[LOGO]
Tax-Efficient Equity Fund
PROSPECTUS
October 15, 1998
<PAGE>
================================================================================
PROSPECTUS
The 59 Wall Street Tax-Efficient Equity Fund
21 Milk Street, Boston, Massachusetts 02109
================================================================================
The 59 Wall Street Tax-Efficient Equity Fund is a separate portfolio of
The 59 Wall Street Fund, Inc. Shares of the Fund are offered by this Prospectus.
The Fund's investment objective is to provide investors with tax-efficient
long-term capital growth while also generating current income. The Fund is
designed to reduce the impact of Federal income taxes on a shareholder's
investment return and to maximize return on an after tax basis. The assets of
the Fund under normal circumstances are fully invested in equity securities of
companies that are well-established and financially sound. The Fund is an
appropriate investment for those investors seeking superior long-term returns
combined with some current income and who are able to accept the risks inherent
in equity investing. There can be no assurance that the Fund's investment
objective will be achieved.
Investments in the Fund are neither insured nor guaranteed by the U.S.
Government. Shares of the Fund are not deposits or obligations of, or guaranteed
by, Brown Brothers Harriman & Co. or any other bank, and the shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other federal, state or other governmental agency.
Brown Brothers Harriman & Co. is the investment adviser to, the
administrator of and the shareholder servicing agent for the Fund. Shares of the
Fund are offered at net asset value and without a sales charge.
This Prospectus, which investors are advised to read and retain for future
reference, sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated October 15, 1998. This information is
incorporated herein by reference and is available without charge upon request
from the Fund's distributor, 59 Wall Street Distributors, Inc., 21 Milk Street,
Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is October 15, 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
Expense Table ............................................................. 3
Investment Objective and Policies.......................................... 4
Investment Restrictions.................................................... 7
Purchase of Shares......................................................... 7
Redemption of Shares....................................................... 8
Management of the Corporation.............................................. 9
Net Asset Value ........................................................... 13
Dividends and Distributions................................................ 13
Taxes...................................................................... 14
Description of Shares...................................................... 15
Additional Information..................................................... 16
Appendix .................................................................. 17
TERMS USED IN THIS PROSPECTUS
Corporation................................ The 59 Wall Street Fund, Inc.
Fund....................................... The 59 Wall Street Tax-Efficient
Equity Fund
Investment Adviser and Administrator ...... Brown Brothers Harriman & Co.
Subadministrator........................... 59 Wall Street Administrators, Inc.
("59 Wall Street Administrators")
Distributor................................ 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors")
1940 Act................................... The Investment Company Act of 1940,
as amended
2
<PAGE>
EXPENSE TABLE
================================================================================
The following table provides (I) a summary of estimated expenses relating
to purchases and sales of shares of the Fund, and the aggregate annual operating
expenses of the Fund, as a percentage of average net assets of the Fund, and
(ii) an example illustrating the dollar cost of such estimated expenses on a
$1,000 investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases................................ None
Sales Load Imposed on Reinvested Dividends..................... None
Deferred Sales Load............................................ None
Redemption Fee................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee............................... 0.65%
12b-1 Fee............................................. None
Other Expenses
Administration Fee.................................. 0.15%
Shareholder Servicing/
Eligible Institution Fee.......................... 0.25
Expense Payment Fee ................................ 0.15 0.55
---- ----
Total Fund Operating Expenses......................... 1.20%
====
Example 1 year 3 years
------- ------ -------
A shareholder of the Fund would pay the following
expenses on a $1,000 investment, assuming (1) 5%
annual return, and (2) redemption at the end of each
time period:........................................ $12 $38
--- ---
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In connection
with the Example, please note that $1,000 is currently less than the Fund's
minimum purchase requirement. The purpose of this table is to assist investors
in understanding the various costs and expenses that shareholders of the Fund
bear directly or indirectly. Under an expense payment agreement, 59 Wall Street
Administrators pays the Fund's expenses, other than fees paid to Brown Brothers
Harriman & Co. under the Corporation's Administration Agreement and other than
expenses relating to the organization of the Fund. If this expense payment
agreement was not in place, the "Other Expenses" would be 0.70%, total Fund
operating expenses would be expected to be 1.35% and the shareholder expenses
reflected in the example above would be $14 and $43, respectively for the Fund.
(See "Expense Payment Agreement".)
For more information with respect to the expenses of the Fund see
"Management of the Corporation" herein.
3
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
================================================================================
The investment objective of the Fund is to provide investors with
tax-efficient long-term capital growth.
The investment objective of the Fund is a fundamental policy and may be
changed only with the approval of the holders of a "majority of the Fund's
outstanding voting securities" (as defined in the 1940 Act). (See "Additional
Information" in this Prospectus.) However, the investment policies of the Fund
as described below are not fundamental and may be changed without such approval.
The Fund is an appropriate investment for those investors seeking superior
long-term returns who are able to accept the risks inherent in equity investing.
The Fund is not an appropriate investment for tax deferred accounts such as 401k
and IRA plans.
The assets of the Fund under normal circumstances are fully invested in
equity securities traded on the New York Stock Exchange, American Stock Exchange
or the National Association of Securities Dealers Automated Quotations (NASDAQ)
System. Although the assets of the Fund are invested primarily in common stocks,
other securities with equity characteristics may be purchased, including
securities convertible into common stock, trust or limited partnership
interests, rights, warrants and American Depositary Receipts. Investments
generally consist of equities issued by domestic firms; however, equities of
foreign-based companies may also be purchased if they are registered under the
Securities Act of 1933.
The Fund primarily invests in medium and large sized companies with a
sound financial structure, proven management, an established industry position
and competitive products and services. In selecting individual securities, the
focus is primarily on those companies that exhibit above average revenue and
earnings growth as well as high or improving returns on investment.
The Fund holds a broadly diversified portfolio representing many sectors
of the U.S. economy. Investment in both growth and value equities provides
exposure to each of the dominant investment styles. These diversification
strategies are designed to control the portfolio's exposure to economic sector
risk, style risk and company specific risk.
[The following table was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
1925 1935 1945 1955 1965 1975 1985 1995 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stocks $1 $2 $4 $19 $53 $73 $279 $1,114 $1,830
Long Term Gov't Bonds $1 $2 $3 $3 $3 $5 $11 $34 $39
U.S. Treasury Bills $1 $1 $1 $1 $2 $3 $8 $13 $14
Inflation $1 $1 $1 $2 $2 $3 $6 $9 $9
</TABLE>
- ----------
This graph illustrates the total return of the major classes of financial assets
since 1925, including common stocks, long-term government bonds and money market
securities as measured by U.S. Treasury bills. The Consumer Price Index is used
as a measure of inflation. Common Stock and Long Term Government Bond numbers
are obtained from Ibbotson Associates' Large Company Stock and Long Term
Government Bond indexes, respectively. This graph is not a prediction of the
future performance of any of these assets or of inflation.
4
<PAGE>
Historically, common stocks have provided investors with higher long-term
returns than other investment vehicles. The preceding graph on page 4
illustrates that over time, common stocks have outperformed investments in
long-term government bonds and U.S. Treasury bills.
The "drag" on investment returns related to income taxes and capital gains
taxes can be reduced over time through the use of tax-efficient investment
strategies. This enables investors to retain a larger portion of their pre-tax
investment returns on an after-tax basis. Key elements of our tax-efficient
approach include:
o Pursuing an equity strategy which emphasizes capital appreciation
o Focusing stock selection process on the security's long-term
investment potential
o Selective realization of losses within the Fund that can be used to
offset realized gains
o Evaluating potential stock sales and reinvestment alternatives on an
after-tax basis
While many equity mutual funds seek to provide superior pre-tax returns,
the Fund seeks to provide superior after-tax returns. Although the Fund's
tax-efficient strategy is to minimize an investor's tax liability, there can be
no guarantee that it will be minimized. In employing its strategies, the Fund
will sell securities when the anticipated performance benefit justifies
incurring the resulting tax liability.
The Fund is actively managed by a team of investment professionals and
research analysts. (See "Investment Adviser".) The Investment Adviser analyzes
economic trends and identifies stocks appropriate for investment in the Fund.
Investment decisions are the result of a disciplined process which
systematically evaluates future growth expectations and asset valuations in
relation to prevailing price levels.
The Fund generally intends to pay redemption proceeds in cash, however, it
reserves the right at its sole discretion to pay significant redemptions by a
distribution in-kind of securities (instead of cash). An in-kind redemption
payment can shield the Fund, and other shareholders, from tax liabilities that
might otherwise be incurred. However, the stocks received will continue to
fluctuate in value after redemption and will be subject to brokerage and other
transaction costs when liquidated.
Risk Factors
Although the assets of the Fund are invested primarily in equity
securities of larger, well-established companies, the portfolio is subject to
market risk, meaning that stock prices in general may decline over short or
extended periods of time. As with any equity-based mutual fund, the investor
should be aware that unfavorable economic conditions can adversely affect
corporate earnings and cause declines in stock prices.
Hedging Strategies
Subject to applicable laws and regulations and solely as a hedge against
changes in the market value of portfolio securities or securities intended to be
purchased, put and call options on stock indexes may be purchased and futures
contracts on stock indexes may be entered into for the Fund. (See Appendix on
page 17 for more detail.) For the same purpose, put and call options on stocks
may be purchased, although the current intention is not to do so in such a
manner that more than 5% of the Fund's net assets would be at risk.
Over-the-counter (OTC) options purchased are treated as not readily
marketable.
Portfolio Brokerage
The portfolio of the Fund is managed actively in pursuit of its
tax-efficient 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. The Fund's annual portfolio turnover rate is expected
to be 30%. A 25% annual turnover rate would occur, for example, if one-quarter
of the securities in the Fund's portfolio (excluding short-term obligations)
were replaced once in a period of one year. The amount of brokerage commissions
and taxes on realized capital gains to be
5
<PAGE>
borne by the shareholders of the Fund tend to increase as the turnover rate
activity increases.
In effecting securities transactions for the Fund, the Investment Adviser
seeks to obtain the best price in execution of orders. In selecting brokers, the
Investment Adviser considers a number of factors including: the broker's ability
to execute orders without disturbing the market price; the broker's reliability
for prompt, accurate confirmations and on-time delivery of securities; the
broker's financial condition and responsibility; the research and other
investment information provided by the broker; and the commissions charged.
Accordingly, the commissions charged by any such broker may be greater than the
amount another firm might charge if the Investment Adviser determines in good
faith that the amount of such commissions is reasonable in relation to the value
of the brokerage services and research information provided by such broker.
The Investment Adviser may direct a portion of the Fund's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from the Fund to pay other unaffiliated service
providers for services provided to the Fund for which the Fund would otherwise
be obligated to pay. Such commissions paid by the Fund are at the same rate paid
to other brokers for effecting similar transactions in listed equity securities.
Brown Brothers Harriman & Co. is one of the principal brokers of the Fund
in the purchase and sale of portfolio securities when, in the judgment of the
Investment Adviser, that firm is able to obtain a price and execution at least
as favorable as other qualified brokers. As one of the principal brokers of the
Fund, Brown Brothers Harriman & Co. receives brokerage commissions from the
Fund.
On those occasions when Brown Brothers Harriman & Co. deems the purchase
or sale of a security to be in the best interests of the Fund as well as other
customers, Brown Brothers Harriman & Co., to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Fund with those to be sold or purchased for other
customers in order to obtain best execution, including lower brokerage
commissions, if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent with its fiduciary obligations to its customers, including the
Fund. In some instances, this procedure might adversely affect the Fund.
Other Investment Techniques
Short-Term Instruments. The assets of the Fund may be invested in U.S.
dollar denominated short-term instruments, including repurchase agreements,
obligations of the U.S. Government, its agencies or instrumentalities,
commercial paper and bank obligations (such as certificates of deposit, fixed
time deposits, and bankers' acceptances). Cash is held for the Fund in demand
deposit accounts with the Fund's custodian bank.
U.S. Government Securities. The assets of the Fund may be invested in
securities issued by the U.S. Government, its agencies or instrumentalities.
These securities include notes and 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 Fund. The price paid for
these securities, or received upon resale, may be lower than the price paid or
received for similar securities with a more liquid market. Accordingly, the
valuation of these securities reflects any limitation on their liquidity.
Loans of Portfolio Securities. Loans up to 30% of the total value of the
securities of the Fund are permitted. These loans must be secured continuously
by cash or equivalent collateral or by an irrevocable letter of credit in favor
of the Fund at least equal at all times to 100% of the market value of the
securities loaned plus accrued income. By lending the securities of the Fund,
the Fund's income can be increased by the Fund continuing to receive income on
the loaned securities as well as by the opportunity for the Fund to
6
<PAGE>
receive interest on the collateral. Any appreciation or depreciation in the
market price of the borrowed securities which occurs during the term of the loan
inures to the Fund and its shareholders.
When-Issued and Delayed Delivery Securities. Securities may be purchased
for the Fund on a when-issued or delayed delivery basis. For example, delivery
and payment may take place a month or more after the date of the transaction.
The purchase price and the interest rate payable on the securities, if any, are
fixed on the transaction date. The securities so purchased are subject to market
fluctuation and no income accrues to the Fund until delivery and payment take
place. At the time the commitment to purchase securities on a when-issued or
delayed delivery basis is made, the transaction is recorded and thereafter the
value of such securities is reflected each day in determining the Fund's net
asset value. At the time of its acquisition, a when-issued or delayed delivery
security may be valued at less than the purchase price. Commitments for such
when-issued or delayed delivery securities are made only when there is an
intention of actually acquiring the securities. On delivery dates for such
transactions, such obligations are met from maturities or sales of securities
and/or from cash flow. If the right to acquire a when-issued or delayed delivery
security is disposed of prior to its acquisition, the Fund could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. When-issued or delayed delivery commitments for the Fund may
not be entered into if such commitments exceed in the aggregate 15% of the
market value of its total assets, less liabilities other than the obligations
created by when-issued or delayed delivery commitments.
INVESTMENT RESTRICTIONS
================================================================================
The Statement of Additional Information for the Fund includes a listing of
the specific investment restrictions which govern the Fund's investment
policies. Certain of these investment restrictions are deemed fundamental
policies and may be changed only with the approval of the holders of a "majority
of the Fund's outstanding voting securities" (as defined in the 1940 Act) (see
"Additional Information in this Prospectus").
As a fundamental policy, money is not borrowed for the Fund in an amount
in excess of 33 1/3% of the assets of the Fund. Money is borrowed only from
banks and only either to accommodate requests for the redemption of shares while
effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations.
As a non-fundamental policy, under normal circumstances, at least 65% of
the value of the total assets of the Fund is invested in equity securities.
The Fund is classified as diversified under the 1940 Act, which means that
at least 75% of its total assets is represented by cash; securities issued by
the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the Fund's total assets. The Fund does not purchase more than 10% of the
outstanding voting securities of any issuer.
PURCHASE OF SHARES
================================================================================
Shares of the Fund are offered on a continuous basis at their net asset
value without a sales charge. The Corporation reserves the right to determine
the purchase orders for Fund shares that it will accept. Shares of the Fund may
be purchased on any day the New York Stock Exchange is open for regular trading
if the Corporation receives the purchase order and acceptable payment for such
order prior to 4:00 P.M., New York time. Purchases of Fund shares are then
executed at the net asset value per share next
7
<PAGE>
determined on that same day. Shares are entitled to dividends declared, if any,
starting as of the first business day following the day a purchase order is
executed on the books of the Corporation.
An investor who has an account with an Eligible Institution (see page 12)
or a Financial Intermediary (see page 11) may place purchase orders for Fund
shares with the Corporation through that Eligible Institution or Financial
Intermediary which holds such shares in its name on behalf of that customer
pursuant to arrangements made between that customer and that Eligible
Institution or Financial Intermediary. Each Eligible Institution and each
Financial Intermediary may establish and amend from time to time a minimum
initial and a minimum subsequent purchase requirement for its customers.
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. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the purchase of Fund shares.
An investor who does not have an account with an Eligible Institution or a
Financial Intermediary must place purchase orders for Fund shares with the
Corporation through the Fund's Shareholder Servicing Agent. Such an investor has
such shares held directly in the investor's name on the books of the Corporation
and is responsible for arranging for the payment of the purchase price of Fund
shares. All purchase orders for initial and subsequent purchases are executed at
the net asset value per share next determined after the Corporation's custodian,
State Street Bank and Trust Company, has received payment in the form of a
cashier's check drawn on a U.S. bank, a check certified by a U.S. bank or a wire
transfer. Brown Brothers Harriman & Co., as the Fund's Shareholder Servicing
Agent, has established a minimum initial purchase requirement for the Fund of
$100,000 and a minimum subsequent purchase requirement for the Fund of $25,000.
These minimum purchase requirements may be amended from time to time.
Inquiries regarding the manner in which purchases of Fund shares may be
effected and other matters pertaining to the Fund should be directed to Brown
Brothers Harriman & Co., the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.)
REDEMPTION OF SHARES
================================================================================
A redemption request must be received by the Corporation prior to 4:00
P.M., New York time on any day the New York Stock Exchange is open for regular
trading. Such a redemption is executed at the net asset value per share next
determined on that same day. Shares continue to earn dividends declared, if any,
through the business day a redemption request is executed on the books of the
Corporation.
Shares held by an Eligible Institution or a Financial Intermediary on
behalf of a shareholder must be redeemed through that Eligible Institution or
Financial Intermediary pursuant to arrangements made between that shareholder
and that Eligible Institution or Financial Intermediary. Proceeds of a
redemption are paid to that shareholder's account at that Eligible Institution
or Financial Intermediary on a date established by the Eligible Institution or
Financial Intermediary. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the redemption of Fund shares.
Shares held directly in the name of a shareholder on the books of the
Corporation may be redeemed by submitting a redemption request in good order to
the Corporation through the Fund's Shareholder Servicing Agent. (See back cover
for address and phone number.) Proceeds resulting from such redemption are paid
by the Corporation directly to the shareholder in "available" funds generally on
the next business day after the redemption request is executed, and in any event
within seven days.
Redemptions By the Corporation
The Fund's Shareholder Servicing Agent (see page 11), each Eligible
Institution (see page 12) and each Financial Intermediary (see page 11) may
establish and amend from time to time for their respective
8
<PAGE>
customers a minimum account size. If the value of a shareholder's holdings in
the Fund falls below that amount because of a redemption of shares, the
shareholder's remaining shares may be redeemed. If such remaining shares are to
be redeemed, the shareholder is so notified and is allowed 60 days to make an
additional investment to enable the shareholder to meet the minimum requirement
before the redemption is processed. Brown Brothers Harriman & Co., as the Fund's
Shareholder Servicing Agent, has established a minimum account size of $25,000.
Further Redemption Information
In the event a shareholder redeems all shares held in the Fund, future
purchases of shares of the Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares. Redemptions of shares are taxable events on which a shareholder may
realize a gain or a loss.
An investor should be aware that redemptions from the Fund may not be
processed if a completed account application with a certified taxpayer
identification number has not been received.
The Corporation has reserved the right to pay the amount of a redemption
from the Fund, either totally or partially, by a distribution in kind of
securities (instead of cash) from the Fund. (See "Net Asset Value; Redemption in
Kind" in the Statement of Additional Information.)
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed for up to
seven days and for such other periods as the 1940 Act may permit. (See
"Additional Information" in the Statement of Additional Information.)
MANAGEMENT OF THE CORPORATION
================================================================================
Directors and Officers
The Directors, in addition to supervising the actions of the
Administrator, Investment Adviser and Distributor of the Fund, as set forth
below, decide upon matters of general policy. Because of the services rendered
by the Investment Adviser and the Administrator, the Corporation itself requires
no employees other than its officers, none of whom, other than the Chairman,
receive compensation from the Fund and all of whom, other than the Chairman, are
employed by 59 Wall Street Administrators. (See "Directors and Officers" in the
Statement of Additional Information.)
The Directors of the Corporation are:
J.V. Shields, Jr.
Chairman and Chief Executive Officer
of Shields & Company
Eugene P. Beard
Vice Chairman, Finance and Operations of
The Interpublic Group of Companies
David P. Feldman
Retired, Chairman and Chief Executive Officer
of AT&T Investment Management
Corporation
Alan G. Lowy
Private Investor
Arthur D. Miltenberger
Retired, Vice President and Chief Financial
Officer of Richard K. Mellon and Sons
Investment Adviser
The Investment Adviser to the Fund is Brown Brothers Harriman & Co.,
Private Bankers, a New York limited partnership established in 1818. The firm is
subject to examination and regulation by the Superintendent of Banks of the
State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
9
<PAGE>
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Fund. Subject to the general supervision of the
Corporation's Directors, Brown Brothers Harriman & Co. makes the day-to-day
investment decisions for the Fund, places the purchase and sale orders for the
portfolio transactions of the Fund, and generally manages the Fund's
investments. Brown Brothers Harriman & Co. provides a broad range of investment
management services for customers in the United States and abroad. At June 30,
1998, it managed total assets of approximately $30 billion.
The Fund's portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. Brian A. Berris, Mr. Stephen C. Whitman, Jr. and Mr.
Geoffrey D. Kimball. Mr. Berris holds a B.S.B.A. from the University of
Nebraska, a M.B.A. from Northwestern University and is a Chartered Financial
Analyst. He joined Brown Brothers Harriman & Co. in 1973. Mr. Whitman holds a
B.A. from Colgate University and a M.B.A. from the University of Virginia. He
joined Brown Brothers Harriman & Co. in 1986. Mr. Kimball holds a B.A. from Yale
University and a M.A. from Columbia University. He joined Brown Brothers
Harriman & Co in 1977.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreement, Brown Brothers Harriman & Co. receives from the
Fund an annual fee, computed daily and payable monthly, equal to 0.65% of the
average daily net assets of the Fund. Brown Brothers Harriman & Co. also
receives an annual administration fee from the Fund equal to 0.15% of the Fund's
average daily net assets and an annual shareholder servicing/eligible
institution fee from the Fund equal to 0.25% of the average daily net assets of
the Fund represented by shares owned during the period by customers for whom
Brown Brothers Harriman & Co. is the holder or agent of record.
The investment advisory services of Brown Brothers Harriman & Co. to the
Fund are not exclusive under the terms of the Investment Advisory Agreement.
Brown Brothers Harriman & Co. is free to and does render investment advisory
services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of December 15, 1993, the
Corporation may continue to use in its name 59 Wall Street, the current and
historic address of Brown Brothers Harriman & Co. The agreement may be
terminated by Brown Brothers Harriman & Co. at any time upon written notice to
the Corporation upon the expiration or earlier termination of any investment
advisory agreement between the 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.
Administrator
Brown Brothers Harriman & Co. acts as Administrator for the Corporation.
(See "Administrator" in the Statement of Additional Information.)
In its capacity as Administrator, Brown Brothers Harriman & Co.
administers all aspects of the Corporation's operations subject to the
supervision of the Corporation's Directors except as set forth below under
"Distributor". In connection with its responsibilities as Administrator and at
its own expense, Brown Brothers Harriman & Co. (I) provides the Corporation with
the services of persons competent to perform such supervisory, administrative
and clerical functions as are necessary in order to provide effective
10
<PAGE>
administration of the Corporation, including the maintenance of certain books
and records; (ii) oversees the performance of administrative and professional
services to the Corporation by others, including the Fund's Custodian, Transfer
and Dividend Disbursing Agent; (iii) provides the Corporation with adequate
office space and communications and other facilities; and (iv) prepares and/or
arranges for the preparation, but does not pay for, the periodic updating of the
Corporation's registration statement and the Fund's prospectus, the printing of
such documents for the purpose of filings with the Securities and Exchange
Commission and state securities administrators, and the preparation of tax
returns for the Fund and reports to the Fund's shareholders and the Securities
and Exchange Commission.
For the services rendered to the Corporation and related expenses borne by
Brown Brothers Harriman & Co., as Administrator of the Corporation, Brown
Brothers Harriman & Co. receives from the Fund an annual fee, computed daily and
payable monthly, equal to 0.15% of the Fund's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the Corporation as are from time to time agreed upon by the parties.
The offices of 59 Wall Street Administrators are located at 21 Milk Street,
Boston, Massachusetts 02109. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Corporation, participation in
the preparation of documents required for compliance by the Corporation with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Directors and shareholders of the Corporation, and other
functions that would otherwise be performed by the Administrator as set forth
above. For performing such subadministrative services, 59 Wall Street
Administrators receives such compensation as is from time to time agreed upon
but not in excess of the amount paid to the Administrator from the Fund.
Shareholder Servicing Agent
The Corporation has entered into a shareholder servicing agreement with
Brown Brothers Harriman & Co. pursuant to which Brown Brothers Harriman & Co.,
as agent for the Corporation with respect to the Fund, among other things:
answers inquiries from shareholders of and prospective investors in the Fund
regarding account status and history, the manner in which purchases and
redemptions of Fund shares may be effected and certain other matters pertaining
to the Fund; assists shareholders of and prospective investors in the Fund in
designating and changing dividend options, account designations and addresses;
and provides such other related services as the Corporation or a shareholder of
or prospective investor in the Fund may reasonably request. For these services,
Brown Brothers Harriman & Co. receives from the Fund an annual fee, computed
daily and payable monthly, equal to 0.25% of the Fund's average daily net assets
represented by shares owned during the period for which payment was being made
by shareholders who did not hold their account with an eligible institution.
Financial Intermediaries
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Fund who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives
11
<PAGE>
funds in connection with customer orders to purchase or redeem shares of the
Fund; provides periodic statements showing a customer's account balance and, to
the extent practicable, integrates such information with information concerning
other customer transactions otherwise effected with or through it; furnishes,
either separately or on an integrated basis with other reports sent to a
customer, monthly and annual statements and confirmations of all purchases and
redemptions of Fund shares in a customer's account; transmits proxy statements,
annual reports, updated prospectuses and other communications from the
Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Fund. For these services, the Financial Intermediary
receives such fees from the Shareholder Servicing Agent as may be agreed upon
from time to time between the Shareholder Servicing Agent and such Financial
Intermediary.
Eligible Institutions
The Corporation enters into eligible institution agreements with banks,
brokers and other financial institutions pursuant to which each financial
institution, as agent for the Corporation with respect to shareholders of and
prospective investors in the Fund who are customers with that financial
institution, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customer's shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Fund. For these services, each financial institution
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of the Fund's average daily net assets represented by shares owned
during the period for which payment was being made by customers for whom the
financial institution was the holder or agent of record.
Expense Payment Agreement
Under an agreement dated August 11, 1998, 59 Wall Street Administrators
pays the Fund's expenses (see "Expense Table"), other than fees paid to Brown
Brothers Harriman & Co. under the Corporation's Administration Agreement and
other than expenses relating to the organization of the Fund. In return, 59 Wall
Street Administrators receives a fee from the Fund such that after such payment
the aggregate expenses of the Fund do not exceed an agreed upon annual rate,
currently 1.20% of the average daily net assets of the Fund. Such fees are
computed daily and paid monthly. The expense payment agreement will terminate on
July 31, 2003. If there had been no expense payment agreement, the Directors of
the Corporation estimate that the total operating expenses of the Fund may
increase to approximately 1.35% of the average annual net assets of the Fund.
The expenses of the Fund paid by 59 Wall Street Administrators under the
agreement include the shareholder servicing/eligible institution fees, the
compensation of the Directors of the Corporation; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Fund;
insurance premiums; expenses of calculating the net asset value of shares of the
Fund; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy
12
<PAGE>
statements and reports to shareholders and to governmental officers and
commissions; expenses of shareholder meetings; expenses related to the issuance,
registration and qualification of shares of the Fund; and expenses connected
with the execution, recording and settlement of portfolio security transactions;
and the expenses associated with the investment advisory agreement.
Distributor
59 Wall Street Distributors acts as exclusive Distributor of shares of the
Fund. Its office is located at 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
the Fund's prospectus as required under federal and state securities laws. (See
"Distributor" in the Statement of Additional Information.) 59 Wall Street
Distributors holds itself available to receive purchase orders for Fund shares.
Custodian, Transfer and Dividend
Disbursing Agent
State Street Bank and Trust Company ("State Street" or the "Custodian"),
225 Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian,
Transfer and Dividend Disbursing Agent for the Fund.
As Custodian, it is responsible for maintaining books and records of the
Fund's portfolio transactions and holding the Fund's portfolio securities and
cash pursuant to a custodian agreement with the Corporation. Cash is held for
the Fund in demand deposit accounts at the Custodian. Subject to the supervision
of the Administrator, the Custodian maintains the Fund's accounting and
portfolio transaction records and for each day computes the Fund's net asset
value. As Transfer and Dividend Disbursing Agent it is responsible for
maintaining the books and records detailing the ownership of the Fund's shares.
Independent Auditors
Deloitte & Touche LLP are the independent auditors for the Fund.
NET ASSET VALUE
================================================================================
The Fund's net asset value per share is determined once daily at 4:00
P.M., New York time on each day the New York Stock Exchange is open for regular
trading.
The determination of the Fund's net asset value per share is made by
subtracting from the value of the total assets of the Fund the amount of its
liabilities and dividing the difference by the number of shares of the Fund
outstanding at the time the determination is made.
Values of assets in the Fund's portfolio are determined on the basis of
their market or other fair value. (See "Net Asset Value; Redemption in Kind" in
the Statement of Additional Information.)
DIVIDENDS AND DISTRIBUTIONS
================================================================================
Substantially all of the Fund's net investment income, together with a
discretionary portion of any net short-term capital gains, is declared and paid
to shareholders as a dividend semi-annually. Substantially all of the Fund's
realized net long-term capital gains, if any, are declared and paid to
shareholders on an annual basis as a capital gains distribution. An additional
dividend and/or capital gains distribution may be made to the extent necessary
to avoid the imposition of federal excise tax on the Fund. (See "Taxes" below.)
Dividends and capital gains distributions are payable to shareholders of record
on the record date.
13
<PAGE>
Unless a shareholder whose shares are held directly in the shareholder's
name on the books of the Corporation elects to have dividends and capital gains
distributions paid in cash, dividends and capital gains distributions are
automatically reinvested in additional Fund shares without reference to the
minimum subsequent purchase requirement. The Corporation reserves the right to
discontinue, alter or limit the automatic reinvestment privilege at any time,
but will provide shareholders prior written notice of any such discontinuance,
alteration or limitation.
Each Eligible Institution and each Financial Intermediary may establish
its own policy with respect to the reinvestment of dividends and capital gains
distributions in additional Fund shares.
TAXES
================================================================================
Each year, the Corporation intends to qualify the Fund and elect that the
Fund be treated as a separate regulated investment company under the Internal
Revenue Code of 1986, as amended. Accordingly, the Fund is not subject to
federal income taxes on its net income and realized net long-term capital gains
that are distributed to its shareholders. A 4% non-deductible excise tax is
imposed on the Fund to the extent that certain distribution requirements for the
Fund for each calendar year are not met. The Corporation intends to meet such
requirements.
Dividends are taxable to shareholders of the Fund as ordinary income,
whether such dividends are paid in cash or reinvested in additional shares.
Dividends paid from the Fund may be eligible for the dividends-received
deduction allowed to corporate shareholders because all or a portion of the
Fund's net income may consist of dividends paid by domestic corporations.
Capital gains distributions are taxable to shareholders as long-term capital
gains, whether paid in cash or reinvested in additional shares and regardless of
the length of time a particular shareholder has held Fund shares.
Any dividend or capital gains distribution has the effect of reducing the
net asset value of Fund shares held by a shareholder by the same amount as the
dividend or capital gains distribution. If the net asset value of the shares
should be reduced below a shareholder's cost as a result of such a dividend or
capital gains distribution, the dividend or capital gains distribution, although
constituting a return of invested capital, would be taxable as described above.
Any gain or loss realized on the redemption of Fund shares by a shareholder who
is not a dealer in securities is treated as long-term capital gain or loss if
the shares have been held for more than one year, and otherwise as short-term
capital gain or loss. However, any loss realized by a shareholder upon the
redemption of shares in the Fund held one year or less is treated as a long-term
capital loss to the extent of any long-term capital gains distributions received
by the shareholder with respect to such shares.
Under U.S. Treasury regulations, the Corporation and each Eligible
Institution are required to withhold and remit to the U.S. Treasury a portion
(31%) of dividends and capital gains distributions on the accounts of those
shareholders who fail to provide a correct taxpayer identification number
(Social Security Number for individuals) or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
State and Local Taxes
The treatment of the Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders are urged to consult their tax advisors regarding any state
or local taxes.
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
14
<PAGE>
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments are available which would not be subject to United
States withholding tax.
Other Information
Annual notification as to the tax status of capital gains distributions,
if any, is provided to shareholders shortly after October 31, the end of the
Fund's fiscal year. Additional tax information is mailed to shareholders in
January.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
================================================================================
The Corporation is an open-end management investment company organized on
July 16, 1990 as a corporation under the laws of the State of Maryland. Its
offices are located at 21 Milk Street, Boston, Massachusetts 02109; its
telephone number is (617) 423-0800.
The Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par value $.001 per share, of which
25,000,000 shares have been classified as shares of the Fund. The Board of
Directors 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 eight such series in addition to the Fund.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of the Fund are entitled to a full vote for each full share
held and to a fractional vote for fractional shares. The voting rights of
shareholders are not cumulative. Shares have no preemptive or conversion rights.
The rights of redemption are described elsewhere herein. Shares are fully paid
and nonassessable by the Corporation. It is the intention of the Corporation not
to hold meetings of shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or as may be permitted by the Articles of Incorporation or By-laws. Shareholders
have under certain circumstances (e.g., upon application and submission of
certain specified documents to the Directors by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Directors. Shareholders also have the right to remove one or more Directors
without a meeting by a declaration in writing by a specified number of
shareholders.
The By-laws of the Corporation provide that the presence in person or by
proxy of the holders of record of one third of the shares of the Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of shareholders of the Fund, except as otherwise required by applicable
law. The By-laws further provide that all questions shall be decided by a
majority of the votes cast at any such meeting at which a quorum is present,
except as otherwise required by applicable law.
The Corporation's Articles of Incorporation provide that, at any meeting
of shareholders of the Fund, each Eligible Institution may vote any shares as to
which that Eligible Institution is the agent of record and which are otherwise
not represented in person or by
15
<PAGE>
proxy at the meeting, proportionately in accordance with the votes cast by
holders of all shares otherwise represented at the meeting in person or by proxy
as to which that Eligible Institution is the agent of record. Any shares so
voted by an Eligible Institution are deemed represented at the meeting for
purposes of quorum requirements.
ADDITIONAL INFORMATION
================================================================================
As used in this Prospectus, the term "majority of the Fund's outstanding
voting securities" (as defined in the 1940 Act) currently means the vote of (I)
67% or more of the Fund's shares present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present in person
or represented by proxy; or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors. The annual report also contains performance information
and is made available to investors upon request and without charge.
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
The Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include the Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the Standard & Poor's 500 Index) and to investments
for which reliable performance data is available. Performance information may
also include comparisons to averages, performance rankings or other information
prepared by recognized mutual fund statistical services. To the extent that
unmanaged indexes are so included, the same indexes are used on a consistent
basis. The Fund's investment results as used in such communications are
calculated on a total rate of return basis in the manner set forth below.
Period and average annualized total rates of return may be provided in
such communications. The total rate of return refers to the change in the value
of an investment in the Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
of return may be annualized. An annualized total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a one year period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return is slightly
higher than a period total rate of return if the period is shorter than one
year, because of the assumed reinvestment.
This Prospectus omits certain of the information contained in the
Statement of Additional Information and the Registration Statement filed with
the Securities and Exchange Commission. The Statement of Additional Information
may be obtained from 59 Wall Street Distributors without charge and the
Registration Statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed by the rules and regulations of
the Securities and Exchange Commission.
16
<PAGE>
APPENDIX -- HEDGING STRATEGIES
================================================================================
Options on Stock Indexes. A stock index fluctuates with changes in the
market values of the stocks included in the index. Examples of stock indexes are
the Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange) and
the New York Stock Exchange Composite Index (New York Stock Exchange).
Options on stock indexes are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of stock at a fixed price (strike price), an option on a
stock index gives the holder the right to receive a cash exercise settlement
amount equal to (a) the amount, if any, by which the strike price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by (b)
a fixed index multiplier. Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the price of
the option. The amount of cash received will be equal to such difference between
the closing price of the index and the strike price of the option times a
specified multiple.
The effectiveness of purchasing stock index options as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio of the Fund being hedged correlate with price movements of
the stock index selected. The value of an index option depends upon future
movements in the level of the overall stock market measured by the underlying
index before the expiration of the option. Accordingly, the successful use of
options on stock indexes for the Fund is subject to the Investment Adviser's
ability both to select an appropriate index and to predict future price
movements over the short term in the overall stock market. Brokerage costs are
incurred in the purchase of stock index options and the incorrect choice of an
index or an incorrect assessment of future price movements may result in poorer
overall performance than if a stock index option had not been purchased.
The Corporation may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. It is possible, however,
that illiquidity in the options markets may make it difficult from time to time
for the Corporation to close out its written option positions. Also, the
securities exchanges have established limitations on the number of options which
may be written by an investor or group of investors acting in concert. It is not
contemplated that these position limits will have any adverse impact on the
Corporation's portfolio strategies.
Futures Contracts on Stock Indexes. Subject to applicable laws and
regulations and solely as a hedge against changes in the market value of
portfolio securities or securities intended to be purchased, futures contracts
on stock indexes ("Futures Contracts") may be entered into for the Fund.
In order to assure that the Fund is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Fund enter into transactions in
futures contracts and options on futures contracts only (I) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of the Fund's
assets.
Futures Contracts provide for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for the
Fund or adversely affect the prices of securities which are intended to be
purchased at a later date. A Futures Contract may also be entered into to close
out or offset an existing futures position.
17
<PAGE>
In general, each transaction in Futures Contracts involves the
establishment of a position which is expected to move in a direction opposite to
that of the investment being hedged. If these hedging transactions are
successful, the futures positions taken would rise in value by an amount which
approximately offsets the decline in value of the portion of the 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 of which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of a Futures Contract depends upon future movements in
the level of the overall stock market measured by the underlying index before
the closing out of the Futures Contract. Accordingly, the successful use of
Futures Contracts is subject to the Investment Adviser's ability both to select
an appropriate index and to predict future price movements over the short term
in the overall stock market. The incorrect choice of an index or an incorrect
assessment of the future price movements over the short term in the overall
stock market may result in a poorer overall performance than if a Futures
Contract had not been purchased. Brokerage costs are incurred in entering into
and maintaining Futures Contracts.
When the Fund enters into a Futures Contract, it 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 Fund may
be required to make subsequent deposits of cash or eligible securities called
"variation margin", with its futures contract clearing broker, which are
reflective of price fluctuations in the Futures Contract.
Currently, Futures Contracts can be purchased on stock indexes such as the
Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange) and the
New York Stock Exchange Composite Index (New York Stock Exchange).
Exchanges may limit the amount by which the price of a Futures Contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
18
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
No dealer, salesman or any other person has been
authorized to give any information or to make any
representations, other than those contained in this Prospectus
and the Statement of Additional Information, in connection
with the offer contained in this Prospectus, and if given or
made, such other information or representations must not be
relied upon as having been authorized by the Corporation or
the Distributor. This Prospectus does not constitute an offer
by the Corporation or by the Distributor to sell or the solicitation
of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the
Corporation or the Distributor to make such offer in such
jurisdiction.
