALAN D. LOWY Director
(Alan D. Lowy)
/S/ JOHN R. ELDER Treasurer
(John R. Elder)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly authorized
in Boston, Massachusetts on the 30th day of December, 1998.
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/SUSAN JAKUBOSKI
Susan Jakuboski as Attorney-in-Fact pursuant to
Powers of Attorney filed previously.
