U.S. SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1998
(expressed in U.S. dollars)
Shares Value
- ---------- ----------
COMMON STOCKS (96.1%)
COMMERCIAL SERVICES (3.4%)
15,900 Advo, Inc.............................................. $ 404,456
21,000 Bowne & Co., Inc....................................... 282,187
5,800 Mail Well Holdings, Inc.*.............................. 75,763
20,300 Romac International, Inc.*............................. 356,519
----------
1,118,925
----------
CONSUMER DURABLES (4.0%)
13,000 Action Performance
Companies, Inc.*..................................... 383,500
3,700 D.R. Horton, Inc....................................... 58,737
14,300 Kaufman & Broad Home Corp.............................. 408,444
21,300 Standard Pacific Corp.................................. 206,344
8,100 U.S. Home Corp. *...................................... 256,162
----------
1,313,187
----------
CONSUMER NON-DURABLES (7.9%)
10,700 Blyth Industries, Inc.*................................ 295,587
4,200 Canandaigua Brands, Inc.*.............................. 211,312
37,800 Chiquita Brands
International, Inc................................... 401,625
8,900 Nautica Enterprises, Inc.*............................. 184,675
17,000 Rexall Sundown, Inc.*.................................. 304,406
11,600 Sola International, Inc.*.............................. 222,575
44,600 Stride Rite Corp. (Rights)............................. 406,975
3,000 Timberland Co.*........................................ 120,000
12,000 Universal Corp......................................... 447,750
----------
2,594,905
----------
CONSUMER SERVICES (3.5%)
28,600 Foodmaker, Inc.*....................................... 452,237
46,000 Grand Casinos, Inc.*................................... 405,375
25,400 Hollinger International, Inc........................... 330,200
----------
1,187,812
----------
ELECTRONIC TECHNOLOGY (5.5%)
20,500 Amkor Technology, Inc.*................................ 100,258
1,000 Amphenol Corp. (New)*.................................. 33,562
15,000 Comverse Technology, Inc. *............................ 691,406
1,600 SCI Systems, Inc.*..................................... 63,200
8,400 Vitesse Semiconductor Corp.*........................... 271,425
21,400 Xircom, Inc............................................ 629,294
----------
1,789,145
----------
ENERGY MINERALS (0.8%)
17,600 Tesoro (Pete) Corp.*................................... 260,700
----------
FINANCE (21.2%)
23,000 Avis Rent A Car, Inc.*................................. 468,625
1,500 Bank United Corp....................................... 59,953
21,200 Budget Group, Inc.*.................................... 380,275
18,600 CBL & Associates
Property's, Inc...................................... 484,762
5,700 CMAC Investment Corp................................... 238,687
5,600 Commerce Group, Inc.................................... 193,900
28,200 Cornerstone Property's, Inc. .......................... 437,100
41,500 Criimi Mae, Inc........................................ 57,063
13,000 Fidelity National Financial, Inc. ..................... 399,750
2,800 First American Financial Corp. 87,675
14,000 FirstMerit Corp........................................ 371,875
4,100 Forest City Enterprises, Inc........................... 88,150
3,500 Golden State Bancorp, Inc.*............................ 67,156
31,100 Independence Community
Bank................................................. 424,709
5,400 Investment Technology
Group, Inc.*......................................... 174,825
8,200 LandAmerica Financial
Group, Inc........................................... 425,888
14,700 LNR Property Corp...................................... 260,925
3,700 Metris Companies, Inc.................................. 120,481
9,600 Omega Health Care
Investors, Inc....................................... 297,600
6,300 Orion Capital Corp..................................... 215,381
26,700 Reliance Group Holdings, Inc........................... 372,131
20,200 Security Capital Group, Inc.*.......................... 321,938
27,420 Sovereign Bancorp, Inc................................. 359,031
34,800 Unicapital Corp. (New)*................................ 241,425
15,300 United Rental, Inc.*................................... 411,188
----------
6,960,493
----------
HEALTH SERVICES (5.2%)
16,500 Foundation Health
Services, Inc.*...................................... 193,875
22,300 Genesis Health Ventures, Inc.*......................... 301,050
10,260 Orthodontic Centers of
America, Inc.*....................................... 194,299
6,200 Pharmaceutical Product
Development, Inc.*................................... 168,175
25,100 Sierra Health Services, Inc.*.......................... 585,144
11,300 Total Renal Care Holdings*............................. 276,850
----------
1,719,393
----------
HEALTH TECHNOLOGY (3.0%)
14,000 Barr Laboratories, Inc.*............................... 478,625
20,700 Cooper Companies, Inc.................................. 491,625
----------
970,250
----------
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1998
(expressed in U.S. dollars)
Shares Value
- ---------- ----------
INDUSTRIAL SERVICES (1.1%)
12,800 Eastern Environmental
Services, Inc.*...................................... $ 355,600
----------
NON-ENERGY MINERALS (1.5%)
90,200 Armco, Inc.*........................................... 428,450
2,200 Texas Industries, Inc.................................. 65,038
----------
493,488
----------
PROCESS INDUSTRIES (2.5%)
26,700 Burlington Industries, Inc.*........................... 246,975
24,700 Crompton & Knowles Corp................................ 396,744
12,500 NL Industries, Inc..................................... 177,344
----------
821,063
----------
PRODUCER MANUFACTURING (17.2%)
16,800 Ametek Aerospace
Products, Inc........................................ 355,950
26,400 Coltec Industries, Inc.*............................... 440,550
40,300 Dal-Tile International, Inc.*.......................... 360,181
14,850 General Cable Corp..................................... 293,287
31,800 Hexcel Corp.*.......................................... 347,813
28,800 Intermet Corp.......................................... 458,100
13,500 Knoll, Inc.*........................................... 364,500
20,100 Lincoln Electronics
Holdings Corp........................................ 434,034
14,800 Meritor Automotive, Inc................................ 276,575
34,400 Metals USA, Inc........................................ 341,850
20,600 Milacron, Inc.......................................... 399,125
6,400 Precision Castparts
Corp. (Rights)....................................... 281,600
25,800 Rayovac Corp.*......................................... 524,063
21,500 Terex Corp.*........................................... 467,625
16,500 Wabash National Corp................................... 292,875
----------
5,638,128
----------
RETAIL TRADE (6.6%)
11,100 Ann Taylor Stores Corp.*............................... 321,900
22,700 Central Garden & Pet Co.*.............................. 451,163
18,200 CSK Auto Corp.*........................................ 474,338
26,500 General Nutrition
Companies, Inc.*..................................... 386,734
24,300 OfficeMax, Inc.*....................................... 221,738
12,500 Zale Corp.*............................................ 296,093
----------
2,151,966
----------
TECHNOLOGY SERVICES (5.5%)
14,400 Ciber, Inc.*........................................... 282,600
13,900 Computer Task
Group, Inc. (Rights)................................. 425,688
13,300 Software AG Systems, Inc.*............................. 199,500
11,900 Sykes Enterprises, Inc.*............................... 232,422
15,500 Symantec Corp.*........................................ 247,516
28,400 Systems & Computer
Technology Corp.*.................................... 405,588
----------
1,793,314
----------
TRANSPORTATION (5.0%)
10,400 Airbourne Freight Corp................................. 243,750
18,500 American West
Holdings Corp.*...................................... 284,438
14,100 Coach USA, Inc. *...................................... 378,056
10,500 Seacor Smit, Inc.*..................................... 502,031
8,900 USFreightways Corp..................................... 223,056
----------
1,631,331
----------
UTILITIES (2.2%)
8,300 Northwestern Corp...................................... 204,906
60,600 Paging Network, Inc.*.................................. 331,406
7,700 Southwest Gas Corp..................................... 182,394
----------
718,706
----------
TOTAL COMMON STOCKS
(identified cost $35,383,814).......................... 31,518,406
----------
Principal
Amount
- ---------
TIME DEPOSIT (3.1%)
$1,000,000 State Street Bank (Cayman)
4.75%, 11/03/98 (identified
cost $1,000,000)..................................... $1,000,000
----------
TOTAL INVESTMENTS (identified cost $36,383,814) (a) ...... 99.2% $32,518,406
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........... 0.8 272,241
----- -----------
NET ASSETS .............................................. 100.0% $32,790,647
===== ===========
- ------------
* Non-income producing security
(a) The aggregate cost for federal income tax purposes is $36,479,168, the
aggregate gross unrealized appreciation is $1,741,707, and the aggregate
gross unrealized depreciation is $5,702,469, resulting in net unrealized
depreciation of $3,960,762.
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified cost
$36,383,814) (Note 1) ................................... $32,518,406
Cash ...................................................... 1,246,698
Receivables for:
Capital stock sold ..................................... 300,000
Margin variation on futures ............................ 16,000
Dividends and other receivables ........................ 24,380
-----------
Total Assets ...................................... 34,105,484
-----------
LIABILITIES:
Payables for:
Withdrawals ............................................ 1,220,260
Investment advisory fee (Note 2) ....................... 16,725
Administrative fee (Note 2) ............................ 901
Accrued expenses and other liabilities ................. 54,570
Foreign withholding taxes .............................. 22,381
-----------
Total Liabilities ................................. 1,314,837
-----------
NET ASSETS ................................................... $32,790,647
===========
Net Assets Consist of:
Paid-in capital ........................................... $36,468,030
Net unrealized depreciation ............................... (3,677,383)
-----------
Net Assets ................................................... $32,790,647
===========
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
(expressed in U.S. dollars)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding taxes
of $12,829) ........................................ $ 312,505
Interest ............................................. 49,349
------------
Total Income ..................................... 361,854
------------
Expenses:
Investment advisory fee (Note 2) ..................... 274,051
Custody fee (Note 3) ................................. 46,894
Administrative fee (Note 2) .......................... 14,757
Professional fees .................................... 30,521
Trustees' fees and expenses (Note 2) ................. 4,944
Amortization of organization expenses (Note 1) ....... 3,081
Miscellaneous ........................................ 443
------------
Total Expenses ....................................... 374,691
Fees paid indirectly (Note 3) .................... (42,338)
------------
Net Expenses ..................................... 332,353
------------
Net Investment Income ............................ 29,501
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (Notes 1 and 3):
Net realized gain on investments ........................ 12,104,984
Net realized loss on future transactions ................ (881,534)
Net change in unrealized depreciation on investments .... (16,859,557)
------------
Net Realized and Unrealized Loss ..................... (5,636,107)
------------
Net Decrease in Net Assets Resulting from Operations .... $ (5,606,606)
============
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the years ended October 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income .................................. $ 29,501 $ 49,182
Net realized gain on investments and future transactions 11,223,450 8,634,544
Net change in unrealized appreciation on investments ... (16,859,557) 1,336,403
------------ ------------
Net increase (decrease) in net assets resulting
from operations ................................... (5,606,606) 10,020,129
------------ ------------
Capital transactions:
Proceeds from contributions ............................ 4,897,021 7,097,111
Value of withdrawals ................................... (10,950,104) (30,601,261)
------------ ------------
Net decrease in net assets resulting from capital
stock transactions ................................ (6,053,083) (23,504,150)
------------ ------------
Total decrease in net assets ....................... (11,659,689) (13,484,021)
NET ASSETS:
Beginning of year .......................................... 44,450,336 57,934,357
------------ ------------
End of year ................................................ $ 32,790,647 $ 44,450,336
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
January 17, 1995
For the years ended October 31, (commencement of
--------------------------------- operations) to
1998 1997 1996 October 31, 1995
-------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $32,791 $44,450 $57,934 $51,226
Ratios as a percentage of average
net assets:
Expenses paid by Portfolio............ 0.79% 0.77% 0.77% 0.77%*
Expenses paid by commissions**........ -- -- 0.05% 0.05%*
Expenses offset arrangements.......... 0.10% 0.09% 0.08% 0.05%*
------- ------- ------- -------
Total Expenses.................... 0.89% 0.86% 0.90% 0.87%*
======= ======= ======= =======
Ratio of net investment income to
average net assets..................... 0.07% 0.10% 0.26% 0.25%*
Portfolio turnover rate................. 158% 63% 51% 115%
</TABLE>
- ---------------
* Annualized
** A portion of the Portfolio's security transactions are directed to certain
unaffiliated brokers which in turn use a portion ofthe commissions they
received from the Portfolio to pay other unaffiliated service providers on
behalf of the Portfolio for services provided for which the Portfolio would
otherwise be obligated to pay.
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
1. Organization and Significant Accounting Policies. U.S. Small Company
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company which was
organized as a trust under the laws of the State of New York on June 15, 1993.
The Portfolio commenced operations on January 17, 1995 and received a
contribution of certain assets and liabilities, including securities, with a
value of $33,464,236 (including $1,223,663 of unrealized appreciation) on that
date from the 59 Wall Street Company Fund in exchange for a beneficial interest
in the Portfolio. The Declaration of Trust permits the Trustees to create an
unlimited number of beneficial interests in the Portfolio.
The Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
A. Valuation of Investments. (1) The value of investments listed on
a securities exchange is based on the last price on that exchange prior to
the time when assets are valued, or in the absence of recorded sales, at
the average of readily available closing bid and asked prices on such
exchange; (2) unlisted securities are valued at the average of the quoted
bid and asked prices in the over-the-counter market; (3) 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 Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to the value from dealers; and
general market conditions; (4) 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 by the Portfolio was
more than 60 days, unless this is determined not to represent fair value
by the Trustees.
B. Futures Contracts. To hedge against anticipated future changes in
interest rates or securities prices, U.S. Small Company Portfolio may
enter into financial futures contracts for the delayed delivery of
securities or contracts based on financial indices at a fixed price on a
future date. The Portfolio is required to deposit either in cash or
securities an amount equal to a certain percentage of the contract amount.
Subsequent payments are made or received by the Portfolio each day,
dependent on the daily fluctuations in the value of the underlying
security or securities or index, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. The Portfolio
recognizes a realized gain or loss when the contract is closed or expires.
Should interest rates or securities prices move unexpectedly, the
Portfolio may not achieve the anticipated benefits of the financial
futures contracts and may realize a loss.
If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there is risk that the positions may
correlate imperfectly with the asset or liability being hedged. Other
risks of entering into these transactions are that a liquid secondary
market may not always exist, or that another party to a transaction may
not perform.
C. Accounting for Investments. Security transactions are accounted
for on the trade date. Realized gains and losses on security transactions
are determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date. Dividend income is recorded net of foreign taxes withheld where
recovery of such taxes is not assured. Interest income is accrued daily.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
D. Federal Income Taxes. The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of the Portfolio's
ordinary income and capital gains. It is intended that the Portfolio's
assets will be managed in such a way that an investor in the Portfolio
will be able to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provisions
for federal income taxes is necessary.
E. Deferred Organization Expenses. Expenses incurred by the
Portfolio in connection with its organization are being amortized on a
straight-line basis over a five-year period.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which it pays
the Adviser a fee calculated daily and paid monthly at an annual rate equivalent
to 0.65% of the Portfolio's average daily net assets. For the year ended October
31, 1998, the Portfolio incurred $274,051 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (Cayman) Limited (the "Administrator") for
which it pays the Administrator a fee calculated daily and paid monthly at an
annual rate equivalent to 0.035% of the Portfolio's average daily net assets.
The Administrator has a subadministration agreement with Signature Financial
Group (Cayman) Ltd. for which Signature Financial Group (Cayman) Ltd. receives
such compensation as is from time to time agreed upon. For the year ended
October 31, 1998, the Portfolio incurred $14,757 for administrative services.
Trustees' Fee. Each Trustee of the Portfolio receives an annual retainer
paid by the Portfolio. Each Trustee is also reimbursed for out-of-pocket
expenses incurred in connection with board meetings. For the year ended October
31, 1998, the Portfolio incurred $4,944 for Trustee fees.
3. Investment Transactions. For the year ended October 31, 1998, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $62,877,674 and $69,400,447, respectively. For that
same period, the portfolio paid brokerage commissions of $70,002 to Brown
Brothers Harriman & Co. for transactions executed on its behalf. Custody fees
for the portfolio were reduced by $42,338 as a result of an expense offset
arrangement with the Portfolio's custodian.
4. Financial Futures Contracts. As of October 31, 1998, U.S. Small Company
Portfolio held open futures contracts. The contractual amount of a futures
contract represents the investment the Portfolio has in a particular contract
and does not necessarily represent the amounts potentially subject to risk. The
measurements of futures contracts is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under open
futures contracts at October 31, 1998 is as follows:
Unrealized
Position Contracts Index Appreciation
------- --------- ----- -----------
Long 10 Russell 2000 $188,025
As of October 31, 1998, the Portfolio had segregated sufficient cash
and/or securities to cover margin requirements on open futures contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Trustees and Shareholders
U.S. Small Company Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of U.S. Small Company Portfolio as of
October 31, 1998, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended October 31, 1998 and
1997 and the financial highlights for each of the years in the four-year period
ended October 31, 1998 (all expressed in U.S. dollars). These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at October 31, 1998 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of U.S. Small Company
Portfolio at October 31, 1998, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Grand Cayman, Cayman Islands
December 11, 1998
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
This report is submitted for the general information of
shareholders and is not authorized for distribution to
prospective investors unless preceded or accompanied by
an effective prospectus. Nothing herein contained is to
be considered an offer of sale or a solicitation of an
offer to buy shares of the Funds. Such offering is made
only by prospectus, which includes details as to
offering price and other material information.
