As filed with the Securities and Exchange Commission on January 10, 2000
Registration Nos. 33-48605 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. 22
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 48
THE 59 WALL STREET FUND, INC.
(Exact Name of Registrant as Specified in Charter)
21 Milk Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Philip W. Coolidge
21 Milk Street, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street, New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on 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 Tax-Efficient Equity Fund
21 Milk Street, Boston, Massachusetts 02109
The 59 Wall Street Tax-Efficient Equity Fund is a separate portfolio of
The 59 Wall Street Fund, Inc. Shares of the Fund are offered by this Prospectus.
The Fund seeks to provide tax-efficient long-term capital growth while also
generating current income.
Brown Brothers Harriman & Co. is the Investment Adviser for the Fund.
Shares of the Fund are offered at net asset value and without a sales charge.
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Neither The Securities And Exchange Commission Nor Any State Securities
Commission Has Approved Or Disapproved Of These Securities Or Passed Upon
The Adequacy Or Accuracy Of This Prospectus. Any Representation To The
Contrary Is A Criminal Offense.
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The date of this Prospectus is March 1, 2000.
<PAGE>
TABLE OF CONTENTS
Page
-----
Investment Objective................................
Investment Strategies...............................
Principal Risk Factors..............................
Fund Performance....................................
Fees and Expenses of the Fund.......................
Investment Adviser..................................
Shareholder Information.............................
Financial Highlights................................
Additional Information..............................
<PAGE>
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital on an after-tax basis.
INVESTMENT STRATEGIES
Under normal circumstances the Investment Adviser fully invests the assets of
the Fund in equity securities traded on the New York Stock Exchange, American
Stock Exchange or the National Association of Securities Dealers Automated
Quotations (NASDAQ) System. Although the Investment Adviser expects to invest
the assets of the Fund primarily in common stocks, it may also purchase other
securities with equity characteristics, including securities convertible into
common stock, trust or limited partnership interests, rights, warrants and
American Depositary Receipts. Investments generally consist of equities issued
by domestic firms; however, equities of foreign-based companies may also be
purchased if they are registered under the Securities Act of 1933.
The Investment Adviser primarily invests in medium and large sized companies
with a sound financial structure, proven management, an established industry
position and competitive products and services. In selecting individual
securities, the focus is primarily on those companies that exhibit above average
revenue and earnings growth as well as high or improving returns on investment.
The Fund holds a broadly diversified portfolio representing many sectors of
the U.S. economy. This industry diversification and participation in both growth
and value oriented equities is designed to control the portfolio's exposure to
market risk and company specific risk.
The use of tax-efficient investment strategies can reduce the "drag" on
investment returns related to income taxes and capital gains taxes. This enables
investors to retain a larger portion of their pre-tax investment returns on an
after-tax basis. Key elements of our tax-efficient approach include:
o Pursuing an equity strategy which emphasizes capital appreciation
o Focusing our stock selection process on each security's long-term
investment potential
o Selective realization of losses within the Fund that can be used to
offset realized gains
o Evaluating potential stock sales and reinvestment alternatives on an
after-tax basis
While many equity mutual funds seek to provide superior pre-tax returns, the
Fund seeks to provide superior after-tax returns. Although the Fund's
tax-efficient strategy is to minimize an investor's tax liability, there can be
no guarantee that it will be minimized. In employing its strategies, the
Investment Adviser will sell the Fund's securities when the anticipated
performance benefit justifies incurring the resulting tax liability.
PRINCIPAL RISK FACTORS
The principal risks of investing in the Fund and the circumstances reasonably
likely to adversely affect an investment are described below. As with any fund
other than a money market mutual fund, the share price of the Fund changes daily
based on market conditions and other factors. A Shareholder may lose money by
investing in the Fund.
The principal risk of investing in the Fund is 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.
Another risk of investing in the Fund is tax management risk. This is
the risk that managing the Fund for after-tax returns may hurt the Fund's
performance. Because the Investment Adviser considers tax consequences in making
investment decisions for the Fund, the Fund's pre-tax performance is likely to
be lower than that of a similar fund that is not tax-managed. The Fund is
therefore not a suitable investment for IRAs, 401(k) plans or other tax-exempt
or tax deferred accounts or for other investors who are not sensitive to the
federal income tax consequences of their investments.
Investments in the Fund are neither insured nor guaranteed by the U.S.
Government. Shares of the Fund are not deposits or obligations of, or guaranteed
by, Brown Brothers Harriman & Co. or any other bank, and the shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other federal, state or other governmental agency.
<PAGE>
FUND PERFORMANCE
The chart and table below give an indication of the risks of investing in
the Fund. The chart shows changes in the Fund's performance from year to year.
The table shows how the Fund's average annual returns for the periods indicated
compare to those of a broad measure of market performance.
When you consider this information, please remember that the Fund's
performance in past years is not necessarily an indication of how the Fund will
do in the future.
[The following table was depicted as a bar chart in the printed material]
Total Return (% per calendar year)
1998 [ ]%
1999 [ ]%
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Highest and Lowest Return
(Quarterly 1998-1999)
Return Quarter Ending
Highest [ ]% [ ]
Lowest [ ]% [ ]
- ------------------------------------------------------------------------------
Average Annual Total Returns
(through December 31, 1999)
- ---------------------------------------- -------------------------------------
1 Year Life of Fund
(Since November 2,
1998)
Tax-Efficient Equity Fund [ ]% [ ]%
S&P 500 Index [ ]% [ ]%
<PAGE>
FEES AND EXPENSES OF THE FUND
The tables below describe the fees and expenses that an investor may pay
if that investor buys and holds shares of the Fund.
SHAREHOLDER FEES
(Fees paid directly from an investor's account)
Maximum Sales Charge (Load)
Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets as a percentage of
average net assets)
Management Fee 0.65%
Distribution (12b-1) Fees None
Other Expenses
Administration Fee 0.15%
Shareholder Servicing/Eligible Institution Fee 0.25
Other Expenses 0.30 0.70
---- ----
Total Annual Fund Operating Expenses 1.35%
Expense Payment (0.15)%1
Net Expenses Paid by Fund 1.20%
- ------------------
1The expense payment arrangement is a contractual limitation on expenses which
will continue until July 31, 2003.
EXAMPLE
This example is intended to help an investor compare the cost of investing
in the Fund to the cost of investing in other mutual funds. The example assumes
that an investor invests $10,000 in the Fund for the time periods indicated and
then sells all of his shares at the end of those periods. The example also
assumes that an investment has a 5% return each year and that the Fund's
operating expenses remain the same as shown in the table above. Although actual
costs on an investor's investment may be higher or lower, based on these
assumptions the investor's costs would be:
1 year $ [ ]
3 years $ [ ]
<PAGE>
INVESTMENT ADVISER
The Investment Adviser to the Fund is Brown Brothers Harriman & Co., Private
Bankers, a New York limited partnership established in 1818. The firm is subject
to examination and regulation by the Superintendent of Banks of the State of New
York and by the Department of Banking of the Commonwealth of Pennsylvania. The
firm is also subject to supervision and examination by the Commissioner of Banks
of the Commonwealth of Massachusetts.
The Investment Adviser provides investment advice and portfolio management
services to the Fund. Subject to the general supervision of the Corporation's
Directors, Brown Brothers Harriman & Co. makes the day-to-day investment
decisions for the Fund, places the purchase and sale orders for the portfolio
transactions of the Fund, and generally manages the 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 $33 billion.
The Fund's portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. Brian A. Berris, Mr. Stephen C. Whitman, Jr. and Mr.
Geoffrey D. Kimball. Mr. Berris holds a B.S.B.A. from the University of
Nebraska, a M.B.A. from Northwestern University and is a Chartered Financial
Analyst. He joined Brown Brothers Harriman & Co. in 1973. Mr. Whitman holds a
B.A. from Colgate University and a M.B.A. from the University of Virginia. He
joined Brown Brothers Harriman & Co. in 1986. Mr. Kimball holds a B.A. from Yale
University and a M.A. from Columbia University. He joined Brown Brothers
Harriman & Co in 1977.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Investment Adviser under the
Investment Advisory Agreement, the Fund pays the Investment Adviser an annual
fee, computed daily and payable monthly, equal to 0.65% of the average daily net
assets of the Fund.
SHAREHOLDER INFORMATION
NET ASSET VALUE
The Corporation determines the Fund's net asset value per share once daily at
4:00 P.M., New York time on each day the New York Stock Exchange is open for
regular trading. The determination of the Fund's net asset value per share is
made by subtracting from the value of the total assets of the Fund the amount of
its liabilities and dividing the difference by the number of shares of the Fund
outstanding at the time the determination is made.
The Corporation values the assets in the Fund's portfolio 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 Directors of the Corporation.
PURCHASE OF SHARES
The Corporation offers shares of the 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
be purchase shares on any day the net asset value is calculated if the
Corporation receives the purchase order and acceptable payment for such order
prior to such calculation. The Corporation then executes purchases of Fund
shares at the net asset value per share next determined on that same day. Shares
are entitled to dividends declared, if any, starting as of the first business
day following the day the Corporation executes the purchase order on the books
of the Corporation.
An investor who has an account with an Eligible Institution or a Financial
Intermediary may place purchase orders for Fund shares through that Eligible
Institution or Financial Intermediary which holds such shares in its name on
behalf of that customer pursuant to arrangements made between that customer and
that Eligible Institution or Financial Intermediary. Each Eligible Institution
and each Financial Intermediary may establish and amend from time to time a
minimum initial and a minimum subsequent purchase requirement for its customers.
Currently, such minimum purchase requirements range from $1,000 to $25,000. Each
Eligible Institution or Financial Intermediary arranges payment for Fund shares
on behalf of its customers. A transaction fee may be charged by an Eligible
Institution or a Financial Intermediary on the purchase of Fund shares.
An investor who does not have an account with an Eligible Institution or a
Financial Intermediary must place purchase orders for Fund shares with the
Corporation through Brown Brothers Harriman & Co., the Fund's Shareholder
Servicing Agent. Such an investor has such shares held directly in the
investor's name on the books of the Corporation and is responsible for arranging
for the payment of the purchase price of Fund shares. The Corporation executes
all purchase orders for initial and subsequent purchases at the net asset value
per share next determined after the Corporation's custodian, State Street Bank
and Trust Company, has received payment in the form of a cashier's check drawn
on a U.S. bank, a check certified by a U.S. bank or a wire transfer. The
Shareholder Servicing Agent has established a minimum initial purchase
requirement for the Fund of $100,000 and a minimum subsequent purchase
requirement for the Fund of $25,000. The Shareholder Servicing Agent may amend
these minimum purchase requirements from time to time.
REDEMPTION OF SHARES
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 the Fund falls below that amount because of a redemption of shares,
the Corporation may redeem the shareholder's remaining shares. If such remaining
shares are to be redeemed, the Corporation notifies the shareholder and allows
the shareholder 60 days to make an additional investment to meet the minimum
requirement before the redemption is processed. Each Eligible Institution and
each Financial Intermediary may establish and amend from time to time for their
respective customers a minimum account size, each of which is currently lower
than that established by the Shareholder Servicing Agent.
Further Redemption Information
Redemptions of shares are taxable events on which a shareholder may realize a
gain or a loss.
The Corporation has reserved the right to pay the amount of a redemption from
the Fund, either totally or partially, by a distribution in kind of securities
(instead of cash) from the Fund. The Fund generally intends to pay redemption
proceeds in cash, however, it reserves the right at its sole discretion to pay
significant redemptions by a distribution in-kind of securities (instead of
cash). An in-kind redemption payment can shield the Fund, and other
shareholders, from tax liabilities that might otherwise be incurred. However,
the stocks received will continue to fluctuate in value after redemption and
will be subject to brokerage and other transaction costs when liquidated.
The Corporation may suspend a shareholder's right to receive payment with
respect to any redemption or postpone the payment of the redemption proceeds
postponed for up to seven days and for such other periods as applicable law may
permit.
DIVIDENDS AND DISTRIBUTIONS
The Corporation declares and pays to shareholders substantially all of the
Fund's net income and any realized net short-term capital gains semi-annually as
a dividend, and substantially all of the Fund's realized net long-term capital
gains, if any, annually as a capital gains distribution. The Corporation may
make an additional dividend and/or capital gains distribution in a given year to
the extent necessary to avoid the imposition of federal excise tax on the Fund.
The Corporation pays dividends and capital gains distributions to shareholders
of record on the record date.
Unless a shareholder whose shares are held directly in the shareholder's name
on the books of the Corporation elects to have dividends and capital gains
distributions paid in cash, The Corporation automatically reinvests dividends
and capital gains distributions in additional Fund shares without reference to
the minimum subsequent purchase requirement.
Each Eligible Institution and each Financial Intermediary may establish its
own policy with respect to the reinvestment of dividends and capital gains
distributions in additional Fund shares.
TAXES
Dividends are taxable to shareholders of the Fund as ordinary income, whether
such dividends are paid in cash or reinvested in additional shares. Capital
gains may be taxable at different rates depending on the length of time the Fund
holds its assets. Capital gains distributions are taxable to shareholders as
long-term capital gains, whether paid in cash or reinvested in additional shares
and regardless of the length of time a particular shareholder has held Fund
shares.
Foreign Investors
The Fund is designed for investors who are either citizens of the United
States or aliens subject to United States income tax. Prospective investors who
are not citizens of the United States and who are not aliens subject to United
States income tax are subject to United States withholding tax on the entire
amount of all dividends. Therefore, such investors should not invest in the Fund
since alternative investments are available which would not be subject to United
States withholding tax.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help an investor understand
the financial performance of the Fund. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Deloitte & Touche LLP, whose report, along with the Fund's financial
statements, are included in the annual report, which is available upon request.
For the period
from November 2, 1998
(commencement of operations)
to October 31, 1999
Net asset value, beginning of period........ $ 10.00
Income from investment operations:
Net investment income.................... (0.03)
Net realized and unrealized gain......... 2.83
----
Net asset value, end of period........... $12.80
======
Total return................................ 28.00%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $36,498
Expenses as a percentage of average net
assets1 ............................... 1.20%2
Ratio of net investment income to average net
assets................................. (0.25%)2
Portfolio turnover rate ................... 37%2
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1 Had the expense payment agreement not been in place, the ratio of
expenses to average net assets and total return would have been as follows:
Ratio of expenses to average net assets..... 1.29%
Total Return................................ 27.91%
2 Annualized.
<PAGE>
ADDITIONAL INFORMATION
Historically, common stocks have provided investors with higher long-term
returns than other investment vehicles. The following graph illustrates that
over time, common stocks have outperformed investments in long-term government
bonds and U.S. Treasury bills.
Growth of $1 investment made in 1925
Common Stock Long Term U.S. Treasury Inflation
Gov't Bonds Bills
1925 $1 $1 $1 $1
1935 $2 $2 $1 $1
1945 $5 $4 $1 $1
1955 $39 $4 $3 $1
1965 $70 $4 $3 $3
1975 $90 $6 $4 $4
1985 $500 $10 $8 $6
1995 $1,500 $39 $12 $8
1997 $2,353 $44 $15 $9
1999 [ ] [ ] [ ] [ ]
This graph illustrates the total return of the major classes of financial
assets since 1925, including common stocks, long-term government bonds and money
market securities as measured by U.S. Treasury bills. The Consumer Price Index
is used as a measure of inflation. This graph is not a prediction of the future
performance of any of these assets or of inflation. Source: Brown Brothers
Harriman & Co.
Year 2000 issue. Information technology experts are concerned about
computer systems' ability to process data-related information on and after
January 1, 2000. This situation, commonly known as the "Year 2000" issue, could
have an adverse impact on the Fund. The cost of addressing the Year 2000 issue,
if substantial, could adversely affect companies and governments that issue
securities held by the Fund. The Investment Adviser is addressing the Year 2000
issue for its systems. The Fund has been informed by its other service providers
that they are taking similar measures. Although the Fund does not expect the
Year 2000 issue to adversely affect it, the Fund cannot guarantee that the
efforts of the Fund, which are limited to requesting and receiving reports from
its service providers, or the efforts of its service providers to correct the
problem will be successful.
<PAGE>
The 59 Wall Street
Tax-Efficient Equity Fund
More information on the Fund is available free upon request, including the
following:
o Annual/Semi-Annual Report
Describes the Fund's performance, lists portfolio holdings and contains a letter
from the Fund's Investment Adviser discussing recent market conditions, economic
trends and Fund strategies that significantly affected the Fund's performance
during its last fiscal year.
o Statement of Additional Information (SAI)
Provides more details about the Fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information or make shareholder inquiries:
o By telephone
Call 1-800-625-5759
o By mail write to the Fund's Shareholder Servicing Agent:
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
o By E-mail send your request to:
[email protected]
o On the Internet:
Text-only versions of Fund documents can be viewed online or downloaded from:
Brown Brothers Harriman & Co.
http://www.bbhco.com
SEC
http://www.sec.gov
You can also review or obtain copies by visiting the SEC's Public Reference Room
in Washington, DC or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. Information on the
operations of the Public Reference Room may be obtained by calling
1-202-942-6009. 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].
Tax-Efficient Equity Fund
Prospectus
March __, 2000
SEC file number: 811-06139
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE 59 WALL STREET TAX-EFFICIENT EQUITY FUND
21 Milk Street, Boston, Massachusetts 02109
The 59 Wall Street Tax-Efficient Equity Fund (the "Tax-Efficient Equity
Fund" or the "Fund") is a separate portfolio of The 59 Wall Street Fund, Inc.
(the "Corporation"), a management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund is
designed to enable investors to be invested in a portfolio of equity securities
of companies that are well established and financially sound. The Fund's
investment objective is to provide investors with tax-efficient long-term
capital growth while also generating current income. There can be no assurance
that the investment objective of the Fund will be achieved.
Brown Brothers Harriman & Co. is the investment adviser (the
"Investment Adviser") to the Fund. 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 to
Page Page in Prospectus
Investments
Investment Objective and Policies . . . . . . . . . 2 3-4
Investment Restrictions . . . . . . . . . . . . . . 6 --
Management
Directors and Officers . . . . . . . . . . . . . . . 8 --
Investment Adviser . . . . . . . . . . . . . . . . . 13 7
Administrator . . . . . . . . . . . . . . . . . . . 14 --
Distributor . . . . . . . . . . . . . . . . . . . . 16 --
Shareholder Servicing Agent,
Financial Intermediaries and Eligible Institutions 16-18 --
Expense Payment Agreement 18 --
Custodian, Transfer and Dividend Disbursing Agent 18-19 --
Independent Auditors 19 --
Net Asset Value; Redemption in Kind 19-20 7
Computation of Performance . . . . . . . . . . . . . 20-21 --
Purchases and Redemptions 21-22 7-8
Federal Taxes . . . . . . . . . . . . . . . . . . . 22-24 9-10
Description of Shares . . . . . . . . . . . . . . . 24-25 --
Portfolio Brokerage Transactions . . . . . . . . . . . . . . . 25-28 --
Additional Information . . . . . . . . . . . . . . . 28 --
Financial Statements 28 10
The date of this Statement of Additional Information is March 1, 2000.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Fund.
Equity Investments
Equity investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of convertible preferred stock, the holder's claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.
Hedging Strategies
Options on Stock. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for the Fund, although the current intention
is not to do so in such a manner that more than 5% of the Fund's net assets
would be at risk. 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 the Fund at any time prior to the expiration of the option which
involves selling the option previously purchased.
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 the Fund. A stock index fluctuates with changes in
the market values of the stocks included in the index. Examples of stock indexes
are the Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange)
and the New York Stock Exchange Composite Index (New York Stock Exchange).
Options on stock indexes are generally similar to options on stock
except that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a fixed price (strike price), an option on
a stock index gives the holder the right to receive a cash exercise settlement
amount equal to (a) the amount, if any, by which the strike price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by (b)
a fixed index multiplier. Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the price of
the option. The amount of cash received will be equal to such difference between
the closing price of the index and the strike price of the option times a
specified multiple.
The effectiveness of purchasing stock index options as a hedging technique
depends upon the extent to which price movements in the portion of the
securities portfolio of the Fund being hedged correlate with price movements of
the stock index selected. The value of an index option depends upon future
movements in the level of the overall stock market measured by the underlying
index before the expiration of the option. Accordingly, the successful use of
options on stock indexes for the Fund is subject to the Investment Adviser's
ability both to select an appropriate index and to predict future price
movements over the short term in the overall stock market. Brokerage costs are
incurred in the purchase of stock index options and the incorrect choice of an
index or an incorrect assessment of future price movements may result in poorer
overall performance than if a stock index option had not been purchased.
The Corporation may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. It is possible, however,
that illiquidity in the options markets may make it difficult from time to time
for the Corporation to close out its written option positions. Also, the
securities exchanges have established limitations on the number of options which
may be written by an investor or group of investors acting in concert. It is not
contemplated that these position limits will have any adverse impact on the
Corporation's portfolio strategies.
Futures Contracts on Stock Indexes. Subject to applicable laws and
regulations and solely as a hedge against changes in the market value of
portfolio securities or securities intended to be purchased, futures contracts
on stock indexes ("Futures Contracts") may be entered into for the Fund.
In order to assure that the Fund is not deemed a "commodity pool" for
purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Fund enter into transactions in
futures contracts and options on futures contracts only (I) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions does not exceed 5% of the liquidation value of the Fund's
assets.
Futures Contracts provide for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for the
Fund or adversely affect the prices of securities which are intended to be
purchased at a later date. A Futures Contract may also be entered into to close
out or offset an existing futures position.
In general, each transaction in Futures Contracts involves the
establishment of a position which is expected to move in a direction opposite to
that of the investment being hedged. If these hedging transactions are
successful, the futures positions taken would rise in value by an amount which
approximately offsets the decline in value of the portion of the Fund's
investments that is being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized. There is also the risk of a potential lack
of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging
technique depends upon the extent of which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of a Futures Contract depends upon future movements in
the level of the overall stock market measured by the underlying index before
the closing out of the Futures Contract. Accordingly, the successful use of
Futures Contracts is subject to the Investment Adviser's ability both to select
an appropriate index and to predict future price movements over the short term
in the overall stock market. The incorrect choice of an index or an incorrect
assessment of the future price movements over the short term in the overall
stock market may result in a poorer overall performance than if a Futures
Contract had not been purchased. Brokerage costs are incurred in entering into
and maintaining Futures Contracts.
When the Fund enters into a Futures Contract, it may be initially required
to deposit, in a segregated account in the name of the broker performing in the
transaction, an "initial margin" of cash, U.S. Government securities or other
high grade liquid obligations equal to approximately 3% of the contract amount.
Initial margin requirements are established by the exchanges on which Futures
Contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
exchanges. Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the Futures
Contract which will be returned upon the proper termination of the Futures
Contract. The margin deposits made are marked to market daily and the Fund may
be required to make subsequent deposits of cash or eligible securities called
"variation margin", with its futures contract clearing broker, which are
reflective of price fluctuations in the Futures Contract.
Currently, Futures Contracts can be purchased on stock indexes such as the
Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange) and the
New York Stock Exchange Composite Index (New York Stock Exchange).
Exchanges may limit the amount by which the price of a Futures Contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
Short-Term Instruments
The assets of the Fund may be invested in U.S. dollar denominated
short-term instruments, including repurchase agreements, obligations of the U.S.
Government, its agencies or instrumentalities, commercial paper and bank
obligations (such as certificates of deposit, fixed time deposits, and bankers'
acceptances). Cash is held for the Fund in demand deposit accounts with the
Fund's custodian bank.
U.S. Government Securities
The assets of the Fund may be invested in securities issued by the U.S.
Government, its agencies or instrumentalities. These securities include notes
and bonds issued by the U.S. Treasury, zero coupon bonds and stripped principal
and interest securities.
Restricted Securities
Securities that have legal or contractual restrictions on their resale may be
acquired for the Fund. The price paid for these securities, or received upon
resale, may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of these securities reflects
any limitation on their liquidity.
When-Issued and Delayed Delivery Securities
Securities may be purchased for the Fund on a when-issued or delayed delivery
basis. For example, delivery and payment may take place a month or more after
the date of the transaction. The purchase price and the interest rate payable on
the securities, if any, are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no income accrues to the Fund
until delivery and payment take place. At the time the commitment to purchase
securities on a when-issued or delayed delivery basis is made, the transaction
is recorded and thereafter the value of such securities is reflected each day in
determining the Fund's net asset value. At the time of its acquisition, a
when-issued or delayed delivery security may be valued at less than the purchase
price. Commitments for such when-issued or delayed delivery securities are made
only when there is an intention of actually acquiring the securities. On
delivery dates for such transactions, such obligations are met from maturities
or sales of securities and/or from cash flow. If the right to acquire a
when-issued or delayed delivery security is disposed of prior to its
acquisition, the Fund could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When-issued or
delayed delivery commitments for the Fund may not be entered into if such
commitments exceed in the aggregate 15% of the market value of its total assets,
less liabilities other than the obligations created by when-issued or delayed
delivery commitments.
Loans of Portfolio Securities
Loans up to 30% of the total value of the securities of the Fund are
permitted. Securities of the Fund may be loaned if such loans are secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the Fund at least equal at all times to 100% of the market
value of the securities loaned plus accrued income. While such securities are on
loan, the borrower pays the Fund any income accruing thereon, and cash
collateral may be invested for the Fund, thereby earning additional income. All
or any portion of interest earned on invested collateral may be paid to the
borrower. Loans are subject to termination by the Corporation in the normal
settlement time, currently three business days after notice, or by the borrower
on one day's notice. Borrowed securities are returned when the loan is
terminated. Any appreciation or depreciation in the market price of the borrowed
securities which occurs during the term of the loan inures to the Fund and its
shareholders. Reasonable finders' and custodial fees may be paid in connection
with a loan. In addition, all facts and circumstances, including the
creditworthiness of the borrowing financial institution, are considered before a
loan is made and no loan is made in excess of one year. There is the risk that a
borrowed security may not be returned to the Fund. Securities of the Fund are
not loaned to Brown Brothers Harriman & Co. or to any affiliate of the
Corporation or Brown Brothers Harriman & Co.
INVESTMENT RESTRICTIONS
The Fund is operated under the following investment restrictions which
are deemed fundamental policies and may be changed only with the approval of the
holders of a "majority of the Fund's outstanding voting securities" (as defined
in the 1940 Act).
Except that the Corporation may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund, the Corporation, with respect to the
Fund, may not:
(1) borrow money or mortgage or hypothecate its assets, except that in
an amount not to exceed 1/3 of the current value of its net assets, it may
borrow money as a temporary measure for extraordinary or emergency purposes, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money will be borrowed
only from banks and only either to accommodate requests for the redemption of
Fund shares while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations);
(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 or the purchase, ownership,
holding, sale or writing of options;
(3) 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;
(4) 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 (5) 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 is part of an
issue to the public shall not be considered the making of a loan;
(5) 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);
(6) 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);
(7) 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);
(8) 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;
(9) 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;
(10) invest more than 5% of its total assets in the securities or
obligations of any one issuer (other than obligations issued by the U.S.
Government, its agencies or instrumentalities); provided, however, that up to
25% of its total assets may be invested without regard to this restriction; or
(11) purchase more than 10% of the outstanding voting securities of
any one issuer.
Non-Fundamental Restrictions. The Fund may not as a matter of operating
policy (except that the Corporation may invest all of the Fund's assets in an
open-end investment company with substantially the same investment objective,
policies and restrictions as the Fund): (i) purchase securities of any
investment company if such purchase at the time thereof would cause more than
10% of its total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers or would cause more than 3% of the
outstanding voting securities of any such issuer to be held for it; (ii) invest
more than 10% of its net assets (taken at the greater of cost or market value)
in restricted securities; or (iii) invest less than 65% of the value of the
total assets of the Fund in equity securities. These policies are not
fundamental and may be changed without shareholder approval in response to
changes in the various state and federal requirements.
Percentage and Rating Restrictions. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security is not considered a violation of policy.
The Fund is classified as diversified under the 1940 Act, which means
that at least 75% of its total assets is represented by cash; securities issued
by the U.S. Government, its agencies or instrumentalities; and other securities
limited in respect of any one issuer to an amount not greater in value than 5%
of the Fund's total assets. The Fund does not purchase more than 10% of the
outstanding voting securities of any issuer.
DIRECTORS AND OFFICERS
The Directors, in addition to supervising the actions of the
Administrator, Investment Adviser and Distributor of the Fund, as set forth
below, decide upon matters of general policy. Because of the services rendered
by the Investment Adviser and the Administrator, the Corporation itself requires
no employees other than its officers, none of whom, other than the Chairman,
receive compensation from the Fund and all of whom, other than the Chairman, are
employed by 59 Wall Street Administrators.
The Directors and executive officers of the Corporation, their
principal occupations during the past five years (although their titles may have
varied during the period) and business addresses are:
DIRECTORS OF THE CORPORATION
J.V. SHIELDS, JR.* - Chairman of the Board and Director; Trustee of The
59 Wall Street Trust; 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; Secretary
of the Los Angeles County Board of Investments (prior to March 1995). His
business address is 4111 Clear Valley Drive, Encino, CA 91436.
ARTHUR D. MILTENBERGER** - Director; Trustee of The 59 Wall Street
Trust; 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) (3). 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
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); Graduate Student, Bentley College (prior to
December 1994).
- -------------------------
* Mr. Shields is an "interested person" of the Corporation because of
his affiliation with a registered broker-dealer.
** These Directors are members of the Audit Committee of the Corporation.
(1) The Portfolios consist of the following active investment
companies: U.S. Money Market Portfolio, International Equity Portfolio,
U.S. Equity Portfolio, European Equity Portfolio and Pacific Basin
Equity Portfolio and the following inactive investment company:
Inflation-Indexed Securities 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 and officer listed above holds the equivalent position
with The 59 Wall Street Trust. The address of each officer is 21 Milk Street,
Boston, Massachusetts 02109. Messrs. Coolidge, Downs, and Hoolahan and Mss.
Gibson, Mugler, Jakuboski 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 is an "interested person" of the
Corporation as that term is defined in the 1940 Act.
Directors of the Corporation
The Directors of the Corporation receive a base annual fee of $15,000
(except the Chairman who receives a base annual fee of $20,000) 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.
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Accrued Estimated Annual from Fund
Name of Person, from the Fund as Part of Benefits upon Complex* Paid
Position Complex* Fund Expenses Retirement to Directors
J.V. Shields, Jr., $ none none $
Director
Eugene P. Beard, $ none none $
Director
Richard L. Carpenter**, $ none none $
Director
Clifford A. Clark**, $ none none $
Director
David P. Feldman, $ none none $
Director
J. Angus Ivory**, $ none none $
Director/Trustee
Alan G. Lowy, $ none none $
Director
Arthur D. Miltenberger, $ none none $
Director
David M. Seitzman**, $ none none $
Director
<FN>
* The Fund Complex consists of the Corporation, The 59 Wall Street Trust (which
currently consists of four series) and the six 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 and the Administration Agreement
(see "Investment Adviser" and "Administrator"), the Corporation does not require
employees other than its officers, and none of its officers devote full time to
the affairs of the Corporation, or, other than the Chairman, receive any
compensation from the Fund.
As of January 31, 1999, the Corporation's Directors and
officers as a group beneficially owned less than 1% of the outstanding shares of
the Corporation. At the close of business on that date no person, to the
knowledge of 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. Partners of Brown Brothers Harriman & Co. and their immediate
families owned [ ] ( %) shares of the Fund. Brown Brothers Harriman and its
affiliates separately are able to direct the disposition of an additional [ ] (
%) shares of the Fund, as to which shares Brown Brothers Harriman & Co.
disclaims beneficial ownership.
<PAGE>
INVESTMENT ADVISER
Under an Investment Advisory Agreement with the Corporation, subject to
the general supervision of the Corporation's Directors and in conformance with
the stated policies of the Fund, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Fund. In this regard,
it is the responsibility of Brown Brothers Harriman & Co. to make the day-to-day
investment decisions for the Fund, to place the purchase and sale orders for
portfolio transactions of the Fund, and to manage, generally, the investments of
the Fund.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Corporation is dated August 11, 1998 and remains in effect for two years
from such date and thereafter, but only as long as the agreement is specifically
approved at least annually (i) by a vote of the holders of a "majority of the
Fund's outstanding voting securities" (as defined in the 1940 Act) or by the
Corporation's Directors, and (ii) by a vote of a majority of the Directors of
the Corporation who are not parties to the Investment Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of the Corporation
("Independent Directors") cast in person at a meeting called for the purpose of
voting on such approval. The Investment Advisory Agreement terminates
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Directors of the Corporation or by a vote of the
holders of a "majority of the Fund's outstanding voting securities (as defined
in the 1940 Act) on 60 days' written notice to Brown Brothers Harriman & Co. and
by Brown Brothers Harriman & Co. on 90 days' written notice to the Corporation.
(See "Additional Information".)
The investment advisory fee paid to the Investment Adviser is
calculated daily and paid monthly at an annual rate equal to 0.65% of the Fund's
average daily net assets. For the period November 2, 1998 to October 31, 1999,
the Fund incurred $192,274 for advisory services.
The investment advisory services of Brown Brothers Harriman & Co. to
the Fund are not exclusive under the terms of the Investment Advisory Agreement.
Brown Brothers Harriman & Co. is free to and does render investment advisory
services to others, including other registered investment companies.
Pursuant to a license agreement between the Corporation and Brown Brothers
Harriman & Co. dated September 5, 1990, as amended as of December 15, 1993, the
Corporation may continue to use in its name 59 Wall Street, the current and
historic address of Brown Brothers Harriman & Co. The agreement may be
terminated by Brown Brothers Harriman & Co. at any time upon written notice to
the Corporation upon the expiration or earlier termination of any investment
advisory agreement between the Corporation or any investment company in which a
series of the Corporation invests all of its assets and Brown Brothers Harriman
& Co. Termination of the agreement would require the Corporation to change its
name and the name of the Fund to eliminate all reference to 59 Wall Street.
Pursuant to license agreements between Brown Brothers Harriman & Co.
and each of 59 Wall Street Administrators and 59 Wall Street Distributors (each
a Licensee), dated June 22, 1993 and June 8, 1990, respectively, each Licensee
may continue to use in its name 59 Wall Street, the current and historic address
of Brown Brothers Harriman & Co., only if Brown Brothers Harriman & Co. does not
terminate the respective license agreement, which would require the Licensee to
change its name to eliminate all reference to 59 Wall Street.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares, such as the Fund.
There is presently no controlling precedent prohibiting financial institutions
such as Brown Brothers Harriman & Co. from performing investment advisory,
administrative or shareholder servicing/eligible institution functions. If Brown
Brothers Harriman & Co. were to terminate its Investment Advisory Agreement with
the Corporation or were prohibited from acting in such capacity, it is expected
that the Directors would recommend the shareholders that they approve a new
investment advisory agreement for the Fund with another qualified adviser. If
Brown Brothers Harriman & Co. were to terminate its Eligible Institution
Agreement or Administration Agreement with the Corporation or were prohibited
from acting in any such capacity, its customers would be permitted to remain
shareholders of the Corporation and alternative means for providing shareholder
services or administrative services, as the case may be, would be sought. In
such event, although the operation of the Corporation might change, it is not
expected that any shareholders would suffer any adverse financial consequences.
However, an alternative means of providing shareholder services might afford
less convenience to shareholders.
ADMINISTRATOR
Brown Brothers Harriman & Co. acts as Administrator for the
Corporation.
In its capacity as Administrator, Brown Brothers Harriman & Co. administers
all aspects of the Corporation's operations subject to the supervision of the
Corporation's Directors except as set forth below under "Distributor". In
connection with its responsibilities as Administrator and at its own expense,
Brown Brothers Harriman & Co. (i) provides the Corporation with the services of
persons competent to perform such supervisory, administrative and clerical
functions as are necessary in order to provide effective administration of the
Corporation, including the maintenance of certain books and records; (ii)
oversees the performance of administrative and professional services to the
Corporation by others, including the Fund's Custodian, Transfer and Dividend
Disbursing Agent; (iii) provides the Corporation with adequate office space and
communications and other facilities; and (iv) prepares and/or arranges for the
preparation, but does not pay for, the periodic updating of the Corporation's
registration statement and the Fund's prospectus, the printing of such documents
for the purpose of filings with the Securities and Exchange Commission and state
securities administrators, and the preparation of tax returns for the Fund and
reports to the Fund's shareholders and the Securities and Exchange Commission.
The Administration Agreement between the Corporation and Brown Brothers
Harriman & Co. (dated November 1, 1993) will remain in effect for two years from
such date and thereafter, but only so long as such agreement is specifically
approved at least annually in the same manner as the Investment Advisory
Agreement (see "Investment Adviser"). The Independent Directors most recently
approved the Corporation's Administration Agreement on November 9, 1999. The
agreement will terminate automatically if assigned by either party thereto and
is terminable at any time without penalty by a vote of a majority of the
Directors of the Corporation, or by a vote of the holders of a "majority of the
Corporation's outstanding voting securities" (as defined in the 1940 Act). (See
"Additional Information"). The Administration Agreement is terminable by the
Directors of the Corporation or shareholders of the Corporation on 60 days'
written notice to Brown Brothers Harriman & Co. and by Brown Brothers Harriman &
Co. on 90 days' written notice to the Corporation.
For the services rendered to the Corporation and related expenses borne
by Brown Brothers Harriman & Co., as Administrator of the Corporation, Brown
Brothers Harriman & Co. receives from the Fund an annual fee, computed daily and
payable monthly, equal to 0.15% of the Fund's average daily net assets. For the
period November 2, 1998 to October 31, 1999, the Fund incurred $44,371 for
administrative services.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman & Co., 59 Wall Street Administrators performs such subadministrative
duties for the Corporation as are from time to time agreed upon by the parties.
The offices of 59 Wall Street Administrators are located at 21 Milk Street,
Boston, Massachusetts 02109. 59 Wall Street Administrators is a wholly-owned
subsidiary of Signature Financial Group, Inc. ("SFG"). SFG is not affiliated
with Brown Brothers Harriman & Co. 59 Wall Street Administrators'
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Corporation, participation in
the preparation of documents required for compliance by the Corporation with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Directors and shareholders of the Corporation, and other
functions that would otherwise be performed by the Administrator as set forth
above. For performing such subadministrative services, 59 Wall Street
Administrators receives such compensation as is from time to time agreed upon
but not in excess of the amount paid to the Administrator from the Fund.
DISTRIBUTOR
59 Wall Street Distributors acts as exclusive Distributor of shares of
the Fund. Its office is located at 21 Milk Street, Boston, Massachusetts 02109.
59 Wall Street Distributors is a wholly-owned subsidiary of SFG. SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The Corporation pays for the preparation,
printing and filing of copies of the Corporation's registration statements and
the Fund's prospectus as required under federal and state securities laws.
59 Wall Street Distributors holds itself available to receive purchase
orders for Fund shares.
The Distribution Agreement (dated September 5, 1990, as amended and
restated February 12, 1991) between the Corporation and 59 Wall Street
Distributors remains in effect indefinitely, but only so long as such agreement
is specifically approved at least annually in the same manner as the Investment
Advisory Agreement. (See "Investment Adviser".) 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 the Fund at any time without
penalty by a vote of a majority of the Directors of the Corporation or by a vote
of the holders of a "majority of the Fund's outstanding voting securities" (as
defined in the 1940 Act). (See "Additional Information".) The Distribution
Agreement is terminable with respect to the Fund by the Corporation's Directors
or shareholders of the Fund on 60 days' written notice to 59 Wall Street
Distributors. The agreement is terminable by 59 Wall Street Distributors on 90
days' written notice to the Corporation.
SHAREHOLDER SERVICING AGENT
The Corporation has entered into a shareholder servicing agreement with Brown
Brothers Harriman & Co. pursuant to which Brown Brothers Harriman & Co., as
agent for the Corporation with respect to the Fund, among other things: answers
inquiries from shareholders of and prospective investors in the Fund regarding
account status and history, the manner in which purchases and redemptions of
Fund shares may be effected and certain other matters pertaining to the Fund;
assists shareholders of and prospective investors in the Fund in designating and
changing dividend options, account designations and addresses; and provides such
other related services as the Corporation or a shareholder of or prospective
investor in the Fund may reasonably request. For these services, Brown Brothers
Harriman & Co. receives from the Fund an annual fee, computed daily and payable
monthly, equal to 0.25% of the Fund's average daily net assets represented by
shares owned during the period for which payment was being made by shareholders
who did not hold their account with an eligible institution.
FINANCIAL INTERMEDIARES
From time to time, the Fund's Shareholder Servicing Agent enters into
contracts with banks, brokers and other financial intermediaries ("Financial
Intermediaries") pursuant to which a customer of the Financial Intermediary may
place purchase orders for Fund shares through that Financial Intermediary which
holds such shares in its name on behalf of that customer. Pursuant to such
contract, each Financial Intermediary as agent with respect to shareholders of
and prospective investors in the Fund who are customers of that Financial
Intermediary, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customers' shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Fund. For these services, the Financial Intermediary
receives such fees from the Shareholder Servicing Agent as may be agreed upon
from time to time between the Shareholder Servicing Agent and such Financial
Intermediary.
ELIGIBILE INSTITUTIONS
The Corporation enters into eligible institution agreements with banks,
brokers and other financial institutions pursuant to which each financial
institution, as agent for the Corporation with respect to shareholders of and
prospective investors in the Fund who are customers with that financial
institution, among other things: provides necessary personnel and facilities to
establish and maintain certain shareholder accounts and records enabling it to
hold, as agent, its customer's shares in its name or its nominee name on the
shareholder records of the Corporation; assists in processing purchase and
redemption transactions; arranges for the wiring of funds; transmits and
receives funds in connection with customer orders to purchase or redeem shares
of the Fund; provides periodic statements showing a customer's account balance
and, to the extent practicable, integrates such information with information
concerning other customer transactions otherwise effected with or through it;
furnishes, either separately or on an integrated basis with other reports sent
to a customer, monthly and annual statements and confirmations of all purchases
and redemptions of Fund shares in a customer's account; transmits proxy
statements, annual reports, updated prospectuses and other communications from
the Corporation to its customers; and receives, tabulates and transmits to the
Corporation proxies executed by its customers with respect to meetings of
shareholders of the Fund. For these services, each financial institution
receives from the Fund an annual fee, computed daily and payable monthly, equal
to 0.25% of the Fund's average daily net assets represented by shares owned
during the period for which payment was being made by customers for whom the
financial institution was the holder or agent of record.
EXPENSE PAYMENT AGREEMENT
Under an agreement dated August 11, 1998, 59 Wall Street Administrators
pays the Fund's expenses (see "Expense Table"), other than fees paid to Brown
Brothers Harriman & Co. under the Corporation's Administration Agreement and
other than expenses relating to the organization of the Fund. In return, 59 Wall
Street Administrators receives a fee from the Fund such that after such payment
the aggregate expenses of the Fund do not exceed an agreed upon annual rate,
currently 1.20% of the average daily net assets of the Fund. Such fees are
computed daily and paid monthly. The expense payment agreement will terminate on
July 31, 2003. If there had been no expense payment agreement, the Directors of
the Corporation estimate that the total operating expenses of the Fund may
increase to approximately 1.35% of the average annual net assets of the Fund.
The expenses of the Fund paid by 59 Wall Street Administrators under the
agreement include the shareholder servicing/eligible institution fees, the
compensation of the Directors of the Corporation; governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute allocable to
the Fund; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Fund;
insurance premiums; expenses of calculating the net asset value of shares of the
Fund; expenses of preparing, printing and mailing prospectuses, reports,
notices, proxy statements and reports to shareholders and to governmental
officers and commissions; expenses of shareholder meetings; expenses related to
the issuance, registration and qualification of shares of the Fund; and expenses
connected with the execution, recording and settlement of portfolio security
transactions; and the expenses associated with the investment advisory
agreement.
CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT
State Street Bank and Trust Company ("State Street" or the "Custodian"),
225 Franklin Street, P.O. Box 351, Boston, Massachusetts 02110, is Custodian,
Transfer and Dividend Disbursing Agent for the Fund.
As Custodian, it is responsible for maintaining books and records of the
Fund's portfolio transactions and holding the Fund's portfolio securities and
cash pursuant to a custodian agreement with the Corporation. Cash is held for
the Fund in demand deposit accounts at the Custodian. Subject to the supervision
of the Administrator, the Custodian maintains the Fund's accounting and
portfolio transaction records and for each day computes the Fund's net asset
value. As Transfer and Dividend Disbursing Agent it is responsible for
maintaining the books and records detailing the ownership of the Fund's shares.
INDEPENDENT AUDITORS
Deloitte & Touche LLP are the independent auditors for the Fund.
NET ASSET VALUE; REDEMPTION IN KIND
The net asset value of each of the Fund's shares is determined each day
the New York Stock Exchange is open for regular trading. (As of the date of this
Statement of Additional Information, such Exchange is open every weekday except
for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) This determination of net asset value of each
share of the Fund is made once during each such day as of the close of regular
trading on such Exchange by subtracting from the value of the Fund's total
assets the amount of its liabilities, and dividing the difference by the number
of shares of the Fund outstanding at the time the determination is made.
The value of the Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of the Fund is determined. The value of the Fund's investment in
the Portfolio is determined by multiplying the value of the Portfolio's net
assets by the percentage, effective for that day, which represents the Fund's
share of the aggregate beneficial interests in the Portfolio. The value of the
Fund's investment in the Portfolio is determined once daily at 4:00 P.M., New
York time on each day the New York Stock Exchange is open for regular trading.
The value of investments listed on a securities exchange is based on
the last sale prices as of the close of regular trading of the New York Stock
Exchange (which is currently 4:00 P.M., New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Corporation's
Directors. Short-term investments which mature in 60 days or less are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their original maturity when
acquired for the Fund was more than 60 days, unless this is determined not to
represent fair value by the Directors.
Subject to the Corporation's compliance with applicable regulations,
the Corporation has reserved the right to pay the redemption price of shares of
the 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 the
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 rate of return of the Fund is calculated for
any period by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, (b) raising the
quotient to a power equal to 1 divided by the number of years in the period, and
(c) subtracting 1 from the result.
The total rate of return of the Fund for any specified period is
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
The annualized rate of return for the Fund for the period November 2,
1998 (commencement of operations) to October 31, 1999 was 28.00%.
Performance calculations should not be considered a representation of
the average annual or total rate of return of the Fund in the future since the
rates of return are not fixed. Actual total rates of return and average annual
rates of return depend on changes in the market value of, and dividends and
interest received from, the investments held by the Fund and the Fund's expenses
during the period.
Total and average annual rate of return information may be useful for
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time, the Fund's
total rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
The Fund's performance may be used from time to time in shareholder
reports or other communications to shareholders or prospective investors.
Performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may include the Fund's
investment results and/or comparisons of its investment results to various
unmanaged indexes (such as the Standard & Poor's 500 Index) and to investments
for which reliable performance data is available. Performance information may
also include comparisons to averages, performance rankings or other information
prepared by recognized mutual fund statistical services. To the extent that
unmanaged indexes are so included, the same indexes are used on a consistent
basis. The Fund's investment results as used in such communications are
calculated on a total rate of return basis in the manner set forth below.
Period and average annualized "total rates of return" may be provided
in such communications. The "total rate of return" refers to the change in the
value of an investment in The Fund over a stated period based on any change in
net asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributions during such period. Period total
rates of return may be annualized. An annualized total rate of return is a
compounded total rate of return which assumes that the period total rate of
return is generated over a one year period, and that all dividends and capital
gains distributions are reinvested. An annualized total rate of return is
slightly higher than a period total rate of return if the period is shorter than
one year, because of the assumed investment.
PURCHASES AND REDEMPTIONS
A confirmation of each purchase and redemption transaction is issued on
execution of that transaction. The Corporation reserves the rights to
discontinue, alter or limit the automatic reinvestment privilege
at any time, but will provide shareholders prior written notice of any such
discontinuance, alteration or limitation.
A 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, the Fund's portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the Securities and Exchange
Commission may permit.
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.
In the event a shareholder redeems all shares held in the Fund, future
purchases of shares of the Fund by such shareholder would be subject to the
Fund's minimum initial purchase requirements.
The value of shares redeemed may be more or less than the shareholder's
cost depending on Fund performance during the period the shareholder owned such
shares.
FEDERAL TAXES
Each year, the Corporation intends to continue to qualify the Fund and
elect that the Fund be treated as a separate "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Subchapter M of the Code the Fund is not subject to federal
income taxes on amounts distributed to shareholders. Accordingly, the Fund is
not subject to federal income taxes on its net income and realized net long-term
capital gains that are distributed to its shareholders. A 4% non-deductible
excise tax is imposed on the Fund to the extent that certain distribution
requirements for the Fund for each calendar year are not met.
The Corporation intends to meet such requirements.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other disposition of
securities, be derived from interest, payments with respect to securities loans,
dividends and gains from the sale or other disposition of securities or other
income derived with respect to its business of investing in such securities; (b)
less than 30% of the Fund's annual gross income be derived from gains (without
offset for losses) from the sale or other disposition of securities held for
less than three months; and (c) the holdings of the Fund be diversified so that,
at the end of each quarter of its fiscal year, (i) at least 50% of the market
value of the Fund's assets be represented by cash, U.S. Government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
assets be invested in the securities of any one issuer (other than U.S.
Government securities). In addition, in order not to be subject to federal
income tax, at least 90% of the Fund's net investment income and net short-term
capital gains earned in each year must be distributed to the Fund's
shareholders.
Dividends paid from the Fund may be eligible for the dividends-received
deduction allowed to corporate shareholders because all or a portion of the
Fund=s net income may consist of dividends paid by domestic corporations.
Gains or losses on sales of securities for the Fund are treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where a put has been acquired or a
call has been written thereon for the Fund. Other gains or losses on the sale of
securities are treated as short-term capital gains or losses. Gains and losses
on the sale, lapse or other termination of options on securities are generally
treated as gains and losses from the sale of securities. If an option written
for the Fund lapses or is terminated through a closing transaction, such as a
repurchase for the Fund of the option from its holder, the Fund may realize a
short-term capital gain or loss, depending on whether the premium income is
greater or less than the amount paid in the closing transaction. If securities
are sold for the Fund pursuant to the exercise of a call option written for it,
the premium received is added to the sale price of the securities delivered in
determining the amount of gain or loss on the sale. The requirement that less
than 30% of the Fund's gross income be derived from gains from the sale of
securities held for less than three months may limit the ability to write
options and engage in transactions involving stock index futures.
Certain options contracts held for the Fund at the end of each fiscal
year are required to be "marked to market" for federal income tax purposes; that
is, treated as having been sold at market value. Sixty percent of any gain or
loss recognized on these deemed sales and on actual dispositions are treated as
long-term capital gain or loss, and the remainder are treated as short-term
capital gain or loss regardless of how long such options were held. The Fund may
be required to defer the recognition of losses on stock or securities to the
extent of any unrecognized gain on offsetting positions held for it.
Return of Capital. If the net asset value of shares is reduced below a
shareholder's cost as a result of a dividend or capital gains distribution by
the Fund, such dividend or capital gains distribution would be taxable even
though it represents a return of invested capital.
Redemption of Shares. Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities would be treated
as long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less is treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares is disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend or capital gains distribution in Fund shares.
Other Taxes. The Fund may be subject to state or local taxes in
jurisdictions in which it is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states which have income tax
laws might differ from treatment under 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 the Fund's fiscal year. Additional tax information is mailed to
shareholders in January. Under U.S. Treasury regulations, the Corporation and
each Eligible Institution are required to withhold and remit to the U.S.
Treasury a portion (31%) of dividends and capital gains distributions on the
accounts of those shareholders who fail to provide a correct taxpayer
identification number (Social Security Number for individuals) or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to such withholdings. Prospective investors should
submit an IRS Form W-9 to avoid such withholding.
This tax discussion is based on the tax laws and regulations in effect on
the date of this Prospectus, however such laws and regulations are subject to
change. Shareholders and prospective investors are urged to consult their tax
advisors regarding specific questions relevant to their particular
circumstances.
DESCRIPTION OF SHARES
The Corporation is an open-end management investment company organized
as a Maryland corporation on July 16, 1990. Its offices are located at 21 Milk
Street, Boston, Massachusetts 02109; its telephone number is (617) 423-0800. The
Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par value $0.001 per share, of which
25,000,000 shares have been classified as shares of The 59 Wall Street
Tax-Efficient Equity Fund. The Board of Directors of the Corporation may
increase the number of shares the Corporation is authorized to issue without the
approval of shareholders. The Board of Directors of the Corporation also has the
power to designate one or more series of shares of common stock and to classify
and reclassify any unissued shares with respect to such series. The Corporation
currently consists of six portfolios.
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 are entitled to one full vote for each full share held and
to a fractional vote for fractional shares. Shareholders in the Corporation do
not have cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Corporation may elect all of the Directors of the
Corporation if they choose to do so and in such event the other shareholders in
the Corporation would not be able to elect any Director. The Corporation is not
required and has no current intention to hold meetings of shareholders annually
but the Corporation will hold special meetings of shareholders when in the
judgment of the Corporation's Directors it is necessary or desirable to submit
matters for a shareholder vote as may be required by the 1940 Act or as may be
permitted by the Articles of Incorporation or By-laws. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Directors by a specified number of shareholders) the
right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Directors.
Shareholders also have the right to remove one or more Directors without a
meeting by a declaration in writing by a specified number of shareholders.
Shares have no preference, pre-emptive, conversion or similar rights. Shares,
when issued, are fully paid and non-assessable.
Stock certificates are not issued by the Corporation.
The By-laws of the Corporation provide that the presence in person or
by proxy of the holders of record of one third of the shares of the Fund
outstanding and entitled to vote thereat shall constitute a quorum at all
meeting of Fund shareholders, except as otherwise required by applicable law.
The Bylaws further provide that all questions shall be decided by a majority of
the votes cast at any such meeting at which a quorum is present, except as
otherwise required by applicable law.
The Corporation's Articles of Incorporation provide that, at any
meeting of shareholders of the Fund, each Eligible Institution may vote any
shares as to which that Eligible Institution is the agent of record and which
are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares
otherwise represented at the meeting in person or by proxy as to which that
Eligible Institution is the agent of record. Any shares so voted by an Eligible
Institution are deemed represented at the meeting for purposes of quorum
requirements.
The 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.
PORTFOLIO BROKERAGE TRANSACTIONS
The portfolio of the Fund is managed actively in pursuit of its
tax-efficient investment objective. Securities are not traded for short-term
profits but, when circumstances warrant, securities are sold without regard to
the length of time held. A 25% annual turnover rate would occur, for example, if
one-quarter of the securities in the Fund's portfolio (excluding short-term
obligations) were replaced once in a period of one year. For the period from
November 2, 1998 to October 31, 1999, the portfolio turnover rate was 37%. The
amount of brokerage commissions and taxes on realized capital gains to be borne
by the shareholders of the Fund tend to increase as the turnover rate activity
increases.
In effecting securities transactions for the Fund, the Investment
Adviser seeks to obtain the best price and execution of orders. In selecting a
broker, the Investment Adviser considers a number of factors including: the
broker's ability to execute orders without disturbing the market price; the
broker's reliability for prompt, accurate confirmations and on-time delivery of
securities; the broker's financial condition and responsibility; the research
and other investment information provided by the broker; and the commissions
charged. Accordingly, the commissions charged by any such broker may be greater
than the amount another firm might charge if the Investment Adviser determines
in good faith that the amount of such commissions is reasonable in relation to
the value of the brokerage services and research information provided by such
broker.
For the period from November 2, 1998 to October 31, 1999, the aggregate
commissions paid by the Fund were $[ ].
Portfolio securities are not purchased from or sold to the
Administrator, Distributor or Investment Adviser or any "affiliated person" (as
defined in the 1940 Act) of the Administrator, Distributor or Investment Adviser
when such entities are acting as principals, except to the extent permitted by
law. The Corporation uses Brown Brothers Harriman & Co. as one of the Fund's
principal brokers where, in the judgment of the Investment Adviser, such firm is
able to obtain a price and execution at least as favorable as prices and
executions provided by other qualified brokers. As one of the Fund's principal
brokers, Brown Brothers Harriman & Co.
receives brokerage commissions from the Fund.
The use of Brown Brothers Harriman & Co. as a broker for the Fund is
subject to the provisions of Rule 11a2-2(T) under the Securities Exchange Act of
1934 which permits the Corporation to use Brown Brothers Harriman & Co. as a
broker provided that certain conditions are met.
In addition, under the 1940 Act, commissions paid by the Fund to Brown
Brothers Harriman & Co. in connection with a purchase or sale of securities
offered on a securities exchange may not exceed the usual and customary broker's
commission.
The Investment Adviser may direct a portion of the Fund's securities
transactions to certain unaffiliated brokers which in turn use a portion of the
commissions they receive from the Fund to pay other unaffiliated service
providers for services provided to the Fund for which the Fund would otherwise
be obligated to pay. Such commissions paid by the Fund are at the same rate paid
to other brokers for effecting similar transactions in listed equity securities.
Brown Brothers Harriman & Co. acts as one of the principal brokers of
the Portfolio in the purchase and sale of portfolio securities when, in the
judgment of the Investment Adviser, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. As one of the
principal brokers of the Portfolio, Brown Brothers Harriman & Co. receives
brokerage commissions from the Portfolio.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
A committee of non-interested Directors from time to time reviews,
among other things, information relating to the commissions charged by Brown
Brothers Harriman & Co. to the Fund and to its other customers and information
concerning the prevailing level of commissions charged by other qualified
brokers. In addition, the procedures pursuant to which Brown Brothers Harriman &
Co. effects brokerage transactions for the Fund are reviewed and approved no
less often than annually by a majority of the non-interested Directors.
For the period from November 2, 1998 to October 31, 1999, total
transactions with a principal value of $[ ] were effected for the Fund of which
transactions with a principal value of $[ ] were effected by Brown Brothers
Harriman & Co. which involved payments of commissions to Brown Brothers Harriman
& Co. of $[ ].
A portion of the transactions for the Fund 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 Fund. 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 the Fund to the Investment Adviser by any amount that
might be attributable to the value of such services.
A committee, comprised of officers and partners of Brown Brothers
Harriman & Co. who are portfolio managers of some of Brown Brothers Harriman &
Co.'s managed accounts (the "Managed Accounts"), evaluates semi-annually the
nature and quality of the brokerage and research services provided by brokers,
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative amounts of brokerage commissions paid to
the brokers on the list may vary substantially from the projected rankings.
The Directors of the Corporation review regularly the reasonableness of
commissions and other transaction costs incurred for the Fund 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 Fund's outstanding voting securities" (as defined in
the 1940 Act) currently means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's outstanding
voting securities are present in person or represented by proxy; or (ii) more
than 50% of the Fund's outstanding voting securities, whichever is less.
Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.
With respect to the securities offered by the Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933. Pursuant to the rules and
regulations of the Securities and Exchange Commission, certain portions have
been omitted. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Securities and Exchange Commission in
Washington, D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Annual Report of the Fund dated October 31, 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 contains performance information
will be provided, without charge, to each person receiving this Statement of
Additional Information.
WS5622B
<PAGE>
PART C
ITEM 23. EXHIBITS.
(a) (i) Restated Articles of Incorporation of the Registrant.(7)
(ii) Establishment and Designation of Series of The 59 Wall
Street U.S. Equity Fund and The 59 Wall Street Short/
Intermediate Fixed Fund.(7)
(iii) Establishment and Designation of Series of The 59 Wall
Street Small Company Fund.(7)
(iv) Establishment and Designation of Series of The 59 Wall
Street International Equity Fund.(7)
(v) Establishment and Designation of Series of The 59 Wall
Street Short Term Fund. (7)
(vi) Redesignation of series of the The 59 Wall Street Short/
Intermediate Fixed Income Fund as The 59 Wall Street
Inflation-Indexed Securities Fund. (8)
(vi) Establishment and Designation of Series of The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(b) Amended and Restated By-Laws of the Registrant.(7)
(c) Not Applicable.
(d) (i) Advisory Agreement with respect to The 59 Wall Street
U.S. Equity Fund.(7)
(ii) Advisory Agreement with respect to The 59 Wall Street
Short/Intermediate Fixed Income Fund.(7)
(iii) Form of Advisory Agreement with respect to The 59 Wall
Street Inflation-Indexed Securities Fund.(8)
(iv) Form of Advisory Agreement with respect to The 59 Wall
Street Tax-Efficient U.S. Equity Fund. (9)
(e) Form of Amended and Restated Distribution Agreement.(3)
(f) Not Applicable.
(g) (a) Form of Custody Agreement.(2)
(b) Form of Transfer Agency Agreement.(2)
(h) (i) Amended and Restated Administration Agreement.(6)
(ii) Subadministrative Services Agreement.(6)
(iii) Form of License Agreement.(1)
(iv) Amended and Restated Shareholder Servicing Agreement.(6)
(i) Appendix A to Amended and Restated Shareholder
Servicing Agreement.(9)
(v) Amended and Restated Eligible Institution Agreement.(6)
(ii) Appendix A to Amended and Restated Eligible
Institution Agreement.(9)
(vi) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street U.S. Equity Fund.(6)
(vii) Form of Expense Reimbursement Agreement with respect to
The 59 Wall Street Short/Intermediate Fixed
Fund.(6)
(viii) Form of Expense Payment Agreement with respect to
The 59 Wall Street Inflation-Indexed Securities Fund.(8)
(ix) Form of Expense Payment Agreement with respect to The
59 Wall Street Tax-Efficient U.S. Equity Fund. (9)
(x) Form of Expense Payment Agreement with respect to The
59 Wall Street International Equity Fund.(10)
(i) Opinion of Counsel (including consent).(2)
(j) Independent auditors' consent.(11)
(k) Not Applicable.
(l) Copies of investment representation letters from initial
shareholders.(2)
(m) Not Applicable.
(n) Not Applicable.
(o) Financial Data Schedule.(11)
(p) Code of Ethics. (11)
<PAGE>
(1)Filed with the initial Registration Statement on July 16, 1990.
(2)Filed with Amendment No. 1 to this Registration Statement on October 9, 1990.
(3)Filed with Amendment No.2 to this Registration Statement on February 14,
1991.
(4)Filed with Amendment No. 5 to this Registration Statement on June 15, 1992.
(5)Filed with Amendment No. 7 to this Registration Statement on March 1, 1993.
(6)Filed with Amendment No.9 to this Registration Statement on
December 30, 1993.
(7)Filed with Amendment No. 24 to this Registration Statement on
February 28, 1996.
(8)Filed with Amendment No. 27 to this Registration Statement on
February 28, 1997.
(9)Filed with Amendment No. 38 to this Registration Statement on
September 21, 1998.
(10)Filed with Amendment No. 40 to this Registration Statement on
December 30, 1998.
(11)To be filed by Amendment.
Item 24. Persons Controlled by or Under Common Control with Registrant.
See "Directors and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.
Item 25. Indemnification
Reference is made to Article VII of Registrant's By-Laws and to Section
5 of the Distribution Agreement between the Registrant and 59 Wall Street
Distributors, Inc.
Registrant, its Directors and officers, and persons affiliated with
them are insured against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser.
The Registrant's investment adviser, Brown Brothers Harriman & Co.
("BBH & Co."), is a New York limited partnership. BBH & Co. conducts a general
banking business and is a member of the New York Stock Exchange, Inc.
To the knowledge of the Registrant, none of the general partners or
officers of BBH & Co. is engaged in any other business, profession, vocation or
employment of a substantial nature.
Item 27. Principal Underwriters.
1. (a) 59 Wall Street Distributors, Inc. ("59 Wall Street
Distributors") and its affiliates, also serves as
administrator and/or distributor to other
registered investment companies.
(b) Set forth below are the names, principal business
addresses and positions of each Director and
officer of 59 Wall Street Distributors. The
principal business address of these individuals is
c/o 59 Wall Street Distributors, Inc., 21 Milk
Street, Boston, MA 02109. Unless otherwise
specified, no officer or Director of 59 Wall
Street Distributors serves as an officer or
Director of the Registrant.
<PAGE>
Position and Offices with Position and Offices
Name 59 Wall Street Distributors with the Registrant
- ------------- --------------------------- --------------------
Philip W. Coolidge Chief Executive President
Officer, President
and Director
Linda T. Gibson Secretary Secretary
Molly S. Mugler Assistant Secretary Assistant Secretary
Christine D. Dorsey -- Assistant Secretary
Susan Jakuboski -- 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 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 10th day of
January, 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)
RICHARD L. CARPENTER* Director
(Richard L. Carpenter)
CLIFFORD A. CLARK* Director
(Clifford A. Clark)
DAVID M. SEITZMAN* Director
(David M. Seitzman)
/S/ SUSAN JAKUBOSKI Assistant Treasurer
(Susan Jakuboski) and Principal Accounting Officer
*By: /s/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to
Powers of Attorney filed previously.
