Small Company Fund
PROSPECTUS
March 1, 1999
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PROSPECTUS
The 59 Wall Street Small Company Fund
21 Milk Street, Boston, Massachusetts 02109
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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.
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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.
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The date of this Prospectus is March 1, 1999.
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TABLE OF CONTENTS
Page
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Investment Objective and Strategies .................................. 3
Principal Risk Factors ............................................... 3
Fund Performance ..................................................... 4
Fees and Expenses of the Fund ........................................ 5
Investment Adviser ................................................... 6
Shareholder Information .............................................. 6
Financial Highlights ................................................. 9
Additional Investment Information .................................... 10
2
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INVESTMENT OBJECTIVE AND STRATEGIES
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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 1,000 companies
which have a stock market capitalization of less than $3.5 billion and more than
$490 million. The common stocks of these companies represent approximately 6% of
the market value of U.S. equities and have a total market value of over $750
billion. 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 1,000
companies on an ongoing basis and ranks the stocks in the universe on the basis
of a proprietary quantitative model utilizing various bottom-up fundamental and
valuation criteria. The ranking of securities according to this model 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 about 100
companies, thereby reducing specific company risk and permitting many sectors of
the U.S. economy to be represented. The Portfolio purchases both growth and
value stocks which result in a blended investment style.
Solely as a hedge against changes in the market value of portfolio
securities or securities intended to be purchased, put and call options on stock
indexes may be purchased and futures contracts on stock indexes may be entered
into for the Portfolio.
PRINCIPAL RISK FACTORS
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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 fall due to changing
economic, political or market conditions, or due to a company's individual
situation.
o Small Company Investment Risk:
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.
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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.
FUND PERFORMANCE
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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.
Total Return (% per calendar year)
[The following information was depicted as a bar chart in the printed material]
1992 1993 1994 1995 1996 1997 1998
----- ----- ------ ----- ----- ----- ------
10.64 12.19 (10.49) 21.95 19.11 19.85 (10.58)
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Highest and Lowest Return
(Quarterly 1992-1998)
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Return Quarter Ending
Highest 17.64% 12/31/92
Lowest (24.97)% 9/30/98
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Average Annual Total Returns
(through December 31, 1998)
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1 Year 5 Years Life of Fund
(Since 4/23/91)
Small Company Fund (10.58)% 6.86% 8.63%
Russell 2000 (2.64)% 11.84% 13.96%
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4
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FEES AND EXPENSES OF THE FUND
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The table below describes the fees and expenses(1) 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)
Imposed on Purchases................................................... None
Maximum Deferred Sales Charge (Load)................................... None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends........................................ None
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 Fee .......... 0.25
Other Expenses .......................................... 0.35 0.76
---- ----
Total Annual Fund Operating Expenses ...................... 1.41%
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(1) The expenses shown for the Fund include the expenses of the Portfolio.
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............................................ $ 144
3 years............................................ $ 446
5 years............................................ $ 771
10 years............................................ $1,691
The table and example above reflect the expenses of both the Fund and the
Portfolio.
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INVESTMENT ADVISER
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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 December 31, 1998, it managed
total assets of approximately $32 billion.
A team of individuals manages the Portfolio on a day-to-day basis. This
team includes Mr. John A. Nielsen, Mr. Jeffrey A. Schoenfeld, Mr. George H. Boyd
and Mr. Paul R. Lenz. 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. Schoenfeld holds a B.S. from the
University of California, Berkeley and a M.B.A. from the University of
Pennsylvania. He joined Brown Brothers Harriman & Co. in 1984. 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. Prior to working for
Brown Brothers Harriman & Co., he worked for Arco Investment Management Company.
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.
SHAREHOLDER INFORMATION
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NET ASSET VALUE
The 59 Wall Street Fund, Inc. (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 quotations
and valuations provided by independent pricing services. If quotations are not
readily available, the assets are valued at fair value in accordance with
procedures established by the Portfolio's Trustees.
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
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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.
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
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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.
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.
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FINANCIAL HIGHLIGHTS
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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 or lost 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
---------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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)
------- ------ ------ ------ ------
Dividends and Distributions:
Dividends (from net investment income) ... -- -- (0.02) (0.07) (0.01)
Distributions (from capital gains) ....... (1.51) (0.61) -- -- (0.38)
Dividends (in excess of net investment
income) ................................ -- (0.01) -- -- --
------- ------ ------ ------ ------
Total Dividends and 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 assets1 ............................ 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 .................. 158%(2) 63%(2) 51%(2) 16% 140%
</TABLE>
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(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:
<TABLE>
<S> <C> <C> <C> <C> <C>
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)%
</TABLE>
The expense payment agreement terminated on July 1, 1997.
Furthermore, the ratio of expenses to average net assets for the year ended
October 31, 1995 reflect fees paid with brokerage 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 rate for period represents that of the Portfolio.
9
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ADDITIONAL INVESTMENT INFORMATION
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Historically, the common stocks of small companies have provided investors
with higher long-term returns than the common stocks of large companies as
represented by the Standard & Poor's 500 Index or the Dow Jones Industrial
Average. This superior long-term performance has been achieved in an irregular
fashion as the common stocks of small companies have experienced relatively long
periods of outperformance followed by periods of underperformance. Over the past
40 years, the major periods of outperformance were from 1958 to 1968, from 1973
to 1983 and from late 1990 to mid-1994. Since mid-1994, the common stocks of
small companies have lagged the performance of common stocks of large companies.
RELATIVE PERFORMANCE CYCLE
<TABLE>
<CAPTION>
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 1998
------- ------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 Index ............. +178% +272% +16% +152% +146% +63% +204%
Small Company Stock Index.. +79% +985% (46)% +1,101% +9% +115% +87%
(Ibbotson Associates)
Russell 2000 Index* ....... n/a n/a n/a n/a +15% +102% +87%
(Index started Dec. 1978)
S&P 600 Index ............. n/a n/a n/a n/a N.A. +100% +105%
(Index started Jan. 1984)
</TABLE>
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Note: Periods shown except for beginning and end points are based on peaks and
troughs of relative performance.
* Index comprised of those U.S. stocks ranked from the 1,001st largest to
the 3,000th largest based on market capitalization.
ANNUALIZED TOTAL RETURN JAN. 1, 1951 - DEC. 31, 1998
(Compound Rate)
S&P 500 Index.................................... +13.1% per year
Small Company Stock Index (Ibbotson Associates).. +14.2% per year
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.
Year 2000 issue. Information technology experts are concerned about
computer systems' ability to process data-related information on and after
January 1, 2000. This situation, commonly known as the "Year 2000" issue, could
have an adverse impact on the Fund. The cost of addressing the Year 2000 issue,
if substantial, could adversely affect companies and governments that issue
securities held by the Fund. The Investment Adviser is addressing the Year 2000
issue for its systems. The Fund has been informed by its other service providers
that they are taking similar measures. Although the Fund does not expect the
Year 2000 issue to adversely affect it, the Fund cannot guarantee that the
efforts of the Fund, which are limited to requesting and receiving reports from
its service providers, or the efforts of its service providers to correct the
problem will be successful.
10
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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:
o Annual/Semi-Annual Report
Describes the Fund's performance, lists portfolio holdings
and contains a letter from the Fund's Investment Adviser
discussing recent market conditions, economic trends and
Fund strategies that significantly affected the Fund's
performance during its last fiscal year.
o Statement of Additional Information (SAI)
Provides more details about the 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:
o By telephone
Call 1-800-625-5759
o By mail write to the Fund's Shareholder Servicing Agent:
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
o By E-mail send your request to:
[email protected]
o On the Internet:
Text-only versions of Fund documents can be viewed
online or downloaded from:
Brown Brothers Harriman & Co.
http://www.bbhco.com
SEC
http://www.sec.gov
You can also review or obtain copies by visiting the SEC's
Public Reference Room in Washington, DC or by sending
your request and a duplicating fee to the SEC's Public
Reference Section, Washington, DC 20549-6009.
Information on the operations of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
