As filed with the Securities and Exchange Commission on February 29, 2000
Registration Nos. 33-35827 and 811-06139
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 26
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 51
THE 59 WALL STREET FUND, INC.
(Exact Name of Registrant as Specified in Charter)
21 Milk Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Philip W. Coolidge
21 Milk Street, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
(par value $.001)
<PAGE>
PROSPECTUS
The 59 Wall Street European Equity Fund
The 59 Wall Street Pacific Basin Equity Fund
The 59 Wall Street International Equity Fund
21 Milk Street, Boston, Massachusetts 02109
The European Equity Fund, the Pacific Basin Equity Fund and the
International Equity Fund are separate series of The 59 Wall Street Fund, Inc.
Shares of each Fund are offered by this Prospectus.
Each of the European Equity Fund, Pacific Basin Equity Fund and
International Equity Fund invests all of its assets in the European Equity
Portfolio, Pacific Basin Equity Portfolio and International Equity Portfolio,
respectively. Brown Brothers Harriman & Co. is the Investment Adviser for the
European Equity Portfolio, the Pacific Basin Equity Portfolio and the
International Equity Portfolio and the Administrator and Shareholder Servicing
Agent of each Fund. Shares of each Fund are offered at net asset value without a
sales charge.
- -------------------------------------------------------------------------------
Neither The Securities And Exchange Commission Nor Any State Securities
Commission Has Approved Or Disapproved Of These Securities Or Passed Upon
The Adequacy Or Accuracy Of This Prospectus. Any Representation To The
Contrary Is A Criminal Offense.
- -------------------------------------------------------------------------------
The date of this Prospectus is March 1, 2000.
<PAGE>
TABLE OF CONTENTS
Page
--------
Investment Objective 3
Investment Strategies 3
Principal Risk Factors 4
Fund Performance 6
Fees and Expenses of the Funds 9
Investment Adviser 10
Shareholder Information 10
Financial Highlights 13
Additional Information 16
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of each Fund is to provide investors with long-term
maximization of total return, primarily through capital appreciation.
INVESTMENT STRATEGIES
European Equity Fund
The European Equity Fund invests all of its assets in the European Equity
Portfolio, an investment company that has the same objective as the Fund. Under
normal circumstances the Investment Adviser fully invests the assets of the
European Equity Portfolio in equity securities of companies based in the
European Union (Belgium, Denmark, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, United Kingdom), as well as Austria,
Czech Republic, Finland, Hungary, Norway, Poland, Romania, Sweden, Switzerland,
Slovakia and Turkey.
Pacific Basin Equity Fund
The Pacific Basin Equity Fund invests all of its assets in the Pacific Basin
Equity Portfolio, an investment company that has the same objective as the Fund.
Under normal circumstances the Investment Adviser fully invests the assets of
the Pacific Basin Equity Portfolio in equity securities of companies based in
Pacific Basin countries, including Australia, Bangladesh, China, Hong Kong,
India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines,
Singapore, Sri Lanka, South Korea, Taiwan and Thailand.
International Equity Fund
The International Equity Fund invests all of its assets in the International
Equity Portfolio, an investment company that has the same objective as the Fund.
Under normal circumstances the Investment Adviser fully invests the assets of
the International Equity Portfolio in equity securities of companies based
outside the United States and Canada in the developed markets of the world.
These markets include Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland and United Kingdom.
Each Fund
Although the Investment Adviser expects to invest the assets of each
Portfolio primarily in common stocks, it may also purchase other securities with
equity characteristics, including securities convertible into common stock,
rights and warrants. The Investment Adviser may purchase these equity securities
directly or in the form of American Depositary Receipts, Global Depositary
Receipts or other similar securities representing securities of foreign-based
companies. Although the Investment Adviser invests primarily in equity
securities which are traded on foreign or domestic national securities
exchanges, the Investment Adviser may also purchase equity securities which are
traded in foreign or domestic over-the-counter markets. The Investment Adviser
may invest in securities of appropriate investment companies in order to obtain
participation in markets or market sectors which restrict foreign investment or
to obtain more favorable investment terms.
The Investment Adviser seeks to add value in international markets primarily
through stock selection, with regional/country allocation and currency selection
playing smaller roles. The Investment Adviser's stock selection process places
emphasis on large capitalization and globally competitive companies. The non-US
equity research universe is comprised of approximately 300 names that have a
minimum market cap of $2 billion and that have strong underlying fundamentals
such as leading industry position, effective management, competitive products
and services, high or improving return on investment and a sound financial
structure.
A bottom-up analysis of companies in the universe identifies earnings growth
potential or, where appropriate, improved return on equity/assets.
Simultaneously, quantitative tools such as discounted cash flow models (DCF),
economic value-added analysis (EVA), and cash flow return on investment (CFROI),
are applied to assess current and future value, and to differentiate companies
within the universe. This process ultimately produces an Attractive Investment
Opportunities List with issues appropriate for inclusion in each Portfolio.
Portfolio construction in each Portfolio is the result of selecting issues
from the Attractive Opportunities List which, when combined with regional
allocation policies, benchmark considerations, and risk management, will produce
a well-diversified portfolio expected to outperform its benchmark over a 12-18
month time horizon.
In a process driven primarily by stock selection, country or regional
allocation assumes a secondary role as a risk management tool. Allocation of
investments among various countries or regions is, in the first analysis, a
function of the availability of attractively priced investment opportunities.
Having identified the most attractive companies, the countries in which those
companies are listed are analyzed based on the economic environment, liquidity
conditions, valuation levels, expected earnings growth, government policies and
political stability. In response to changes or anticipated changes in these
criteria, the Investment Adviser may increase, decrease, or eliminate a
particular country's representation. In applying these criteria, the Investment
Adviser allocates assets among countries in a manner that quantifies and manages
the Portfolio's risk relative to its benchmark.
The Investment Adviser may enter into foreign currency exchange
transactions from time to time. The Investment Adviser may convert the U.S.
dollar to and from different foreign currencies for the purchase and sale of
foreign securities that are denominated in foreign currencies. Additionally
interest and dividends may be paid in foreign currencies. The Investment Adviser
may also enter into forward foreign exchange contracts to protect the dollar
value of securities that are denominated in foreign currencies. The Investment
Adviser may enter into futures contracts on stock indexes. Such transactions are
used solely as a hedge against changes in the market value of securities that
are held by a Portfolio or are being considered for purchase.
PRINCIPAL RISK FACTORS
The principal risks of investing in each Fund and the circumstances
reasonably likely to adversely affect an investment are described below. The
share price of each Fund changes daily based on market conditions and other
factors. A shareholder may lose money by investing in the Funds.
The principal risks of investing in the Funds are:
o Market Risk:
This is the risk that the price of a security will fall due to changing
economic, political or market conditions, or due to a company's individual
situation.
o Foreign Investment Risk:
Investing in equity securities of foreign-based companies involves risks not
typically associated with investing in equity securities of companies organized
and operated in the United States.
Changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations may
adversely affect the value of such investments. Changes in government
administrations or economic or monetary policies in the United States or abroad
could result in appreciation or depreciation of portfolio securities and could
favorably or unfavorably affect the operations of the European Equity Portfolio,
Pacific Basin Equity Portfolio or International Equity Portfolio. The economies
of individual foreign nations differ from the U.S. economy, whether favorably or
unfavorably, in areas such as growth of gross domestic product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. It may be more difficult to obtain and enforce a judgment
against a foreign company. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
on foreign investments as compared to dividends and interest paid to other funds
by domestic companies.
In general, less information is publicly available with respect to
foreign-based companies than is available with respect to U.S. companies. Most
foreign-based companies are also not subject to the uniform accounting and
financial reporting requirements applicable to companies based in the United
States.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, foreign investments are
less liquid and their prices are more volatile than comparable investments in
securities of U.S. companies. Moreover, the settlement periods for foreign
securities, which are often longer than those for securities of U.S. companies,
may affect portfolio liquidity. In buying and selling securities on foreign
exchanges, fixed commissions are normally paid that are generally higher than
the negotiated commissions charged in the United States. In addition, there is
generally less government supervision and regulation of securities exchanges,
brokers and companies in foreign countries than in the United States.
The foreign investments made by the Investment Adviser are in compliance with
the currency regulations and tax laws of the United States and foreign
governments. There may also be foreign government regulations and laws which
restrict the amounts and types of foreign investments.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the European Equity Portfolio, Pacific Basin
Equity Portfolio and International Equity Portfolio hold various foreign
currencies from time to time, the value of their respective net assets as
measured in U.S. dollars is affected favorably or unfavorably by changes in
exchange rates. European Equity Portfolio, Pacific Basin Equity Portfolio and
International Equity Portfolio also incur costs in connection with conversion
between various currencies.
o Developing Countries:
The Investment Adviser may invest the assets of the European Equity Portfolio
and the International Equity Portfolio in securities of issuers based in
developing countries. The Investment Adviser may invest a substantial portion of
the assets of the Pacific Basin Equity Portfolio in the securities of issuers
based in developing countries. Investments in securities of issuers in
developing countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing in
securities of foreign issuers outlined in this section to a heightened degree.
These heightened risks include (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the small current size of the markets for securities of issuers in
developing countries and the currently low or non-existent volume of trading,
resulting in lack of liquidity and in price volatility; (iii) certain national
policies which may restrict the Portfolios' investment opportunities including
restrictions on investing in issuers or industries deemed sensitive to relevant
national interests; and (iv) the absence of developed legal structures governing
private or foreign investment and private property.
o Diversification Risk
Each Fund and each Portfolio is classified as "non-diversified" for purposes
of the Investment Company Act of 1940, as amended, which means that it is not
limited by that Act with regard to the portion of its assets that may be
invested in the securities of a single issuer. The Portfolio is however limited
with respect to such assets by certain requirements of federal tax law. The
possible assumption of large positions in the securities of a small number of
issuers may cause performance to fluctuate to a greater extent than that of a
diversified investment company as a result of changes in the financial condition
or in the market's assessment of the issuers.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government. Shares of the Funds are not deposits or obligations of, or
guaranteed by, Brown Brothers Harriman & Co. or any other bank, and the shares
are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other federal, state or other governmental agency.
<PAGE>
FUND PERFORMANCE
The charts and tables below give an indication of the Funds' risks. The
charts show changes in the Funds' performance from year to year. The tables show
how the Funds' average annual returns for the periods indicated compare to those
of a broad measure of market performance.
When you consider this information, please remember that a Fund's
performance in past years is not an indication of how that Fund will do in the
future.
EUROPEAN EQUITY FUND
Total Return (% per calendar year)
1991 9.25
1992 7.53
1993 27.12
1994 -3.93
1995 16.49
1996 19.25
1997 15.28
1998 24.17
1999 21.42
- ------------------------------------------------------------------------------
Highest and Lowest Return
(Quarterly 1991-1999)
- ------------------------------------------------------------------------------
Return Quarter Ending
Highest 22.08% 12/31/99
Lowest (15.55)% 9/30/98
- ------------------------------------------------------------------------------
Average Annual Total Returns
(through December 31, 1999)
- ------------------------------------------------------------------------------
1 Year 5 Years Life of Fund
(Since 10/31/90 )
European Equity Fund 21.42% 19.28% 14.24%
MSCI-Europe 15.90% 22.12% 15.85%
- -----------------------------------------------------------------------------
<PAGE>
PACIFIC BASIN EQUITY FUND
Total Return (% per calendar year)
1991 13.64
1992 6.15
1993 74.90
1994 -21.50
1995 3.49
1996 -0.71
1997 -20.13
1998 4.91
1999 120.16
- ---------------------------------------------------------------------------
Highest and Lowest Return
(Quarterly 1991-1999)
- --------------------------------------------------------------------------
Return Quarter Ending
Highest 36.69% 12/31/93
Lowest (16.42)% 3/31/94
- ----------------------------------------------------------------------------
Average Annual Total Returns
(through December 31, 1999)
- ----------------------------------------------------------------------------
1 Year 5 Years Life of Fund
(Since 10/31/90 )
Pacific Basin Equity Fund 120.16% 13.64% 12.77%
MSCI- Pacific 57.63% 2.48% 4.19%
- ------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL EQUITY FUND
Total Return (% per calendar year)
1996 8.05
1997 1.05
1998 16.17
1999 44.60
- ------------------------------------------------------------------------------
Highest and Lowest Return
(Quarterly 1995-1999)
- -----------------------------------------------------------------------------
Return Quarter Ending
Highest 24.28% 12/31/99
Lowest (13.77)% 9/30/98
- ---------------------------------------------------------------------------
Average Annual Total Returns
(through December 31, 1999)
- ---------------------------------------------------------------------------
1 Year Life of Portfolio
(Since 4/1/95)
International Equity Fund 44.60% 15.19%
MSCI-EAFE 26.97% 13.11%
- ---------------------------------------------------------------------------
Historical performance information for the Fund for any period or portion
thereof prior to its commencement of operations (6/6/97), is that of the
Portfolio as adjusted to reflect all fees and expenses of the Fund.
<PAGE>
FEES AND EXPENSES OF THE FUNDS
The tables below describe the fees and expenses that an investor may pay
if that investor buys and holds shares of the Funds.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from an investor's account)
<S> <C> <C> <C>
European Pacific Basin International
Equity Fund Equity Fund Equity Fund
---------- ----------- ----------
Maximum Sales Charge (Load)
Imposed on Purchases None None None
Maximum Deferred Sales Charge (Load) None None None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from Fund assets
as a percentage of average net assets)
<S> <C> <C> <C>
European Pacific Basin International
Equity Fund Equity Fund Equity Fund
----------- ------------ ------------
Management Fees 0.65% 0.65% 0.65%
Distribution (12b-1) Fees None None None
Other Expenses
Administration Fee 0.16% 0.16% 0.16%
Shareholder Servicing/Eligible Institution Fee 0.25 0.25 0.25
Other Expenses 0.28 0.69 0.34 0.75 0.44 2 0.85
---- ---- ----- ---- ------ ----
Total Annual Fund Operating Expenses 1.34%3 1.40%3 1.50%
<FN>
- -------------------------------------------------------------------------------------------------------------------
1 The expenses shown for each Fund include the expenses of its corresponding
Portfolio.
- -------------------------------------------------------------------------------------------------------------------
2 These expenses are paid pursuant to expense payment arrangements.
3 The annual fund operating expenses have been restated for the past fiscal
year for purposes of this table to reflect fees currently in effect.
</FN>
</TABLE>
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EXAMPLE 4
This example is intended to help an investor compare the cost of investing
in the Funds to the cost of investing in other mutual funds. The example assumes
that an investor invests $10,000 in a Fund for the time periods indicated and
then sells all of his shares at the end of those periods. The example also
assumes that an investment has a 5% return each year and that the Funds'
operating expenses remain the same as shown in the table above. Although actual
costs on an investor's investment may be higher or lower, based on these
assumptions the investor's costs would be:
European Pacific Basin International
Equity Fund Equity Fund Equity Fund
---------- ----------- -----------
1 year $ 136 $ 143 $ 153
3 years $ 425 $ 443 $ 474
5 years $ 734 $ 766 $ 818
10 years $1,613 $1,680 $1,791
4The example above reflects the expenses of each Fund and its
corresponding Portfolio.
<PAGE>
INVESTMENT ADVISER
The Investment Adviser to each 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 each Portfolio. Subject to the general supervision of the
Trustees of each Portfolio, the Investment Adviser makes the day-to-day
investment decisions for each Portfolio, places the purchase and sale orders for
the portfolio transactions of each Portfolio, and generally manages each
Portfolio's investments. The Investment Adviser provides a broad range of
investment management services for customers in the United States and abroad. At
December 31, 1999, it managed total assets of approximately $35 billion.
A team of individuals manages each Portfolio on a day-to-day basis. This
team includes Mr. Young Chin, Mr. G. Scott Clemons, Mr. Paul J. Fraker, Mr. Ben
Kottler and Mr. Mohammad Rostom. Mr. Chin holds a B.A. and M.B.A. from the
University of Chicago. He joined Brown Brothers Harriman & Co. in 1999. Prior to
joining Brown Brothers Harriman & Co., he worked at Blackrock Financial
Management. Mr. Clemons holds a A.B. from Princeton University and is a
Chartered Financial Analyst. He joined Brown Brothers Harriman & Co. in 1990. Mr
Fraker holds a B.A. from Carleton College and a M.A. from Johns Hopkins
University. He joined Brown Brothers Harriman & Co. in 1996. Prior to joining
Brown Brothers Harriman & Co., he worked for Clay Finlay. Mr. Kottler holds a
B.A. from Durham University and is a Chartered Financial Analyst. He joined
Brown Brothers Harriman & Co. in 1996. Prior to joining Brown Brothers Harriman
& Co., he worked for NatWest Investment Management Ltd. Mr. Rostom holds a B.S.
from Rochester Institute of Technology and a M.A. from Temple University. He
joined Brown Brothers Harriman & Co. in 1997. Prior to joining Brown Brothers
Harriman & Co., he worked for Kulicke & Soffa Industries.
European Equity Portfolio, Pacific Basin Equity Portfolio and International
Equity Portfolio each pays the Investment Adviser an annual fee, computed daily
and payable monthly, equal to 0.65% of the average daily net assets of each
Portfolio. This fee compensates the Investment Adviser for its services and
expenses (such as salaries of its personnel).
SHAREHOLDER INFORMATION
NET ASSET VALUE
The Corporation determines each Fund's net asset value per share once daily
at 4:00 P.M., New York time on each day the New York Stock Exchange is open for
regular trading. The determination of each Fund's net asset value is made by
subtracting from the value of the total net assets of each Fund the amount of
its liabilities and dividing the difference by the number of shares of each Fund
outstanding at the time the determination is made.
Each 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 each Fund 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. Investors may
purchase shares on any day the net asset value is calculated if the Corporation
receives the purchase order, including acceptable payment for such order, prior
to such calculation. The Corporation then executes purchases of Fund shares at
the net asset value per share next determined. 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 Funds' Shareholder
Servicing Agent. Such an investor has such shares held directly in the
investor's name on the books of the Corporation and is responsible for arranging
for the payment of the purchase price of Fund shares. The Corporation executes
all purchase orders for initial and subsequent purchases at the net asset value
per share next determined after the Corporation's transfer agent, State Street
Bank and Trust Company, has received payment in the form of a cashier's check
drawn on a U.S. bank, a check certified by a U.S. bank or a wire transfer. The
Shareholder Servicing Agent has established a minimum initial purchase
requirement for each Fund of $100,000 and a minimum subsequent purchase
requirement for each Fund of $25,000. The Shareholder Servicing Agent may amend
these minimum purchase requirements from time to time.
REDEMPTION OF SHARES
The Corporation executes your redemption request at the next net asset value
calculated after the Corporation receives your redemption request. 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 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 a Fund falls below that amount because of a redemption of shares,
the Corporation may redeem the shareholder's remaining shares. If such remaining
shares are to be redeemed, the Corporation notifies the shareholder and allows
the shareholder 60 days to make an additional investment to meet the minimum
requirement before the redemption is processed. Each Eligible Institution and
each Financial Intermediary may establish and amend from time to time for their
respective customers a minimum account size, each of which is currently lower
than that established by the Shareholder Servicing Agent.
Further Redemption Information
Redemptions of shares are taxable events on which a shareholder may realize a
gain or a loss.
The Corporation has reserved the right to pay the amount of a redemption from
a Fund, either totally or partially, by a distribution in kind of securities
(instead of cash) from that Fund.
The Corporation may suspend a shareholder's right to receive payment with
respect to any redemption or postpone the payment of the redemption proceeds for
up to seven days and for such other periods as applicable law may permit.
Redemptions may be suspended or payment dates postponed when the NYSE is closed
(other than weekends or holidays), when trading on the NYSE is restricted, or as
permitted by the SEC.
DIVIDENDS AND DISTRIBUTIONS
The Corporation declares and pays to shareholders substantially all of each
Fund's net income and realized net short-term capital gains at least annually as
a dividend, and substantially all of each Fund's realized net long-term capital
gains annually as a capital gains distribution. The Corporation may make an
additional dividend and/or capital gains distribution in a given year to the
extent necessary to avoid the imposition of federal excise tax on a Fund. The
Corporation pays dividends and capital gains distributions to shareholders of
record on the record date. Each Fund's net income and realized net capital gains
includes that Fund's pro rata share of its corresponding 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 a Fund as ordinary income, whether
such dividends are paid in cash or reinvested in additional shares. Capital
gains may be taxable at different rates depending on the length of time a
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.
The treatment of each Fund and its shareholders in those states which have
income tax laws might differ from treatment under the federal income tax laws.
Therefore, distributions to shareholders may be subject to additional state and
local taxes. Shareholders are urged to consult their tax advisors regarding any
state or local taxes.
Foreign Investors
Each Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in a Fund
since alternative investments are available which would not be subject to United
States withholding tax.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The financial highlights table is intended to help an investor understand
the Funds' financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in each Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the Funds' financial statements, are included in the
annual report, which is available upon request.
European Equity Fund
For the years ended October 31
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net asset value, beginning of year......... $39.05 $ 38.02 $ 35.02 $ 31.95 $ 1.82
Income from investment operations:
Net investment income................... 0.091 0.42 0.39 0.381 0.45
Net realized and unrealized gain......... 4.15 6.06 5.29 4.08 2.09
Less dividends and distributions:
From net investment income............... (0.65) (0.31) (0.41) -- --
In excess of net investment income....... (0.01) -- -- -- --
From net realized gains.................. (4.71) (5.14) (2.27) (1.39) (2.41)
------- ------ ------ ------ ------
Net asset value, end of year................ $ 37.92 $ 39.05 $ 38.02 $ 35.02 $ 31.95
======= ======= ======== ======= =======
Total return................................ 11.87% 19.34% 17.28% 14.63% 9.42%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).. $143,315 $155,557 $154,179 $146,350 $116,955
Expenses as a percentage of average
net assets:
Expenses paid by Fund.................... 1.33% 1.18% 1.32% 1.23% 1.24%
Expenses paid by commissions2............ -- 0.01% 0.01% 0.01% 0.05%
Expense offset arrangement............... -- 0.02% 0.03% 0.09% 0.14%
--- ----- ------ ------ -----
Total expenses........................ 1.33% 1.21% 1.36% 1.33% 1.43%
Ratio of net investment income to
average net assets....................... 0.24% 0.60% 1.02% 1.16% 1.55%
Portfolio turnover rate ................... 37% 56% 82% 42% 72%
- -------------------------------------------------------------------------------------------------------------------
<FN>
1 Calculated using average shares outstanding for the year.
2 A portion of the Fund's securities transactions are directed to certain
unaffiliated brokers which in turn use a portion of the commissions they
receive from the Fund to pay other unaffiliated service providers on behalf
of the Fund for services provided for which the Fund would otherwise be
obligated to pay.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Basin Equity Fund
For the years ended October 31
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net asset value, beginning of period........ $20.31 $24.52 $30.19 $29.88 $39.85
Income from investment operations:
Net investment income (loss)............. (0.17)1 (0.20) 0.001,2 0.051 0.11
Net realized and unrealized gain (loss).. 18.63 (2.39) (4.69) 1.62 (4.50)
Less dividends and distributions:
From net investment income............... -- (0.52) (0.00)2 (0.86) (0.00)2
In excess of net investment income....... -- (1.10) (0.25) (0.50) --
From net realized gains.................. -- -- (0.28) -- (5.58)
In excess of net realized gains.......... -- -- (0.45) -- --
--- -- ------ -- --
Net asset value, end of period.............. $38.77 $20.31 $24.52 $30.19 $29.88
======= ====== ======= ======= ======
Total return................................ 90.89% (10.78)% (16.03)% 5.65% (10.62)%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).. $ 80,411 $32,630 $102,306 $150,685 $114,932
Expenses as a percentage of average
net assets:
Expenses paid by Fund ................. 1.39% 1.44% 1.19% 1.13% 1.24%
Expenses paid by commissions3 ....... -- -- 0.01% 0.01% 0.05%
Expense offset arrangement4 ........... -- 0.18% 0.06% 0.16% 0.14%
-- ----- ----- ----- -----
Total expenses......................... 1.39% 1.62% 1.26% 1.30% 1.43%
Ratio of net investment income (loss) to
average net assets .................... (0.58%) (0.73%) 0.00% 0.16% 0.53%
Portfolio turnover rate ................. 97% 91% 63% 58% 82%
- -------------------------------------------------------------------------------------------------------------------
<FN>
1 Calculated using average shares outstanding for the year.
2 Less than $0.01 per share.
3 A portion of the Fund's securities transactions are directed to certain
unaffiliated brokers which in turn use a portion of the commissions they
receive from the Fund to pay other unaffiliated service providers on behalf
of the Fund for services provided for which the Fund would otherwise be
obligated to pay.
Less than 0.01%.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund
--------------------------------------
<S> <C> <C> <C>
For the period from
June 6, 1997
(commencement of
For the year ended October 31, operations to)
1999 1998 to October 31, 1997
---- ---- -------------------
Net asset value, beginning of period........ $10.09 $9.42 $10.00
Income from investment operations:
Net investment loss...................... (0.02) 0.001 0.001
Net realized and unrealized gain (loss).. 3.00 0.75 (0.58)
Less dividends and distributions:
In excess of net investment income....... (0.03) (0.03) --
From net realized gains.................. -- (0.05) --
---------- ------- ---
Net asset value, end of period.............. $13.04 $10.09 $9.42
======= ====== ======
Total return................................ 29.57% 8.06% (5.80)%2
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)...$ 59,961 $ 27,475 $ 7,040
Ratio of expenses to average net assets . 1.50%4 1.50%4 1.36%3,4
Ratio of net investment loss to
average net assets .................... (0.25)% (0.15)% 0.06%3
- -------------------------------------------------------------------------------
<FN>
1 Less than $0.01.
2 Not annualized.
3 Annualized.
4 Includes the Fund's share of International Equity Portfolio expenses.
</FN>
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
Other mutual funds or institutional investors may invest in each Portfolio on
the same terms and conditions as the Portfolio's corresponding Fund. However,
these other investors may have different aggregate performance results. The
Corporation may withdraw a Fund's investment in its corresponding Portfolio at
any time as a result of changes in such Portfolio's investment objective,
policies or restrictions or if the Board of Directors determines that it is
otherwise in the best interests of that Fund to do so.
<PAGE>
The 59 Wall Street
European Equity Fund
The 59 Wall Street
Pacific Basin Equity Fund
The 59 Wall Street
International Equity Fund
More information on the Funds is available free upon request, including the
following:
o Annual/Semi-Annual Report
Describes the Funds' performance, lists portfolio holdings and contains a letter
from the Funds' Investment Adviser discussing recent market conditions, economic
trends and Fund strategies that significantly affected each Fund's performance
during their last fiscal year. o Statement of Additional Information (SAI)
Provides more details about each Fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus). To obtain information
or make shareholder inquiries: o By telephone
Call 1-800-625-5759
o By mail write to the Funds' 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 20549-0102. Information on the
operations of the Public Reference Room may be obtained by calling
1-202-942-8090. Additionally, this information is available on the EDGAR
database at the SEC's internet site at http://www.sec.gov. A copy may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address:
[email protected].
SEC file number: 811-06139
<PAGE>
European Equity Fund
Pacific Basin Equity Fund
International Equity Fund
Prospectus
March 1, 2000
<PAGE>
- -------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET EUROPEAN EQUITY FUND
THE 59 WALL STREET PACIFIC BASIN EQUITY FUND
21 Milk Street, Boston, Massachusetts 02109
- -------------------------------------------------------------------
The 59 Wall Street European Equity Fund (the "European Equity Fund")
and The 59 Wall Street Pacific Basin Equity Fund (the "Pacific Basin Equity
Fund") (each a "Fund" and collectively the "Funds") are separate portfolios of
The 59 Wall Street Fund, Inc. (the "Corporation"), a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Each Fund is designed to enable investors to participate in the
opportunities available in foreign equity markets. The investment objective of
each Fund is to provide investors with long-term maximization of total return,
primarily through capital appreciation. There can be no assurance that a Fund's
investment objective will be achieved.
The Corporation seeks to achieve the investment objective of the
European Equity Fund and the Pacific Basin Equity Fund by investing all of the
Fund's assets in a corresponding open-end investment company having the same
investment objective as the Fund. The European Equity Fund invests in the
European Equity Portfolio and the Pacific Basin Equity Fund invests in the
Pacific Basin Equity Portfolio (each, a "Portfolio" and, collectively, the
"Portfolios")
Brown Brothers Harriman & Co. is each Portfolio's investment adviser
(the "Investment Adviser"). This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated March 1,
2000, a copy of which may be obtained from the Corporation at the address noted
above.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Cross-Reference
Page to Page in Prospectus
Investments
Investment Objective and Policies . . . . . 3 3-5
Investment Restrictions . . . . . . . . 9
Management
Directors, Trustees and Officers . . . . . . . . 12
Investment Adviser . . . . . . . . . . 17 10
Administrator . . . . . . . . . . . . 18
Distributor . . . . . . . . . . . . 20
</TABLE>
The date of this Statement of Additional Information is
March 1, 2000.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Cross-Reference
Page to Page in Prospectus
Shareholder Servicing Agent,
Financial Intermediaries and Eligible Institutions . . . 20-22
Custodian, Transfer and Dividend Disbursing Agent 22
Independent Auditors 22
Net Asset Value; Redemption in Kind . . . . 22 10
Computation of Performance . . . . . . . 24
Purchases and Redemptions 25
Federal Taxes . . . . . . . . . . . . 26
Description of Shares . . . . . . . . . 29
Portfolio Brokerage Transactions . . . . . . . . . 31
Financial Statements . . . . . . . . . 34
Appendix 34
</TABLE>
The date of this Statement of Additional Information is
March 1, 2000.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of each Portfolio.
In response to adverse market, economic, political or other conditions, the
Investment Adviser may make temporary investments for the Portfolios that are
not consistent with its investment objective and principal investment
strategies. Such investments may prevent the Portfolios from achieving their
investment objective.
Equity Investments
Equity investments may or may not pay dividends and may or may not carry voting
rights. Common stock occupies the most junior position in a company's capital
structure. Convertible securities entitle the holder to exchange the securities
for a specified number of shares of common stock, usually of the same company,
at specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors, and are senior to the claims
of preferred and common shareholders. In the case of convertible preferred
stock, the holder's claims on assets and earnings are subordinated to the claims
of all creditors and are senior to the claims of common shareholders.
Domestic Investments
The assets of the Portfolios are not invested in domestic securities (other than
short-term instruments), except temporarily when extraordinary circumstances
prevailing at the same time in a significant number of foreign countries render
investments in such countries inadvisable.
Options Contracts
Options on Stock. Subject to applicable laws and regulations and solely as a
hedge against changes in the market value of portfolio securities or securities
intended to be purchased, put and call options on stocks may be purchased for a
Portfolio, although in each case the current intention is not to do so in such a
manner that more than 5% of a Portfolio's net assets would be at risk. A call
option on a stock gives the purchaser of the option the right to buy the
underlying stock at a fixed price at any time during the option period.
Similarly, a put option gives the purchaser of the option the right to sell the
underlying stock at a fixed price at any time during the option period. To
liquidate a put or call option position, a "closing sale transaction" may be
made for a Portfolio at any time prior to the expiration of the option which
involves selling the option previously purchased.
Covered call options may also be sold (written) on stocks for a Portfolio,
although in each case the current intention is not to do so. A call option is
"covered" if the writer owns the underlying security.
Options on Stock Indexes. Subject to applicable laws and regulations and solely
as a hedge against changes in the market value of portfolio securities or
securities intended to be purchased, put and call options on stock indexes may
be purchased for a Portfolio, although the current intention is not to do so in
a manner that more than 5% of a Portfolio's net assets would be at risk. A stock
index fluctuates with changes in the market values of the stocks included in the
index. Examples of stock indexes are the Standard & Poor's 500 Stock Index
(Chicago Board of Options Exchange), the New York Stock Exchange Composite Index
(New York Stock Exchange), The Financial Times-Stock Exchange 100 (London Traded
Options Market), the Nikkei 225 Stock Average (Osaka Securities Exchange) and
Tokyo Stock Price Index (Tokyo Stock Exchange).
Options on stock indexes are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a fixed price ("strike price"), an option on a stock
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (a) the amount, if any, by which the strike price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of exercise, multiplied by (b) a fixed
"index multiplier". Receipt of this cash amount depends upon the closing level
of the stock index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the price of the option. The
amount of cash received is equal to such difference between the closing price of
the index and the strike price of the option expressed in U.S. dollars or a
foreign currency, as the case may be, times a specified multiple.
The effectiveness of purchasing stock index options as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of an index option depends upon future movements in
the level of the overall stock market measured by the underlying index before
the expiration of the option. Accordingly, the successful use of options on
stock indexes for a Portfolio is subject to the Investment Adviser's ability
both to select an appropriate index and to predict future price movements over
the short term in the overall stock market. Brokerage costs are incurred in the
purchase of stock index options and the incorrect choice of an index or an
incorrect assessment of future price movements may result in poorer overall
performance than if a stock index option had not been purchased.
Options on Currencies. Subject to applicable laws and regulations and solely
as a hedge against changes in the market value of portfolio securities or
securities intended to be purchased, put and call options on currencies may be
purchased for a Portfolio, although the current intention is not to do so in a
manner that more than 5% of a Portfolio's net assets would be at risk. A call
option on a currency gives the purchaser of the option the right to buy the
underlying currency at a fixed price, either at any time during the option
period (American style) or on the expiration date (European style). Similarly, a
put option gives the purchaser of the option the right to sell the underlying
currency at a fixed price, either at any time during the option period or on the
expiration date. To liquidate a put or call option position, a "closing sale
transaction" may be made for a Portfolio at any time prior to the expiration of
the option, such a transaction involves selling the option previously purchased.
Options on currencies are traded both on recognized exchanges (such as the
Philadelphia Options Exchange) and over-the counter.
The value of a currency option purchased for a Portfolio depends upon
future changes in the value of that currency before the expiration of the
option. Accordingly, the successful use of options on currencies for a Portfolio
is subject to the Investments Adviser's ability to predict future changes in the
value of currencies over the short term. Brokerage costs are incurred in the
purchase of currency options and an incorrect assessment of future changes in
the value of currencies may result in a poorer overall performance than if such
a currency had not been purchased.
Futures Contracts
Futures Contracts on Stock Indexes. Subject to applicable laws and
regulations and solely as a hedge against changes in the market value of
portfolio securities or securities intended to be purchased, futures contracts
on stock indexes ("Futures Contracts") may be entered into for a Portfolio.
Futures contracts on foreign currencies may also be entered into for each
Portfolio, although in each case the current intention is not to do so.
In order to assure that a Portfolio is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that each Portfolio enter into transactions
in futures contracts and options on futures contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of a
Portfolio's assets.
Futures Contracts provided for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for a
Portfolio or adversely affect the prices of securities which are intended to be
purchased at a later date for a Portfolio. A Futures Contract may also be
entered into to close out or offset an existing futures position.
In general, each transaction in Futures Contracts involves the
establishment of a position which is expected to move in a direction opposite to
that of the investment being hedged. If these hedging transactions are
successful, the futures position taken for a Portfolio would rise in value by an
amount which approximately offsets the decline in value of the portion of that
Portfolio's investments that is being hedged. Should general market prices move
in an unexpected manner, the full anticipated benefits of Futures Contracts may
not be achieved or a loss may be realized. There is also the risk of a potential
lack of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging
technique depends upon the extent to which price movements in the portion of the
securities portfolio of a 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 for a Portfolio is subject to the Investment
Adviser's ability both to select an appropriate index and to predict future
price movements over the short term in the overall stock market. The incorrect
choice of an index or an incorrect assessment of future price movements over the
shore term in the overall stock market may result in poorer overall performance
than if a Futures Contract had not been purchased. Brokerage costs are incurred
in entering into and maintaining Futures Contracts.
When a Portfolio enters into a Futures Contract, it may be initially
required to deposit with that Portfolio's custodian, in a segregated account in
the name of the broker performing the transaction, an "initial margin" of cash,
U.S. Government securities or other high grade short-term obligations equal to
approximately 3% of the contract amount. Initially margin requirements are
established by the exchanges on which Futures Contracts trade and may, from time
to time, change. In addition, brokers may establish margin deposit requirements
in excess of those required by the exchanges. Initial margin in futures
transactions is different from margin in securities transactions in that initial
margin does not involve the borrowing of funds by a broker's client but is,
rather, a good faith deposit on the Futures Contract which will be returned upon
the proper termination of the Futures Contract. The margin deposits made are
marked to market daily and a Portfolio may be required to make subsequent
deposits of cash or eligible securities called "variation margin", with that
Portfolio's futures contract clearing broker, which are reflective of price
fluctuations in the Futures Contract.
Currently, investments in Futures Contracts on non-U.S. stock indexes by
U.S. investors, such as the Portfolios, can be purchased on such non-U.S. stock
indexes as the Osaka Stock Exchange (OSE), Tokyo Stock Exchange (TSE), Hong Kong
Futures Exchange (HKFE), Singapore International Monetary Exchange (SIMEX),
London International Financial Futures and Options Exchange (LIFFE), Marche a
Terme International de France (MATIF), Sydney Futures Exchange Ltd. (SFE), Meff
Sociedad Rectora de Productos Financieros Derivados de Renta Variable, S.A.
(MEFF RENTA VARIABLE), Deutsche Terminbsrse (DTB), Italian Stock Exchange (ISE),
The Amsterdam Exchange (AE), and London Securities and Derivatives Exchange,
Ltd. (OMLX).
Exchanges may limit the amount by which the price of a Futures Contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
Another risk which may arise in employing Futures Contracts to protect
against the price volatility of portfolio securities is that the prices of an
index subject to Futures Contracts (and thereby the Futures Contract prices) may
correlate imperfectly with the behavior of the cash prices of a Portfolio's
portfolio securities. Another such risk is that the price of the Futures
Contract may not move in tandem with the change in overall stock market prices
against which that Portfolio seeks a hedge.
Loans of Portfolio Securities
Loans up to 30% of the total value of a Portfolio are permitted.
Securities of a Portfolio may be loaned if such loans are secured continuously
by cash or equivalent liquid short term securities as collateral or by an
irrevocable letter of credit in favor of a Portfolio at least equal at all times
to 100% of the market value of the securities loaned plus accrued income. By
lending the securities of a Portfolio, that Portfolio's income can be increased
by that Portfolio's continuing to receive income on the loaned securities as
well as by the opportunity for that Portfolio to receive income on the
collateral. All or any portion of interest earned on invested collateral may be
paid to the borrower. Loans are subject to termination by a Portfolio in the
normal settlement time, currently three business days after notice, or by the
borrower on one day's notice. Borrowed securities are returned when the loan is
terminated. Any appreciation or depreciation in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio and
its investors. Reasonable finders' and custodial fees may be paid in connection
with a loan. In addition, all facts and circumstances, including the
creditworthiness of the borrowing financial institution, are considered before a
loan is made and no loan is made in excess of one year. There is the risk that a
borrowed security may not be returned to a Portfolio. Securities are not loaned
to Brown Brothers Harriman & Co. or to any affiliate of the Corporation, a
Portfolio or Brown Brothers Harriman & Co.
Short-Term Investments
Although it is intended that the assets of each Portfolio stay invested
in the securities described above and in the Prospectus to the extent practical
in light of that Portfolio's investment objective and long-term investment
perspective, a Portfolio's assets may be invested in short-term instruments to
meet anticipated expenses or for day-to-day operating purposes and when, in the
Investment Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when a Portfolio experiences large cash inflows through issuance of
new shares or the sale of portfolio securities, and desirable equity securities
that are consistent with that Portfolio's investment objective are unavailable
in sufficient quantities, assets of that Portfolio may be held in short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("Standard & Poor's"), or if unrated are of comparable
quality in the opinion of the Investment Adviser; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and (v) repurchase agreements. Time deposits with a
maturity of more than seven days are treated as not readily marketable. At the
time a Portfolio's assets are invested in commercial paper, bank obligations or
repurchase agreements, the issuer must have outstanding debt rated A or higher
by Moody's or Standard & Poor's; the issuer's parent corporation, if any, must
have outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Investment Adviser. The assets may be
invested in non-U.S. dollar denominated and U.S. dollar denominated bank
deposits and short-term instruments, including U.S. dollar denominated
repurchase agreements. Cash is held for each Portfolio in demand deposit
accounts with the Portfolio's custodian bank.
Government Securities
The assets of each Portfolio may be invested in securities issued by
the U.S. Government or sovereign foreign governments, their agencies or
instrumentalities. These securities include notes and bonds, zero coupon bonds
and stripped principal and interest securities.
Restricted Securities
Securities that have legal or contractual restrictions on their resale
may be acquired for a Portfolio. The price paid for these securities, or
received upon resale, may be lower than the price paid or received for similar
securities with a more liquid market. Accordingly, the valuation of these
securities for a Portfolio reflects any limitation on their liquidity.
Repurchase Agreements
Repurchase agreements may be entered into for a Portfolio only with a
"primary dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. This is an agreement in which the seller (the "Lender")
of a security agrees to repurchase from a Portfolio the security sold at a
mutually agreed upon time and price. As such, it is viewed as the lending of
money to the Lender. The resale price normally is in excess of the purchase
price, reflecting an agreed upon interest rate. The rate is effective for the
period of time assets of a Portfolio are invested in the agreement and is not
related to the coupon rate on the underlying security. The period of these
repurchase agreements is usually short, from overnight to one week. The
securities which are subject to repurchase agreements, however, may have
maturity dates in excess of one week from the effective date of the repurchase
agreement. A Portfolio always receives as collateral securities which are issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
Collateral is marked to the market daily and has a market value, including
accrued interest, at least equal to 100% of the dollar amount invested on behalf
of that Portfolio in each agreement along with accrued interest. Payment for
such securities is made for that Portfolio only upon physical delivery or
evidence of book entry transfer to the account of State Street Bank and Trust
Company (the "Custodian"). If the Lender defaults, a Portfolio might incur a
loss if the value of the collateral securing the repurchase agreement declines
and might incur disposition costs in connection with liquidating the collateral.
In addition, if bankruptcy proceedings are commenced with respect to the Lender,
realization upon the collateral on behalf of a Portfolio may be delayed or
limited in certain circumstances.
When-Issued and Delayed Delivery Securities
Securities may be purchased for a Portfolio on a when-issued or delayed
delivery basis. For example, delivery and payment may take place a month or more
after the date of the transaction. The purchase price and the interest rate
payable on the securities, if any, are fixed on the transaction date. The
securities so purchased are subject to market fluctuation and no income accrues
to a Portfolio until delivery and payment take place. At the time the commitment
to purchase securities for a Portfolio on a when-issued or delayed delivery
basis is made, the transaction is recorded and thereafter the value of such
securities is reflected each day in determining that Portfolio's net asset
value. At the time of its acquisition, a when-issued or delayed delivery
security may be valued at less than the purchase price. Commitments for such
when-issued or delayed delivery securities are made only when there is an
intention of actually acquiring the securities. On delivery dates for such
transactions, such obligations are met from maturities or sales of securities
and/or from cash flow. If the right to acquire a when-issued or delayed delivery
security is disposed of prior to its acquisition, a Portfolio could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. When-issued or delayed delivery commitments for a Portfolio
may not be entered into if such commitments exceed in the aggregate 15% of the
market value of that Portfolio's total assets, less liabilities other than the
obligations created by when-issued or delayed delivery commitments.
Investment Company Securities
Subject to applicable statutory and regulatory limitations, the assets
of each Portfolio may be invested in shares of other investment companies. Under
the 1940 Act, assets of either Portfolio may be invested in shares of other
investment companies in connection with a merger, consolidation, acquisition or
reorganization or if immediately after such investment (i) 10% or less of the
market value of that Portfolio's total assets would be so invested, (ii) 5% or
less of the market value of that Portfolio's total assets would be invested in
the shares of any one such company, and (iii) 3% or less of the total
outstanding voting stock of any other investment company would be owned by that
Portfolio. As a shareholder of another investment company, the Portfolio would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Portfolio bears directly
in connection with its own operations.
INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------
Each Fund and Portfolio are operated under the following investment
restrictions which are deemed fundamental policies and may be changed only with
the approval of the holders of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Fund or the Portfolio, as the case may be.
Except that the Corporation may invest all of each Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, neither Portfolio nor the Corporation,
with respect to the Funds, may:
(1) borrow money or mortgage or hypothecate its assets, except that in an amount
not to exceed 1/3 of the current value of its net assets, it may borrow money as
a temporary measure for extraordinary or emergency purposes, and except that it
may pledge, mortgage or hypothecate not more than 1/3 of such assets to secure
such borrowings (it is intended that money will be borrowed only from banks and
only either to accommodate requests for the redemption of Fund shares or the
withdrawal of part or all of an interest in a Portfolio, as the case may be,
while effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations), provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute;
(2) purchase any security or evidence of interest therein on margin, except that
such short-term credit as may be necessary for the clearance of purchases and
sales of securities may be obtained and except that deposits of initial deposit
and variation margin may be made in connection with the purchase, ownership,
holding or sale of futures;
(3) write, purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent (i) the purchase, ownership, holding or
sale of warrants where the grantor of the warrants is the issuer of the
underlying securities, or (ii) the purchase, ownership, holding or sale of
futures and options, other than the writing of put options;
(4) underwrite securities issued by other persons except insofar as it may
technically be deemed an underwriter under the Securities Act of 1933, as
amended, in selling a portfolio security;
(5) make loans to other persons except (a) through the lending of its portfolio
securities and provided that any such loans not exceed 30% of its net assets
(taken at market value), (b) through the use of repurchase agreements or the
purchase of short-term obligations and provided that not more than 10% of its
net assets is invested in repurchase agreements maturing in more than seven
days, or (c) by purchasing, subject to the limitation in paragraph (6) below, a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan;
(6) knowingly invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days) if, as a result thereof, more than 10% of its net assets (taken
at market value) would be so invested (including repurchase agreements maturing
in more than seven days);
(7) purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts (except futures
and option contracts) in the ordinary course of business (the freedom of action
to hold and to sell real estate acquired as a result of the ownership of
securities is reserved);
(8) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short, and unless not more than 10% of its net assets (taken at
market value) is represented by such securities, or securities convertible into
or exchangeable for such securities, at any one time (it is the present
intention of management to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes; such sales would
not be made of securities subject to outstanding options);
(9) concentrate its investments in any particular industry, but if it is deemed
appropriate for the achievement of its investment objective, up to 25% of its
assets, at market value at the time of each investment, may be invested in any
one industry, except that positions in futures or option contracts shall not be
subject to this restriction;
(10) issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered to be the issuance of a senior security for purposes of this
restriction; or
(11) invest more than 5% of its total assets in the securities or obligations of
any one issuer (other than U.S. Government obligations) or more than 10% of its
total assets in the outstanding voting securities of any one issuer; provided,
however, that up to 25% of its total assets may be invested without regard to
this restriction, and provided further, that neither Fund shall be subject to
this restriction.
Non-Fundamental Restrictions. Each Portfolio or the Corporation, on
behalf of each Fund, may not as a matter of operating policy (except that the
Corporation may invest all of each Fund's assets in an open-end investment
company with substantially the same investment objective, policies and
restrictions as the Fund): (i) purchase securities of any investment company if
such purchase at the time thereof would cause more than 10% of its total assets
(taken at the greater of cost or market value) to be invested in the securities
of such issuers or would cause more than 3% of the outstanding voting securities
of any such issuer to be held for it; (ii) invest more than 10% of its net
assets (taken at the greater of cost or market value) in restricted securities;
or (iii) invest less than 65% of the value of the total assets of each Portfolio
in equity securities of companies based in countries in which that Fund may
invest. For these purposes, equity securities are defined as common stock,
securities convertible into common stock, rights and warrants, and include
securities purchased directly and in the form of American Depository Receipts,
Global Depository Receipts or other similar securities representing common stock
of foreign-based companies. These policies are not fundamental and may be
changed for without shareholder or investor approval.
Percentage and Rating Restrictions. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy. . If a Fund's and its
corresponding Portfolio's respective investment restrictions relating to any
particular investment practice or policy are not consistent, each Portfolio has
agreed with the Corporation that each Portfolio will adhere to the more
restrictive limitation.
DIRECTORS, TRUSTEES AND OFFICERS
- -------------------------------------------------------------------
The Corporation's Directors, in addition to supervising the actions of
the Administrator of the Corporation and Distributor, as set forth below, decide
upon matters of general policy with respect to the Corporation. Each Portfolio's
Trustees, in addition to supervising the actions of each Portfolio's Investment
Adviser and Administrator, as set forth below, decide upon matters of general
policy with respect to each Portfolio.
Because of the services rendered to each Portfolio by the Investment
Adviser and to the Corporation and each Portfolio by their respective
Administrators, the Corporation and each Portfolio require no employees, and
their respective officers, other than the Chairman, receive no compensation from
the Fund or each Portfolio.
The Directors of the Corporation, Trustees of each Portfolio and
executive officers of the Corporation and each Portfolio, their principal
occupations during the past five years (although their titles may have varied
during the period) and business addresses are:
DIRECTORS OF THE CORPORATION AND TRUSTEES OF THE PORTFOLIO
J.V. SHIELDS, JR.* - Chairman of the Board and Director; Trustee of The
59 Wall Street Trust; Trustee of the Portfolios(1) (since October 1999);
Managing Director, Chairman and Chief Executive Officer of Shields & Company;
Chairman of Capital Management Associates, Inc.; Director of Flowers Industries,
Inc.(2). Vice Chairman and Trustee of New York Racing Association. His business
address is Shields & Company, 140 Broadway, New York, NY 10005.
EUGENE P. BEARD** - Director; Trustee of The 59 Wall Street Trust;
Trustee of the Portfolios (since October 1999); Executive Vice President -
Finance and Operations of The Interpublic Group of Companies. His business
address is The Interpublic Group of Companies, Inc., 1271 Avenue of the
Americas, New York, NY 10020.
DAVID P. FELDMAN** - Director; Trustee of The 59 Wall Street Trust;
Trustee of the Portfolios (since October 1999); Retired; Vice President and
Investment Manager of AT&T Investment Management Corporation (prior to October
1997); Director of Dreyfus Mutual Funds, Jeffrey Co. and Heitman Financial. His
business address is 3 Tall Oaks Drive, Warren, NJ 07059.
ALAN G. LOWY** - Director; Trustee of The 59 Wall Street Trust; Trustee
of the Portfolios (since October 1999); Private Investor. His business address
is 4111 Clear Valley Drive, Encino, CA 91436.
ARTHUR D. MILTENBERGER** - Director; Trustee of The 59 Wall Street
Trust; Trustee of the Portfolios (since October 1999); Retired, Executive Vice
President and Chief Financial Officer of Richard K. Mellon and Sons (prior to
June 1998); Treasurer of Richard King Mellon Foundation (prior to June 1998);
Vice President of the Richard King Mellon Foundation; Trustee, R.K. Mellon
Family Trusts; General Partner, Mellon Family Investment Company IV, V and VI;
Director of Aerostructures Corporation (since 1996) (2). His business address is
Richard K. Mellon and Sons, P.O. Box RKM, Ligonier, PA 15658.
RICHARD L. CARPENTER** - Director and Trustee of The 59 Wall Street
Trust (since October 1999); Trustee of the Portfolios; Trustee of Dow Jones
Islamic Market Index Portfolio (since March 1999); Director of The 59 Wall
Street Fund, Inc. (since October 1999); Retired; Director of Investments,
Pennsylvania Public School Employees' Retirement System (prior to December
1997). His business address is 12664 Lazy Acres Court, Nevada City, CA 95959.
CLIFFORD A. CLARK** - Director and Trustee of The 59 Wall Street Trust
(since October 1999); Trustee of the Porfolios; Trustee of Dow Jones Islamic
Market Index Portfolio (since March 1999); Director of The 59 Wall Street Fund,
Inc. (since October 1999); Retired. His business address is 42 Clowes Drive,
Falmouth, MA 02540.
DAVID M. SEITZMAN** - Director and Trustee of The 59 Wall Street Trust
(since October 1999); Trustee of the Porfolios; Director of The 59 Wall Street
Fund, Inc. (since October 1999); Physician, Private
Practice. His business address is 7117 Nevis Road, Bethesda, MD 20817.
J. ANGUS IVORY - Director and Trustee of The 59 Wall Street Trust
(since October 1999); Trustee of the Portfolios (since October 1999); Director
of The 59 Wall Street Fund, Inc. (since October 1999); Trustee of Dow Jones
Islamic Market Index Portfolio (since March 1999); Director of Brown Brothers
Harriman Ltd., subsidiary of Brown Brothers Harriman & Co.; Director of Old
Daily Saddlery; Advisor, RAF Central Fund; Committee Member, St. Thomas Hospital
Pain Clinic (since 1999).
OFFICERS OF THE CORPORATION AND THE PORTFOLIOS
PHILIP W. COOLIDGE - President; Chief Executive Officer and President
of Signature Financial Group, Inc. ("SFG"), 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors") and 59 Wall Street Administrators, Inc. ("59
Wall Street Administrators").
JAMES E. HOOLAHAN - Vice President; Senior Vice President of SFG.
LINDA T. GIBSON - Secretary, Senior Vice President and Secretary of
SFG; Secretary of 59 Wall Street Distributors and 59 Wall Street Administrators.
SUSAN JAKUBOSKI - Assistant Treasurer; Assistant Treasurer and
Assistant Secretary of the Portfolio; Assistant Secretary, Assistant Treasurer
and Vice President of Signature Financial Group (Cayman) Limited.
LINWOOD C. DOWNS - Assistant Treasurer; Senior Vice President and
Treasurer of SFG.
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary of SFG; and Assistant Secretary of 59 Wall Street Distributors and 59
Wall Street Administrators.
CHRISTINE D. DORSEY - Assistant Secretary; Vice President of SFG (since
January 1996); Paralegal and Compliance Officer, various financial companies
(July 1992 to January 1996).
- -------------------------
* Mr. Shields is an "interested person" of the Corporation and the
Portfolios because of his affiliation with a registered broker-dealer.
** These Trustees are members of the Audit Committee of the Corporation
or the Portfolios, as the case may be.
(1) The Portfolios consist of the following active investment
companies: U.S. Money Market Portfolio, U.S. Equity Portfolio, European Equity
Portfolio, Pacific Basin Equity Portfolio and International Equity Portfolio and
the following inactive investment company: Inflation-Indexed Securities
Portfolio, U.S. Small Company Portfolio, U.S. Mid-Cap Portfolio and Emerging
Markets Portfolio.
(2) Shields & Company, Capital Management Associates, Inc. and Flowers
Industries, Inc., with which Mr. Shields is associated, are a
registered broker-dealer and a member of the New York Stock Exchange, a
registered investment adviser, and a diversified food company,
respectively.
(3) Richard K. Mellon and Sons, Richard King Mellon Foundation, R.K. Mellon
Family Trusts, Mellon Family Investment Company IV, V and VI and
Aerostructures Corporation, with which Mr. Miltenberger is or has been
associated, are a private foundation, a private foundation, a trust, an
investment company and an aircraft manufacturer, respectively.
Each Director/Trustee and officer of the Corporation and the Portfolios
listed above holds the equivalent position with The 59 Wall Street Trust. The
address of each officer of the Corporation and the Portfolios is 21 Milk Street,
Boston, Massachusetts 02109. Messrs. Coolidge, Hoolahan and Downs, and Mss.
Gibson, Jakuboski, Mugler and Dorsey also hold similar positions with other
investment companies for which affiliates of 59 Wall Street Distributors serve
as the principal underwriter.
Except for Mr. Shields, no Director/Trustee is an "interested person"
of the Corporation or the Portfolios as that term is defined in the 1940 Act.
<TABLE>
<CAPTION>
Directors of the Corporation and Trustees of the Portfolios
The Directors of the Corporation and the Trustees of the Portfolios
receive a base annual fee of $15,000 (except the Chairman who receives a base
annual fee of $20,000) and such base annual fee is allocated among all series of
the Corporation, all series of The 59 Wall Street Trust and the Portfolios and
any other active Portfolios having the same Board of Trustees based upon their
respective net assets. In addition, each series of the Corporation and The 59
Wall Street Trust, the Portfolios and any other active Portfolios which has
commenced operations pays an annual fee to each Directors/Trustee of $1,000.
<PAGE>
<S> <C> <C> <C> <C>
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued Estimated Annual from Fund
Name of Person, from the European as Part of Benefits upon Complex* Paid
Position Equity Fund Fund Expenses Retirement to Directors/Trustees
J.V. Shields, Jr., $2,835.15 none none $31,000
Director/Trustee
Eugene P. Beard, $2,376.36 none none $26,000
Director/Trustee
Richard L. Carpenter**, $0 none none $15,500
Director/Trustee
Clifford A. Clark**, $0 none none $15,500
Director/Trustee
David P. Feldman, $2,376.36 none none $26,000
Director/Trustee
J. Angus Ivory**, $0 none none $0
Director/Trustee
Alan G. Lowy, $2,376.36 none none $26,000
Director/Trustee
Arthur D. Miltenberger, $2,376.36 none none $26,000
Director/Trustee
David M. Seitzman**, $0 none none $15,500
Director/Trustee
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Aggregate Retiremen Compensation
Compensation Benefits Accrued Estimated Annual from Fund
Name of Person, from the Pacific as Part of Benefits upon Complex* Paid
Position Basin Equity Fund Fund Expenses Retirement to Directors/Trustees
J.V. Shields, Jr., $1,468.12 none none $31,000
Director/Trustee
Eugene P. Beard, $1,351.09 none none $26,000
Director/Trustee
Richard L. Carpenter**, $0 none none $15,500
Director/Trustee
Clifford A. Clark**, $0 none none $15,500
Director/Trustee
David P. Feldman, $1,351.09 none none $26,000
Director/Trustee
J. Angus Ivory**, $0 none none $0
Director/Trustee
Alan G. Lowy, $1,351.09 none none $26,000
Director/Trustee
Arthur D. Miltenberger, $1,351.09 none none $26,000
Director/Trustee
David M. Seitzman**, $0 none none $15,500
Director/Trustee
<FN>
* The Fund Complex consists of the Corporation, The 59 Wall Street Trust (which
currently consists of four series) and the five active Portfolios.
**Prior to October 22, 1999, these Trustees received no compensation from the
Corporation or The 59 Wall Street Trust.
</FN>
</TABLE>
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with each Portfolio and the
Administration Agreement with each Fund, and by Brown Brothers Harriman Trust
Company under the Administration Agreement with each Portfolio (see "Investment
Adviser" and "Administrators"), neither the Corporation nor the Portfolios
requires employees other than its officers, and none of its officers devote full
time to the affairs of the Corporation or the Portfolios, as the case may be,
or, other than the Chairmen, receive any compensation from the Fund or the
Portfolios.
As of January 31, 2000, the Directors/Trustees and officers of the
Corporation and the Portfolio as a group owned less than 1% of the outstanding
shares of the Corporation and less than 1% of the aggregate beneficial interests
in the Portfolio. At the close of business on that date no person, to the
knowledge of management, owned beneficially more than 5% of the outstanding
shares of the Fund nor more than 5% of the aggregate beneficial interests in the
Portfolio. However, as of that date, partners of Brown Brothers Harriman & Co.
and their immediate families owned 70,894 (2.2%) and 31,213 (2.4%)shares,
respectively, of the European Equity Fund and the Pacific Basin Equity Fund.
Brown Brothers Harriman & Co. and its affiliates separately are able to direct
the disposition of an additional 2,199,279 (55.3%) and 1,032,064 (54.2%) shares,
respectively, of the European Equity Fund and the Pacific Basin Equity Fund, as
to which shares Brown Brothers Harriman & Co. disclaims beneficial ownership.
<PAGE>
INVESTMENT ADVISER
- -------------------------------------------------------------------
Prior to November 1, 1999, Brown Brothers Harriman & Co. managed the
assets of the Fund pursuant to an Investment Advisory Agreement. This Agreement
was terminated by the Corporation, on behalf of the Fund, effective as of
October 31, 1999 pursuant to previous approval by the Fund's shareholders on
September 23, 1993 of certain changes in the Fund's investment restrictions
which enabled all of the Fund's investable assets to be invested in the
Portfolio.
Currently, under its Investment Advisory Agreements with each
Portfolio, subject to the general supervision of each Portfolio's Trustees and
in conformance with the stated policies of each Portfolio, Brown Brothers
Harriman & Co. provides investment advice and portfolio management services to
each Portfolio. In this regard, it is the responsibility of Brown Brothers
Harriman & Co. to make the day-to-day investment decisions for each Portfolio,
to place the purchase and sale orders for the portfolio transactions of each
Portfolio and to manage, generally, each Portfolio's investments.
The Investment Advisory Agreements between Brown Brothers Harriman &
Co. and each Portfolio is dated December 15, 1993. Each agreement remains in
effect for two years from its date and thereafter, but only so long as such
agreement is specifically approved with respect to the Portfolio at least
annually (i) by a vote of the holders of a "majority of outstanding voting
securities" (as defined in the 1940 Act) of that Portfolio or by that
Portfolio's Trustees, and (ii) by a vote of a majority of that Portfolio's
Trustees who are not parties to that Investment Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of the Portfolio ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval. Each Investment Advisory Agreement was most recently approved by the
Independent Trustees on November 9, 1999. Each Investment Advisory Agreement
terminates automatically if assigned and is terminable with respect to each
Portfolio at any time without penalty by a vote of a majority of the Trustees of
the Portfolio or by a vote of the holders of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio on 60 days'
written notice to Brown Brothers Harriman & Co. and by Brown Brothers Harriman &
Co. on 90 days' written notice to the Portfolio. (See "Additional Information".)
With respect to the European Equity Portfolio, the investment advisory
fee paid to the Investment Adviser is calculated daily and paid monthly at an
annual rate equal to 0.65% of that Portfolio's average daily net assets. The
advisory fee is the same as the fee paid by the European Equity Fund prior to
November 1, 1999. For the fiscal years ended October 31, 1997, 1998 and 1999,
the European Equity Fund incurred $1,012,388, $1,045,922 and $963,214,
respectively, for advisory services.
With respect to the Pacific Basin Equity Portfolio, the investment
advisory fee paid to the Investment Adviser is calculated daily and paid monthly
at an annual rate equal to 0.65% of that Portfolio's average daily net assets.
The advisory fee is the same as the fee paid by the Pacific Basin Equity Fund
prior to November 1, 1999. For the fiscal years ended October 31, 1997, 1998 and
1999, the Pacific Basin Equity Fund incurred $931,879, $281,852 and $342,621,
respectively, for advisory services.
The investment advisory services of Brown Brothers Harriman & Co. to
each Portfolio are not exclusive under the terms of the Investment Advisory
Agreements. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of December 15, 1993, the
Corporation may continue to use in its name "59 Wall Street", the current and
historic address of Brown Brothers Harriman & Co. The agreement may be
terminated by Brown Brothers Harriman & Co. at any time upon written notice to
the Corporation upon the expiration or earlier termination of any investment
advisory agreement between the Corporation or any investment company in which a
series of the Corporation invests all of its assets and Brown Brothers Harriman
& Co. Termination of the agreement would require the Corporation to change its
name and the name of each Portfolio to eliminate all reference to "59 Wall
Street".
Pursuant to license agreements between Brown Brothers Harriman & Co. and
each of 59 Wall Street Administrators and 59 Wall Street Distributors (each a
"Licensee"), dated June 22, 1993 and June 8, 1990, respectively, each Licensee
may continue to use in its name "59 Wall Street", the current and historic
address of Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co.
does not terminate the respective license agreement, which would require the
Licensee to change its name to eliminate all reference to "59 Wall Street".
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Funds.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing investment advisory,
administrative or shareholder servicing/eligible institution functions. If Brown
Brothers Harriman & Co. were to terminate its Investment Advisory Agreement with
a Portfolio or were prohibited from acting in such capacity, it is expected that
the Trustees would recommend to the investors that they approve a new investment
advisory agreement for such Portfolio with another qualified adviser. If Brown
Brothers Harriman & Co. were to terminate its Shareholder Servicing Agreement,
Eligible Institution Agreement or Administration Agreement with the Corporation
or were prohibited from acting in any such capacity, its customers would be
permitted to remain shareholders of the Corporation and alternative means for
providing shareholder services or administrative services, as the case may be,
would be sought. In such event, although the operation of the Corporation might
change, it is not expected that any shareholders would suffer any adverse
financial consequences. However, an alternative means of providing shareholder
services might afford less convenience to shareholders.
<PAGE>
ADMINISTRATORS
- ---------------------------------------------------------------
Brown Brothers Harriman & Co. acts as Administrator of the Corporation
and Brown Brothers Harriman Trust Company acts as Administrator of each
Portfolio. Brown Brothers Harriman Trust Company is a wholly-owned subsidiary of
Brown Brothers Harriman & Co.
In its capacity as Administrator of the Corporation, Brown Brothers
Harriman & Co. administers all aspects of the Corporation's operations subject
to the supervision of the Corporation's Directors except as set forth below
under "Distributor". In connection with its responsibilities as Administrator
and at its own expense, Brown Brothers Harriman & Co. (i) provides the
Corporation with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary in order to provide
effective administration of the Corporation, including the maintenance of
certain books and records; (ii) oversees the performance of administrative and
professional services to the Corporation by others, including the Funds'
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 Funds' 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 Funds and reports to shareholders and the Securities and
Exchange Commission.
Brown Brothers Harriman Trust Company, in its capacity as Administrator of
each Portfolio, administers all aspects of the Portfolios' operations subject to
the supervision of the Portfolios' Trustees except as set forth above under
"Investment Adviser". In connection with its responsibilities as Administrator
for each Portfolio and at its own expense, Brown Brothers Harriman Trust Company
(i) provides the Portfolios with the services of persons competent to perform
such supervisory, administrative and clerical functions as are necessary in
order to provide effective administration of the Portfolios, including the
maintenance of certain books and records, receiving and processing requests for
increases and decreases in the beneficial interests in the Portfolios,
notification to the Investment Adviser of available funds for investment,
reconciliation of account information and balances between the Custodian and the
Investment Adviser, and processing, investigating and responding to investor
inquiries; (ii) oversees the performance of administrative and professional
services to the Portfolios by others, including the Custodian; (iii) provides
the Portfolios 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 Portfolios' registration statement for
filing with the Securities and Exchange Commission, and the preparation of tax
returns for the Portfolios and reports to investors and the Securities and
Exchange Commission.
The Administration Agreement between the Corporation and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, but only so long as such agreement is specifically
approved at least annually in the same manner as each Portfolio's Investment
Advisory Agreement (see "Investment Adviser"). The Administration Agreement
between each Portfolio and Brown Brothers Harriman Trust Company (dated December
15, 1993) shall remain in effect for successive annual periods, but only so long
as such agreement is specifically approved at least annually in the same manner
as each Portfolio's Investment Advisory Agreement (see "Investment Adviser").
The Independent Directors/Trustees most recently approved each of the
Corporation's and each Portfolio's Administration Agreement on November 9, 1999.
Each agreement will terminate automatically if assigned by either party thereto
and is terminable by the Corporation or a Portfolio at any time without penalty
by a vote of a majority of the Directors of the Corporation or the Trustees of
such Portfolio, as the case may be, or by a vote of the holders of a "majority
of the outstanding voting securities" (as defined in the 1940 Act) of the
Corporation or the Portfolio, as the case may be (see "Additional Information").
The Corporation's Administration Agreement is terminable by the Directors of the
Corporation or shareholders of the Corporation on 60 days' written notice to
Brown Brothers Harriman & Co. Each Portfolio's Administration Agreement is
terminable by the Trustees of the Portfolio or by the corresponding Fund and
other investors in such Portfolio on 60 days' written notice to Brown Brothers
Harriman Trust Company. Each agreement is terminable by the respective
Administrator on 90 days' written notice to the Corporation or the Portfolio, as
the case may be.
The administrative fee payable to Brown Brothers Harriman & Co. from the
Fund is calculated daily and payable monthly at an annual rate equal to 0.125%
of the Fund's average daily net assets. For the services rendered to the
Portfolio and related expenses borne by Brown Brothers Harriman Trust Company as
Administrator of the Portfolio, Brown Brothers Harriman Trust Company receives
from the Portfolio an annual fee, computed daily and payable monthly, equal to
0.035% of the Portfolio's average daily net assets. Prior to November 1, 1999,
Brown Brothers Harriman & Co. was paid monthly at an annual rate equal to 0.15%
of each Fund's average daily net assets. For the fiscal years ended October 31,
1997, 1998 and 1999 the European Equity Fund incurred $233,628, $241,367 and
$222,280, respectively, for administrative services. For the fiscal years ended
October 31, 1997, 1998 and 1999, the Pacific Basin Equity Fund incurred
$215,035, $65,043 and $79,066, respectively, for administrative services.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company, 59 Wall Street Administrators performs such
subadministrative duties for each Portfolio 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, MA 02109. 59 Wall Street Administrators is a wholly-owned
subsidiary of SFG. 59 Wall Street Administrators' subadministrative duties may
include providing equipment and clerical personnel necessary for maintaining the
organization of each Portfolio, participation in the preparation of documents
required for compliance by the Portfolio with applicable laws and regulations,
preparation of certain documents in connection with meetings of Trustees of and
investors in the Portfolio, and other functions that would otherwise be
performed by the Administrator of the Portfolio as set forth above. For
performing such subadministrative services, 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 Portfolio. Prior to
March 1, 1999, Signature Financial Group (Cayman) Limited acted as
subadministrator under the same terms and conditions as set forth herein.
DISTRIBUTOR
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59 Wall Street Distributors acts as exclusive Distributor of shares of each
Fund. Its office is located at 21 Milk Street, Boston, Massachusetts 02109. 59
Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
each Fund's prospectus as required under federal and state securities laws.
59 Wall Street Distributors holds itself available to receive purchase
orders for Fund shares. The Distribution Agreement (dated September 5, 1990, as
amended and restated February 12, 1991) between the Corporation and 59 Wall
Street Distributors remains in effect indefinitely, but only so long as such
agreement is specifically approved at least annually in the same manner as the
Investment Advisory Agreement. The Distribution Agreement was most recently
approved by the Independent Directors of the Corporation on February 8, 2000.
The agreement terminates automatically if assigned by either party thereto and
is terminable with respect to each Fund at any time without penalty by a vote of
a majority of the Directors of the Corporation or by a vote of the holders of a
"majority of each Fund's outstanding voting securities" (as defined in the 1940
Act). (See "Additional Information".) The Distribution Agreement is terminable
with respect to each Fund by the Corporation's Directors or shareholders of the
Fund on 60 days' written notice to 59 Wall Street Distributors. The agreement is
terminable by 59 Wall Street Distributors on 90 days' written notice to the
Corporation.
SHAREHOLDER SERVICING AGENT
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The Corporation has entered into a shareholder servicing agreement with
Brown Brothers Harriman & Co. pursuant to which Brown Brothers Harriman & Co.,
as agent for the Funds, among other things: answers inquiries from shareholders
of and prospective investors in the Funds regarding account status and history,
the manner in which purchases and redemptions of Fund shares may be effected and
certain other matters pertaining to the Funds; assists shareholders of and
prospective investors in the Funds in designating and changing dividend options,
account designations and addresses; and provides such other related services as
the Corporation or a shareholder of or prospective investor in a Fund may
reasonably request. For these services, Brown Brothers Harriman & Co. receives
from each Fund an annual fee, computed daily and payable monthly, equal to 0.25%
of that Fund's average daily net assets represented by shares owned during the
period for which payment was being made by shareholders who did not hold their
shares with an Eligible Institution.
FINANCIAL INTERMEDIARIES
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From time to time, the Funds' Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Funds who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Funds; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Funds. For these services, the Financial Intermediary
receives such fees from the Shareholder Servicing Agent as may be agreed upon
from time to time between the Shareholder Servicing Agent and such Financial
Intermediary.
ELIGIBLE INSTITUTIONS
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The Corporation enters into eligible institution agreements with banks,
brokers and other financial institutions pursuant to which each financial
institution, as agent for the Corporation with respect to shareholders of and
prospective investors in the Funds who are customers with that financial
institution, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Funds; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Funds. For these services, each financial institution
receives from each Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of that Funds average daily net assets represented by shares owned
during the period for which payment was being made by customers for whom the
financial institution was the holder or agent of record.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
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Brown Brothers Harriman & Co. (the "Custodian"), 50 Milk Street,
Boston, Massachusetts 02109, is Custodian for each Fund and each Portfolio and
Transfer and Dividend Disbursing Agent for each Fund.
As Custodian for each Fund, it is responsible for holding the Fund's assets
(i.e., cash and the Fund's interest in its corresponding Portfolio) pursuant to
a custodian agreement with the Corporation. Cash is held for each Fund in demand
deposit accounts at the Custodian. Subject to the supervision of the
Administrator of the Corporation, the Custodian maintains the accounting records
for each Fund and each day computes the net asset value per share of the Fund.
As Transfer and Dividend Disbursing Agent it is responsible for maintaining the
books and records detailing the ownership of each Fund's shares.
As Custodian for each Portfolio, it is responsible for maintaining
books and records of portfolio transactions and holding the Portfolio's
securities and cash pursuant to a custodian agreement with the Portfolio. Cash
is held for each Portfolio in demand deposit accounts at the Custodian. Subject
to the supervision of the Administrator of each Portfolio, the Custodian
maintains the accounting and portfolio transaction records for the Portfolio and
each day computes the net asset value and net income of the Portfolio.
INDEPENDENT AUDITORS
- -------------------------------------------------------------------
Deloitte & Touche LLP, Boston, Massachusetts are the independent
auditors for the Funds and the Portfolios.
NET ASSET VALUE; REDEMPTION IN KIND
- -------------------------------------------------------------------
The net asset value of each of a Fund's shares is determined each day
the New York Stock Exchange is open for regular trading. (As of the date of this
Statement of Additional Information, such Exchange is so open every weekday
except for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) This determination of net asset value of each
share of a Fund is made once during each such day as of the close of regular
trading on such Exchange by subtracting from the value of the Fund's total
assets (i.e., the value of its investment in its corresponding Portfolio and
other assets) the amount of its liabilities, including expenses payable or
accrued, and dividing the difference by the number of shares of the Fund
outstanding at the time the determination is made.
The value of a Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the corresponding Fund is determined. The value of a Fund's
investment in its corresponding Portfolio is determined by multiplying the value
of the Portfolio's net assets by the percentage, effective for that day, which
represents the Fund's share of the aggregate beneficial interests in the
Portfolio. The value of a Fund's investment in its corresponding Portfolio is
determined once daily at 4:00 P.M., New York time on each day the New York Stock
Exchange is open for regular trading.
The value of investments listed on a domestic securities exchange is
based on the last sale prices as of the regular close of the New York Stock
Exchange (which is currently 4:00 p.m., New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange. Securities listed on a foreign exchange are valued at the last
quoted sales price available before the time at which net assets are valued.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security. For purposes of
calculating net asset value per share, all assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at the
prevailing market rates available at the time of valuation.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Portfolios'
Trustees. Such procedures include the use of independent pricing services, which
use prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Short-term investments which mature in 60 days or less are
valued at amortized cost if their original maturity was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if their original
maturity when acquired was more than 60 days, unless this is determined not to
represent fair value by the Trustees of the Portfolios.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when a Fund's net
asset value is calculated, such securities would be valued at fair value in
accordance with procedures established by and under the general supervision of
the Portfolios' Trustees.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
each Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Corporation has elected, however, to be governed by Rule 18f-1
under the 1940 Act, as a result of which the Corporation is obligated with
respect to any one investor during any 90 day period to redeem shares of a Fund
solely in cash up to the lesser of $250,000 or 1% of the Fund's net assets at
the beginning of such 90 day period.
COMPUTATION OF PERFORMANCE
- -------------------------------------------------------------------
The average annual total return of a Fund is calculated for any period
by (a) dividing (i) the sum of the aggregate net asset value per share on the
last day of the period of shares purchased with a $1,000 payment on the first
day of the period and the aggregate net asset value per share on the last day of
the period of shares purchasable with dividends and capital gains distributions
declared during such period with respect to shares purchased on the first day of
such period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) $1,000, (b) raising the quotient to a power equal
to 1 divided by the number of years in the period, and (c) subtracting 1 from
the result.
The annualized average rate of return of a Fund for any specified
period is calculated by (a) dividing (i) the sum of the aggregate net asset
value per share on the last day of the period of shares purchased with a $1,000
payment on the first day of the period and the aggregate net asset value per
share on the last day of the period of shares purchasable with dividends and
capital gains distributions declared during such period with respect to shares
purchased on the first day of such period and with respect to shares purchased
with such dividends and capital gains distributions, by (ii) $1,000, and (b)
subtracting 1 from the result.
The annualized average rate of return for the European Equity Fund and
the Pacific Basin Equity Fund for the period November 1, 1990 (commencement of
operations) to October 31, 1999 was 12.49% and 10.02%, respectively. The average
annual rate of return for the European Equity Fund and the Pacific Basin Equity
Fund for the fiscal year ended October 31, 1999 was 11.87% and 90.89%,
respectively. The average annual rate of return for the European Equity Fund and
the Pacific Basin Equity Fund for the five-year period ended October 31, 1999
was 14.45% and 6.21%, respectively.
Performance calculations should not be considered a representation of
the average annual or total rate of return of a Fund in the future since the
rates of return are not fixed. Actual total rates of return and average annual
rates of return depend on changes in the market value of, and dividends and
interest received from, the investments held by a Portfolio and that Portfolio's
and its corresponding Fund's expenses during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time, a Fund's total
rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
Each Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include a Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the MSCI-Europe and MSCI-Pacific) and to investments
for which reliable performance data is available. Performance information may
also include comparisons to averages, performance rankings or other information
prepared by recognized mutual fund statistical services. To the extent that
unmanaged indexes are so included, the same indexes are used on a consistent
basis. A Fund's investment results as used in such communications are calculated
on a total rate of return basis in the manner set forth below. From time to
time, fund rankings from various sources, such as Micropal, may be quoted.
Period and average annualized "total rates of return" may be provided
in such communications. The "total rate of return" refers to the change in the
value of an investment in a Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with any
dividends or capital gains distributions during such period. Period total rates
of return may be annualized. An annualized total rate of return is a compounded
total rate of return which assumes that the period total rate of return is
generated over a one year period, and that all dividends and capital gains
distributions are reinvested. An annualized total rate of return is slightly
higher than a period total rate of return if the period is shorter than one
year, because of the assumed reinvestment.
PURCHASES AND REDEMPTIONS
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A confirmation of each purchase and redemption transaction is issued on
execution of that transaction.
The Corporation reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when regular trading on such Exchange is restricted as determined by
the Securities and Exchange Commission by rule or regulation, (ii) during
periods in which an emergency exists which causes disposal of, or evaluation of
the net asset value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
In the event a shareholder redeems all shares held in the Fund, future
purchases of shares of the Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
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 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.
FEDERAL TAXES
- -------------------------------------------------------------------
Each year, the Corporation intends to continue to qualify each Fund and
elect that each Fund be treated as a separate "regulated investment company" of
the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the
Funds are not subject to federal income taxes on its net income and realized net
long-term capital gains in excess of net short-term capital losses that are
distributed to its shareholders. A 4% non-deductible excise tax is imposed on a
Fund to the extent that certain distribution requirements for that Fund for each
calendar year are not met. The Corporation intends to continue to meet such
requirements. Each Portfolio is also not required to pay any federal income or
excise taxes. Under Subchapter M of the Code each Fund is not subject to federal
income taxes on amounts distributed to shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of a Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities, foreign
currencies or other income derived with respect to its business of investing in
such securities; (b) less than 30% of a Fund's annual gross income be derived
from gains (without offset for losses) from the sale or other disposition of
securities held for less than three months; and (c) the holdings of a Fund be
diversified so that, at the end of each quarter of its fiscal year, (i) at least
50% of the market value of a Fund's assets be represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of that Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of a Fund's assets be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other investment companies).
Foreign currency gains that are not directly related to a Fund's business of
investing in stock or securities is included in the income that counts toward
the 30% gross income requirement described above but may be excluded by Treasury
Regulations from income that counts toward the 90% of gross income requirement
described above. In addition, in order not to be subject to federal income tax,
at least 90% of a Fund's net investment income and net short-term capital gains
earned in each year must be distributed to that Fund's shareholders.
Under the Code, gains or losses attributable to foreign currency
contracts, or to fluctuations in exchange rates between the time a Portfolio
accrues income or receivables or expenses or other liabilities denominated in a
foreign currency and the time that Portfolio actually collects such income or
pays such liabilities, are treated as ordinary income or ordinary loss.
Similarly, gains or losses on the disposition of debt securities held by a
Portfolio, if any, denominated in foreign currency, to the extent attributable
to fluctuations in exchange rates between the acquisition and disposition dates
are also treated as ordinary income or loss.
Dividends paid from the Funds are not eligible for the
dividends-received deduction allowed to corporate shareholders because the
income of the Portfolios does not consist of dividends paid by domestic
corporations.
Gains or losses on sales of securities are treated as long-term capital
gains or losses if the securities have been held by it for more than one year
except in certain cases where a put has been acquired or a call has been written
thereon. Other gains or losses on the sale of securities are treated as
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities are generally treated as gains and losses
from the sale of securities. If an option written for a Portfolio lapses or is
terminated through a closing transaction, such as a repurchase of the option
from its holder, that Portfolio may realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than the amount paid
in the closing transaction. If securities are sold pursuant to the exercise of a
call option written for them, the premium received would be added to the sale
price of the securities delivered in determining the amount of gain or loss on
the sale. The requirement that less than 30% of a Fund's gross income be derived
from gains from the sale of securities held for less than three months may limit
the ability to write options and engage in transactions involving stock index
futures.
Certain options contracts held for a Portfolio at the end of each
fiscal year are required to be "marked to market" for federal income tax
purposes; that is, treated as having been sold at market value. Sixty percent of
any gain or loss recognized on these deemed sales and on actual dispositions are
treated as long-term capital gain or loss, and the remainder are treated as
short-term capital gain or loss regardless of how long that Portfolio has held
such options. A Portfolio may be required to defer the recognition of losses on
stock or securities to the extent of any unrecognized gain on offsetting
positions held for it.
If shares are purchased by a Portfolio in certain foreign investment
entities, referred to as "passive foreign investment companies", the
corresponding Fund may be subject to U.S. federal income tax, and an additional
charge in the nature of interest, on the Fund's portion of any "excess
distribution" from such company or gain from the disposition of such shares,
even if the distribution or gain is paid by the Fund as a dividend to its
shareholders. If the Fund were able and elected to treat a passive foreign
investment company as a "qualified electing fund", in lieu of the treatment
described above, the Fund would be required each year to include in income, and
distribute to shareholders, in accordance with the distribution requirements set
forth above, the Fund's pro rata share of the ordinary earnings and net capital
gains of the company, whether or not distributed to the Fund.
Return of Capital. Any dividend or capital gains distribution has the
effect of reducing the net asset value of Fund shares held by a shareholder by
the same amount as the dividend or capital gains distribution. If the net asset
value of shares is reduced below a shareholder's cost as a result of a dividend
or capital gains distribution from a Fund, such dividend or capital gains
distribution would be taxable even though it represents a return of invested
capital.
Redemption of Shares. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities is treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
Foreign Taxes. Foreign Taxes. Each Fund may be subject to foreign withholding
taxes and if more than 50% of the value of the Fund's share of the corresponding
Portfolio's total assets at the close of any fiscal year consists of stock or
securities of foreign corporations, at the election of the Corporation any such
foreign income taxes paid by the Fund may be treated as paid directly by its
shareholders. The Corporation makes such an election only if it deems it to be
in the best interest of the Fund's shareholders and notifies shareholders in
writing each year if it makes the election and of the amount of foreign income
taxes, if any, to be treated as paid by the shareholders. If the Corporation
elects to treat foreign income taxes paid from the Fund as paid directly by the
Fund's shareholders, the Fund's shareholders would be required to include in
income such shareholder's proportionate share of the amount of foreign income
taxes paid by the Fund and would be entitled to claim either a credit or
deduction in such amount. (No deduction is permitted in computing alternative
minimum tax liability). Shareholders who choose to utilize a credit (rather than
a deduction) for foreign taxes are subject to the limitation that the credit may
not exceed the shareholder's U.S. tax (determined without regard to the
availability of the credit) attributable to that shareholder's total foreign
source taxable income. For this purpose, the portion of dividends and capital
gains distributions paid from a Fund from its foreign source income is treated
as foreign source income. The Fund's gains and losses from the sale of
securities are generally treated as derived from U.S. sources, however, and
certain foreign currency gains and losses likewise are treated as derived from
U.S. sources. The limitation of the foreign tax credit is applied separately to
foreign source "passive income", such as the portion of dividends received from
the Fund which qualifies as foreign source income. In addition, the foreign tax
credit is allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, a shareholder may be
unable to claim a credit for the full amount of such shareholder's proportionate
share of the foreign income taxes paid from a Fund.
Certain entities, including corporations formed as part of corporate
pension or profit-sharing plans and certain charitable and other organizations
described in Section 501 (c) of the Internal Revenue Code, as amended, that are
generally exempt from federal income taxes may not receive any benefit from the
election by the Corporation to "pass through" foreign income taxes to a Fund's
shareholders.
In certain circumstances foreign taxes imposed with respect to a Fund's
income may not be treated as income taxes imposed on the Fund. Any such taxes
would not be included in the Fund's income, would not be eligible to be "passed
through" to Fund shareholders, and would not be eligible to be claimed as a
foreign tax credit or deduction by Fund shareholders. In particular, in certain
circumstances it may not be clear whether certain amounts of taxes deducted from
gross dividends paid to the Fund would, for U.S. federal income tax purposes, be
treated as imposed on the issuing corporation rather than the Fund.
Other Taxes. A Fund may be subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of a Fund and its shareholders in those states which have income tax
laws might differ from treatment under the federal income tax laws.
Distributions to shareholders may be subject to additional state and local
taxes. Shareholders should consult their own tax advisors with respect to any
state or local taxes.
Other Information. Annual notification as to the tax status of capital
gains distributions, if any, is provided to shareholders shortly after October
31, the end of each Funds fiscal year. Additional tax information is mailed to
shareholders in January.
Under U.S. Treasury regulations, the Corporation and each Eligible
Institution are required to withhold and remit to the U.S. Treasury a portion
(31%) of dividends and capital gains distributions on the accounts of those
shareholders who fail to provide a correct taxpayer identification number
(Social Security Number for individuals) or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
such withholdings. Prospective investors should submit an IRS Form W-9 to avoid
such withholding.
This tax discussion is based on the tax laws and regulations in effect
on the date of the Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
The Corporation is an open-end management investment company organized
as a Maryland corporation on July 16, 1990. Its offices are located at 21 Milk
Street, Boston, Massachusetts 02109; its telephone number is (617) 423-0800. The
Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par value $0.001 per share, of which
25,000,000 shares have been classified as shares of the European Equity Fund and
25,000,000 as shares of Pacific Basin Equity Fund. The Board of Directors may
increase the number of shares the Corporation is authorized to issue without the
approval of shareholders. The Board of Directors also has the power to designate
one or more series of shares of common stock and to classify and reclassify any
unissued shares with respect to such series. Currently there are four such
series in addition to the Funds.
Each share of the Fund represents an equal proportional interest in the
Fund with each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Shareholders of each Fund are entitled to a full vote for each full
share held and to a fractional vote for fractional shares. Shareholders in the
Corporation do not have cumulative voting rights, and shareholders owning more
than 50% of the outstanding shares of the Corporation may elect all of the
Directors of the Corporation if they choose to do so and in such event the other
shareholders in the Corporation would not be able to elect any Director. The
Corporation is not required and has no current intention to hold meetings of
shareholders annually but the Corporation will hold special meetings of
shareholders when in the judgment of the Corporation's Directors it is necessary
or desirable to submit matters for a shareholder vote as may be required by the
1940 Act or as may be permitted by the Articles of Incorporation or By-laws.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Directors by a specified number
of shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Directors. Shareholders also have the right to remove one or more Directors
without a meeting by a declaration in writing by a specified number of
shareholders. Shares have no preemptive or conversion rights. The rights of
redemption are described in the Prospectus. Shares, when issued, are fully paid
and non-assessable by the Corporation.
Stock certificates are not issued by the Corporation.
The By-laws of the Corporation provide that the presence in person or
by proxy of the holders of record of one third of the shares of a Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of shareholders of that Fund, except as otherwise required by
applicable law. The By-laws further provide that all questions shall be decided
by a majority of the votes cast at any such meeting at which a quorum is
present, except as otherwise required by applicable law.
The Corporation's Articles of Incorporation provide that, at any
meeting of shareholders of a Fund, each Eligible Institution may vote any shares
as to which that Eligible Institution is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares otherwise represented
at the meeting in person or by proxy as to which that Eligible Institution is
the agent of record. Any shares so voted by an Eligible Institution are deemed
represented at the meeting for purposes of quorum requirements.
The Articles of Incorporation of the Corporation contain a provision
permitted under Maryland Corporation Law which under certain circumstances
eliminates the personal liability of the Corporation's Directors to the
Corporation or its shareholders.
Each Portfolio, in which all of the assets of the Fund are invested, is
organized as a trust under the law of the State of New York. The Portfolio's
Declaration of Trust provides that the corresponding Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolio. However, the risk of the corresponding Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Directors of the
Corporation believe that neither the corresponding Fund nor its shareholders
will be adversely affected by reason of the investment of all of the assets of
the Fund in the Portfolio. Each investor in each Portfolio, including the
corresponding Fund, may add to or reduce its investment in the Portfolio on each
day the New York Stock Exchange is open for regular trading. At 4:00 P.M., New
York time on each such business day, the value of each investor's beneficial
interest in each Portfolio is determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio is then recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 4:00 P.M., New York time on such day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's investment in
the Portfolio effected on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 P.M., New York time on
such day plus or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in the Portfolio by all investors
in the Portfolio. The percentage so determined is then applied to determine the
value of the investor's interest in the Portfolio as of 4:00 P.M., New York time
on the following business day of the Portfolio.
Whenever the Corporation is requested to vote on a matter pertaining to
a Portfolio, the Corporation will vote its shares without a meeting of
shareholders of the corresponding Fund if the proposal is one, if which made
with respect to the Fund, would not require the vote of shareholders of the
Fund, as long as such action is permissible under applicable statutory and
regulatory requirements. For all other matters requiring a vote, the Corporation
will hold a meeting of shareholders of the Fund and, at the meeting of investors
in the Portfolio, the Corporation will cast all of its votes in the same
proportion as the votes of the Fund's shareholders even if all Fund shareholders
did not vote. Even if the Corporation votes all its shares at the Portfolio
meeting, other investors with a greater pro rata ownership in the Portfolio
could have effective voting control of the operations of the Portfolio.
The Articles of Incorporation and the By-Laws of the Corporation
provide that the Corporation indemnify the Directors and officers of the
Corporation to the full extent permitted by the Maryland Corporation Law, which
permits indemnification of such persons against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Corporation. However, nothing in the Articles of
Incorporation or the By-Laws of the Corporation protects or indemnifies a
Director or officer of the Corporation against any liability to the Corporation
or its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Interests in each Portfolio will have no preference, preemptive,
conversion or similar rights, and are fully paid and non-assessable. Each
Portfolio is not required to hold annual meetings of investors, but will hold
special meetings of investors when, in the judgment of its Trustees, it is
necessary or desirable to submit matters for an investor vote. Each investor is
entitled to a vote in proportion to the share of its investment in the
Portfolio.
PORTFOLIO BROKERAGE TRANSACTIONS
Each Portfolio is managed actively in pursuit of its investment
objective. Securities are not traded for short-term profits but, when
circumstances warrant, securities are sold without regard to the length of time
held. A 100% annual turnover rate would occur, for example, if all securities in
a Portfolio (excluding short-term obligations) were replaced once in a period of
one year. The portfolio turnover rate for the European Equity Fund was 56% and
37% for the fiscal years ended October 31, 1998 and 1999, respectively. For the
same time periods, the portfolio turnover rate for the Pacific Basin Equity Fund
was 91% and 97%, respectively. The amount of brokerage commissions and taxes on
realized capital gains to be borne by the shareholders of a Fund tend to
increase as the level of portfolio activity increases.
In effecting securities transactions for a Portfolio, the Investment
Adviser seeks to obtain the best price and execution of orders. In selecting a
broker, the Investment Adviser considers a number of factors including: the
broker's ability to execute orders without disturbing the market price; the
broker's reliability for prompt, accurate confirmations and on-time delivery of
securities; the broker's financial condition and responsibility; the research
and other investment information provided by the broker; and the commissions
charge. Accordingly, the commissions charged by any such broker may be greater
than the amount another firm might charge if the Investment Adviser determines
in good faith that the amount of such commissions is reasonable in relation to
the value of the brokerage services and research information provided by such
broker.
The Investment Adviser may direct a portion of a Portfolio's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from that Portfolio to pay other unaffiliated service
providers on behalf of that Portfolio for services provided for which that
Portfolio would otherwise be obligated to pay. Such commissions paid by a
Portfolio are at the same rate paid to other brokers for effecting similar
transactions in listed equity securities.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of a Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for that Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolios. In some instances, this procedure might
adversely affect a Portfolio.
For the fiscal year ended October 31, 1997, the aggregate commissions
paid by the European Equity Fund and the Pacific Basin Equity Fund were $625,439
and $669,481, respectively. For the fiscal year ended October 31, 1998, the
aggregate commissions paid by the European Equity Fund and the Pacific Basin
Equity Fund were $460,433 and $362,267, respectively. For the fiscal year ended
October 31, 1999, the aggregate commissions paid by the European Equity Fund and
the Pacific Basin Equity Fund were $293,948 and $295,352, respectively.
Portfolio securities are not purchased from or sold to the
Administrator, Distributor or Investment Adviser or any "affiliated person" (as
defined in the 1940 Act) of the Administrator, Distributor or Investment Adviser
when such entities are acting as principals, except to the extent permitted by
law.
All of the transactions for the Portfolios are executed through
qualified brokers other than Brown Brothers Harriman & Co. In selecting such
brokers, the Investment Adviser may consider the research and other investment
information provided by such brokers. Research services provided by brokers to
which Brown Brothers Harriman & Co. has allocated brokerage business in the past
include economic statistics and forecasting services, industry and company
analyses, portfolio strategy services, quantitative data, and consulting
services from economists and political analysts. Research services furnished by
brokers are used for the benefit of all the Investment Adviser's clients and not
solely or necessarily for the benefit of the Portfolios. The Investment Adviser
believes that the value of research services received is not determinable nor
does such research significantly reduce its expenses. The Corporation does not
reduce the fee paid by a Portfolio to the Investment Adviser by any amount that
might be attributable to the value of such services.
A committee, comprised of officers and partners of Brown Brothers
Harriman & Co. who are portfolio managers of some of Brown Brothers Harriman &
Co.'s managed accounts (the "Managed Accounts"), evaluates semi-annually the
nature and quality of the brokerage and research services provided by brokers,
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative amounts of brokerage commissions paid to
the brokers on the list may vary substantially from the projected rankings.
The Directors of the Corporation review regularly the reasonableness of
commissions and other transaction costs incurred for the Portfolios in light of
facts and circumstances deemed relevant from time to time and, in that
connection, receive reports from the Investment Adviser and published data
concerning transaction costs incurred by institutional investors generally.
Over-the-counter purchases and sales are transacted directly with
principal market makers, except in those circumstances in which, in the judgment
of the Investment Adviser, better prices and execution of orders can otherwise
be obtained. If the Corporation effects a closing transaction with respect to a
futures or option contract, such transaction normally would be executed by the
same broker-dealer who executed the opening transaction. The writing of options
by the Corporation may be subject to limitations established by each of the
exchanges governing the maximum number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are written on the same or different exchanges or are
held or written in one or more accounts or through one or more brokers. The
number of options which the Corporation may write may be affected by options
written by the Investment Adviser for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" (as defined in the 1940
Act) currently means the vote of (i) 67% or more of the shares present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or represented by proxy; or (ii) more than 50% of the
outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
Other mutual funds or institutional investors may invest in each Portfolio
on the same terms and conditions as the Fund. However, these other investors may
have different sales commissions and other operating expenses which may generate
different aggregate performance results. Information concerning other investors
in each Portfolio is available from Brown Brothers Harriman & Co.
The Corporation may withdraw the Fund's investment in each Portfolio as
a result of certain changes in such Portfolio's investment objective, policies
or restrictions or if the Board of Directors of the Corporation determines that
it is otherwise in the best interests of the Fund to do so. Upon any such
withdrawal, the Board of Directors of the Corporation would consider what action
might be taken, including the investment of all of the assets of the Fund in
another pooled investment entity or the retaining of an investment adviser to
manage the Fund's assets in accordance with the investment policies of such
Portfolio.
In the event the Directors of the Corporation were unable to accomplish
either, the Directors will determine the best course of action.
With respect to the securities offered by the Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Annual Report of the Funds dated October 31, 1999 has been filed
with the Securities and Exchange Commission pursuant to Section 30(b) of the
1940 Act and Rule 30b2-1 thereunder and is hereby incorporated herein by
reference. A copy of the Annual Report which also contains performance
information will be provided, without charge, to each person receiving this
Statement of Additional Information.
WS5306H
<PAGE>
PART C
ITEM 23. EXHIBITS.
(a) (i) Restated Articles of Incorporation of the Registrant.(7)
(ii) Establishment and Designation of Series of The 59 Wall
Street U.S. Equity Fund and The 59 Wall Street Short/
Intermediate Fixed Fund.(7)
(iii) Establishment and Designation of Series of The 59 Wall
Street Small Company Fund.(7)
(iv) Establishment and Designation of Series of The 59 Wall
Street International Equity Fund.(7)
(v) Establishment and Designation of Series of The 59 Wall
Street Short Term Fund. (7)
(vi) Redesignation of series of the The 59 Wall Street Short/
Intermediate Fixed Income Fund as The 59 Wall Street
Inflation-Indexed Securities Fund. (8)
(vii) Establishment and Designation of Series of The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(viii) Establishment and Designation of Series of The 59 Wall Street
Opportunities Fund. (13)
(b) Amended and Restated By-Laws of the Registrant.(7)
(c) Not Applicable.
(d) (i) Advisory Agreement with respect to The 59 Wall Street
U.S. Equity Fund.(7)
(ii) Advisory Agreement with respect to The 59 Wall Street
Short/Intermediate Fixed Income Fund. (7)
(iii) Form of Advisory Agreement with respect to The 59 Wall Street
Inflation-Indexed Securities Fund.(8)
(iv) Form of Advisory Agreement with respect to The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(v) Form of Advisory Agreement with respect to The 59 Wall
Street Opportunities Fund. (12)
(vi) Form of Sub-Advisory Agreement with respect to The 59
Wall Street Opportunities Fund. (12)
(e) Form of Amended and Restated Distribution Agreement.(3)
(f) Not Applicable.
(g) (i) Form of Custody Agreement.(2)
(ii) Form of Transfer Agency Agreement.(2)
(h) (i) Amended and Restated Administration Agreement.(6)
(ii)Subadministrative Services Agreement.(6)
(iii) Form of License Agreement.(1)
(iv) Amended and Restated Shareholder Servicing Agreement.(6)
(a) Appendix A to Amended and Restated Shareholder
Servicing Agreement.(9)
(b) Appendix A to Amended and Restated Shareholder
Servicing Agreement. (12)
(v) Amended and Restated Eligible Institution Agreement.(6)
(a) Appendix A to Amended and Restated Eligible
Institution Agreement.(9)
(b) Appendix A to Amended and Restated Eligible
Institution Agreement. (12)
(vi) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street U.S. Equity Fund.(6)
(vii) Form of Expense Reimbursement Agreement with
respect to The 59 Wall Street Short/Intermediate
Fixed Income Fund.(6)
(viii) Form of Expense Payment Agreement with respect to
The 59 Wall Street Inflation-Indexed Securities Fund.(8)
(ix) Form of Expense Payment Agreement with respect to The
59 Wall Street Tax-Efficient U.S. Equity Fund. (9)
(x) Form of Expense Payment Agreement with respect to The
59 Wall Street International Equity Fund.(10)
(i) Opinion of Counsel (including consent).(2)
(j) Independent auditors' consent.(14)
(k) Not Applicable.
(l) Copies of investment representation letters from initial
shareholders.(2)
(i) Form of investment representation letter from initial
shareholders of The 59 Wall Street Opportunities Fund.(13)
(m) Not Applicable.
(n) Not Applicable.
(p) Code of Ethics. (13)
27 Financial Data Schedules. (14)
<PAGE>
(1)Filed with the initial Registration Statement on July 16, 1990.
(2)Filed with Amendment No. 1 to this Registration Statement on October 9, 1990.
(3)Filed with Amendment No.2 to this Registration Statement on February 14,
1991.
(4)Filed with Amendment No. 5 to this Registration Statement on June 15, 1992.
(5)Filed with Amendment No. 7 to this Registration Statement on March 1, 1993.
(6)Filed with Amendment No.9 to this Registration Statement on December 30,
1993.
(7)Filed with Amendment No. 24 to this Registration Statement on
February 28, 1996.
(8)Filed with Amendment No. 27 to this Registration Statement on
February 28, 1997.
(9)Filed with Amendment No. 38 to this Registration Statement on
September 21, 1998.
(10)Filed with Amendment No. 40 to this Registration Statement on
December 30, 1998.
(11)Filed with Amendment No.43 to this Registration Statement on February 26,
1999.
(12) Filed with Amendment No. 46 to this Registration Statement on September
28, 1999.
(13) To be filed by Amendment.
(14) Filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant.
See "Directors and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.
Item 25. Indemnification
Reference is made to Article VII of Registrant's By-Laws and to Section
5 of the Distribution Agreement between the Registrant and 59 Wall Street
Distributors, Inc.
Registrant, its Directors and officers, and persons affiliated with
them are insured against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser.
The Registrant's investment adviser, Brown Brothers Harriman & Co.
("BBH & Co."), is a New York limited partnership. BBH & Co. conducts a general
banking business and is a member of the New York Stock Exchange, Inc.
To the knowledge of the Registrant, none of the general partners or
officers of BBH & Co. is engaged in any other business, profession, vocation or
employment of a substantial nature.
Item 27. Principal Underwriters.
1. (a) 59 Wall Street Distributors, Inc. ("59 Wall Street
Distributors") and its affiliates, also serves as
administrator and/or distributor to other
registered investment companies.
(b) Set forth below are the names, principal business
addresses and positions of each Director and
officer of 59 Wall Street Distributors. The
principal business address of these individuals is
c/o 59 Wall Street Distributors, Inc., 21 Milk
Street, Boston, MA 02109. Unless otherwise
specified, no officer or Director of 59 Wall
Street Distributors serves as an officer or
Director of the Registrant.
<PAGE>
Position and Offices with Position and Offices
Name 59 Wall Street Distributors with the Registrant
- ------------- --------------------------- --------------------
Philip W. Coolidge Chief Executive President
Officer, President
and Director
Linda T. Gibson Secretary Secretary
Molly S. Mugler Assistant Secretary Assistant Secretary
Christine D. Dorsey -- Assistant Secretary
Susan Jakuboski Assistant Treasurer Assistant Treasurer
Linwood C. Downs Treasurer Assistant Treasurer
Robert Davidoff Director --
CMNY Capital, L.P.
135 East 57th Street
New York, NY 10022
Donald Chadwick Director --
Scarborough & Company
110 East 42nd Street
New York, NY 10017
Leeds Hackett Director --
National Credit
Management Corporation
10155 York Road
Cockeysville, MD 21030
Laurence E. Levine Director --
First International
Capital Ltd.
130 Sunrise Avenue
Palm Beach, FL 33480
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of:
The 59 Wall Street Fund, Inc.
21 Milk Street
Boston, MA 02109
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
(investment adviser, eligible institution
and shareholder servicing agent)
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, MA 02109
(distributor)
59 Wall Street Administrators, Inc.
21 Milk Street
Boston, MA 02109
(subadministrator)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
(custodian and transfer agent)
<PAGE>
Item 29. Management Services.
Other than as set forth under the caption "Management of the
Corporation" in the Prospectus constituting Part A of the Registration
Statement, Registrant is not a party to any management-related service contract.
Item 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts on the 29th day of February,
2000.
THE 59 WALL STREET FUND, INC.
By /s/ PHILIP W. COOLIDGE
(Philip W. Coolidge, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
/s/ J.V. SHIELDS, JR. Director and Chairman of
(J.V. Shields, Jr.) the Board
/s/ PHILIP W. COOLIDGE President (Principal
(Philip W. Coolidge) Executive Officer)
/s/ EUGENE P. BEARD Director
(Eugene P. Beard)
/s/ DAVID P. FELDMAN Director
(David P. Feldman)
/s/ ARTHUR D. MILTENBERGER Director
(Arthur D. Miltenberger)
/s/ ALAN D. LOWY Director
(Alan D. Lowy)
/s/ CLIFFORD A. CLARK Director
(Clifford A. Clark)
/s/ RICHARD L. CARPENTER Director
(Richard L. Carpenter)
/s/ DAVID M. SEITZMAN Director
(David M. Seitzman)
/s/ J. ANGUS IVORY Director
(J. Angus Ivory)
/S/ SUSAN JAKUBOSKI Assistant Treasurer and Principal
(Susan Jakuboski) Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts on the 29th day of February,
2000.
EUROPEAN EQUITY PORTFOLIO
By /s/ PHILIP W. COOLIDGE
(Philip W. Coolidge, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
/s/ J.V. SHIELDS, JR. Director and Chairman of
(J.V. Shields, Jr.) the Board
/s/ PHILIP W. COOLIDGE President (Principal
(Philip W. Coolidge) Executive Officer)
/s/ EUGENE P. BEARD Director
(Eugene P. Beard)
/s/ DAVID P. FELDMAN Director
(David P. Feldman)
/s/ ARTHUR D. MILTENBERGER Director
(Arthur D. Miltenberger)
/s/ ALAN D. LOWY Director
(Alan D. Lowy)
/s/ CLIFFORD A. CLARK Director
(Clifford A. Clark)
/s/ RICHARD L. CARPENTER Director
(Richard L. Carpenter)
/s/ DAVID M. SEITZMAN Director
(David M. Seitzman)
/s/ J. ANGUS IVORY Director
(J. Angus Ivory)
/S/ SUSAN JAKUBOSKI Assistant Treasurer and Principal
(Susan Jakuboski) Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts on the 29th day of February,
2000.
PACIFIC BASIN EQUITY PORTFOLIO
By /s/ PHILIP W. COOLIDGE
(Philip W. Coolidge, President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated above.
Signature Title
/s/ J.V. SHIELDS, JR. Director and Chairman of
(J.V. Shields, Jr.) the Board
/s/ PHILIP W. COOLIDGE President (Principal
(Philip W. Coolidge) Executive Officer)
/s/ EUGENE P. BEARD Director
(Eugene P. Beard)
/s/ DAVID P. FELDMAN Director
(David P. Feldman)
/s/ ARTHUR D. MILTENBERGER Director
(Arthur D. Miltenberger)
/s/ ALAN D. LOWY Director
(Alan D. Lowy)
/s/ CLIFFORD A. CLARK Director
(Clifford A. Clark)
/s/ RICHARD L. CARPENTER Director
(Richard L. Carpenter)
/s/ DAVID M. SEITZMAN Director
(David M. Seitzman)
/s/ J. ANGUS IVORY Director
(J. Angus Ivory)
/S/ SUSAN JAKUBOSKI Assistant Treasurer and Principal
(Susan Jakuboski) Accounting Officer
INDEX TO EXHIBITS
EX-99.(j) Consent of Independent Auditors
EX-27.1-
EX-27.2 Financial Data Schedules.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 26 to Registration Statement (No. 33-35827) of The 59 Wall Street
Fund, Inc. on behalf of The 59 Wall Street European Equity Fund and The 59 Wall
Street Pacific Basin Equity Fund (two of the series constituting The 59 Wall
Street Fund, Inc.) of our reports dated December 17, 1999 in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the heading "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
/S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 28, 2000
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information from the The 59 Wall Street European
Equity Fund Annual Report, dated October 31, 1999, and is qualified in its
entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 2
<NAME> THE 59 WALL STREET EUROPEAN EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> OCT-31-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 112,663,732
<INVESTMENTS-AT-VALUE> 142,769,731
<RECEIVABLES> 417,528
<ASSETS-OTHER> 660,653
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,847,912
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 533,353
<TOTAL-LIABILITIES> 533,353
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,590,120
<SHARES-COMMON-STOCK> 3,778,953
<SHARES-COMMON-PRIOR> 3,815,150
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (9,204)
<ACCUMULATED-NET-GAINS> 11,632,511
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 143,314,559
<DIVIDEND-INCOME> 2,269,003
<INTEREST-INCOME> 62,116
<OTHER-INCOME> 0
<EXPENSES-NET> 1,977,490
<NET-INVESTMENT-INCOME> 353,629
<REALIZED-GAINS-CURRENT> 17,161,319
<APPREC-INCREASE-CURRENT> (476,200)
<NET-CHANGE-FROM-OPS> 17,038,748
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,480,869
<DISTRIBUTIONS-OF-GAINS> 17,676,237
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,815,753
<NUMBER-OF-SHARES-REDEEMED> 107,760,311
<SHARES-REINVESTED> 13,820,724
<NET-CHANGE-IN-ASSETS> (12,242,192)
<ACCUMULATED-NII-PRIOR> 2,106,080
<ACCUMULATED-GAINS-PRIOR> 16,401,088
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 963,214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,977,490
<AVERAGE-NET-ASSETS> 148,186,833
<PER-SHARE-NAV-BEGIN> 39.05
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 4.15
<PER-SHARE-DIVIDEND> 0.66
<PER-SHARE-DISTRIBUTIONS> 4.71
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 37.92
<EXPENSE-RATIO> 1.33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information from the The 59 Wall Street Pacific
Basin Equity Fund Annual Report, dated October 31, 1999, and is qualified in
its entirety by reference to such report.
</LEGEND>
<CIK> 0000865898
<NAME> THE 59 WALL STREET FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> THE 59 WALL STREET PACIFIC BASIN EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> OCT-31-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 57,667,009
<INVESTMENTS-AT-VALUE> 77,891,442
<RECEIVABLES> 2,590,093
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80,554,593
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143,526
<TOTAL-LIABILITIES> 143,526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,924,895
<SHARES-COMMON-STOCK> 2,073,868
<SHARES-COMMON-PRIOR> 1,606,883
<ACCUMULATED-NII-CURRENT> 675,496
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (26,412,431)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,223,107
<NET-ASSETS> 80,411,067
<DIVIDEND-INCOME> 385,096
<INTEREST-INCOME> 46,939
<OTHER-INCOME> 0
<EXPENSES-NET> 735,288
<NET-INVESTMENT-INCOME> (303,253)
<REALIZED-GAINS-CURRENT> 11,428,050
<APPREC-INCREASE-CURRENT> 21,794,575
<NET-CHANGE-FROM-OPS> 32,919,372
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 115,186,849
<NUMBER-OF-SHARES-REDEEMED> 100,325,530
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 47,780,691
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (36,462,766)
<OVERDISTRIB-NII-PRIOR> (489,072)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 342,621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 737,785
<AVERAGE-NET-ASSETS> 52,710,974
<PER-SHARE-NAV-BEGIN> 20.31
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 18.63
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 38.77
<EXPENSE-RATIO> 1.39
</TABLE>
