THE WALL STREET FUND INC.
SEMI-ANNUAL REPORT
June 30, 1997
<PAGE>
<TABLE>
<CAPTION>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS AND WARRANTS - 90.07%
MARKET
SHARES VALUE
------ -----
<C> <S> <C>
BASIC MATERIALS -5.53%
100,000 +International Precious Metals Corp. .............. $695,313
3,000 Nucor Corp. ...................................... 169,500
-------
864,813
CAPITAL GOODS- 7.24%
2,000 Boeing Co. ....................................... 106,125
81,000 +Flow Intl. Corp. ................................. 779,625
2,500 Hewlett Packard Co. .............................. 140,000
30,000 +Stevens Graphics Series A ........................ 30,000
2,000 +USA Waste Services Inc. .......................... 77,250
1,133,000
CONSUMER - CYCLICAL - 7.98%
2,500 +Delia*s, Inc. .................................... 46,250
3,000 Hilton Hotels Corp. .............................. 79,687
3,000 Home Depot Inc. .................................. 206,812
12,500 +North Face Inc. .................................. 226,563
10,000 +Officemax Inc. ................................... 144,375
5,000 +Pixar ............................................ 78,438
6,000 Tiffany & Co. ..................................... 277,125
2,000 +Tommy Hilfiger Corp. ............................. 80,375
15,000 +Zomax Optical Media .............................. 108,750
---------
1,248,375
---------
CONSUMER NON-CYCLICAL - 17.17%
35,000 +Alpha-Beta Technology Inc. ....................... 312,812
5,000 +Alza Corp. ....................................... 145,000
10,000 +Biochem Pharma Inc. .............................. 222,500
5,000 +Centocor Inc. .................................... 155,156
10,000 +Chiron Corp. ..................................... 208,437
10,000 +Ergo Science Corp. ............................... 110,938
5,000 +Genzyme Corp. .................................... 138,438
7,500 +Healthcare Compare Corp. ......................... 393,281
3,000 +Incyte Pharmaceutics Inc. ........................ 197,625
5,000 +Liposome Co. Inc. ................................ 44,531
10,000 +Martek Biosciences Corp. ......................... 115,625
1,000 Merck & Co. ...................................... 103,500
2,000 Pfizer Inc. ...................................... 239,000
7,000 +Transkaryotic Therapies Inc. ..................... 215,688
2,000 Vencor Inc. ...................................... 84,500
---------
2,687,031
---------
DIVERSIFIED - 1.87%
598,000 +International UNP Holdings Ltd. .................. 88,863
2,000 Minnesota Mining & Manufacturing Co. ............. 204,000
---------
292,863
---------
ENERGY - 1.82%
10,000 +Gulf Canada Resources ............................ 83,125
3,500 +Nuevo Energy Co. ................................. 143,500
1,500 Unocal Corp ...................................... 58,219
---------
284,844
---------
COMMON STOCKS AND WARRANTS (continued)
MARKET
SHARES VALUE
------ -----
FINANCIAL 2.87%
8,000 Allmerica Financial Corp. ........................ $319,000
3,000 Federal National Mortgage Association ............ 130,875
----------
449,875
----------
SERVICES - 11.12%
1,000 Automatic Data Processing ........................ 47,000
3,000 Cintas Corp. ..................................... 206,437
5,000 +CUC International Inc. ........................... 129,063
15,000 +Electronic Processing ............................ 69,375
60,000 +Executive Telecard Ltd ........................... 401,250
6,000 First Data Corp. ................................. 263,625
6,000 +Lernout & Hauspie Speech ......................... 165,000
7,000 Ogden Corp. ...................................... 152,250
8,000 +Renaissance Solutions Inc. ....................... 294,000
7,000 +U-Ship Inc. ...................................... 11,594
----------
1,739,594
----------
TECHNOLOGY - 34.47%
2,000 +Adaptec Inc. ..................................... 69,500
5,000 Adobe Systems Inc. ............................... 175,469
8,000 +Advanced Digital Information Corp. ............... 129,500
8,000 +Analog Devices Inc. .............................. 212,500
5,000 +Ascend Communications Inc. ....................... 196,406
8,000 +Celeritek Inc. ................................... 98,000
1,000 +Digital Equipment Corp. .......................... 35,437
10,000 +Excite Inc. ...................................... 142,187
100,000 +Executone Info. Systems .......................... 167,187
2,000 +Gateway 2000 ..................................... 64,875
6,500 +Harbinger Corp. .................................. 182,812
1,500 Intel Corp. ...................................... 212,390
25,000 +Kasten Chase Applied Research .................... 54,365
8,000 +Metacreations .................................... 87,000
1,000 Motorola Inc. .................................... 76,000
4,000 Netscape Communications .......................... 128,125
20,000 +Object Design Inc. ............................... 171,250
15,000 Octel Communications Corp. ....................... 351,094
5,000 +Oracle Systems Corporation ....................... 251,719
6,000 +Parametric Technologies .......................... 255,187
4,000 +Qualcomm Inc. .................................... 203,625
8,000 Rational Software Corp. .......................... 134,250
19,000 +Rogue Wave Software Inc. ......................... 241,063
9,000 +Sawtek Inc. ...................................... 303,750
4,000 +Seagate Technology ............................... 140,750
8,000 +Segue Software Inc. .............................. 109,500
30,100 +Select Software Tools Ltd. Sponsored Adr ......... 395,063
5,000 +Spacehab Inc. .................................... 45,313
1,000 +Synopsys Inc. .................................... 36,906
2,500 +Transwitch Corporation ........................... 21,563
2,000 +Viasoft Inc. ..................................... 101,750
9,500 +Vitesse Semi-Conductor Corp. ..................... 310,234
7,500 +Worldcom Inc. .................................... 239,766
1,000 +Xilinx Inc. ...................................... 49,031
----------
5,393,567
----------
See notes to financial statements. Page 1
<PAGE>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS (continued)
(Unaudited) June 30, 1997
COMMON STOCKS AND WARRANTS (continued)
MARKET
SHARES VALUE
------ -----
WARRANTS - 0.00%
875 +American Satellite Network Inc. Warrants ......... $ 0
580 +Stevens International Inc. Cl A Warrants ......... 0
----------
0
----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $11,630,066) 14,093,962
----------
BONDS - 8.87%
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
CONVERTIBLE BONDS - 8.87%
$200,000 Air & Water Technologies 8.00%
05/15/2015 ....................................... 167,000
200,000 Alza Corp. 5.00%
05/01/2006 ....................................... 201,000
200,000 +^Bonneville Pacific Corp. 7.75%
08/15/2009 ....................................... 274,000
500,000 Executone Information Systems 7.50% 03/15/2011 ... 444,375
300,000 VLSI Technology Inc. 8.25% 10/01/2005 ............ 302,250
----------
TOTAL BONDS
(Cost $840,378) ................................. 1,388,625
----------
TOTAL INVESTMENTS
(Cost $12,470,444) 98.94% .... 15,482,587
OTHER ASSETS LESS LIABILITIES 1.06% .... 166,369
----------
TOTAL NET ASSETS 100.00% .... $15,648,956
====== ===========
<FN>
(1) Federal Tax Information: At June 30, 1997 the net unrealized appreciation
based on cost for Federal Income tax purposes of $12,471,219 was as
follows:
Aggregate gross unrealized appreciation for all investments in
which there was an excess of value over cost .......... $3,790,190
Aggregate gross unrealized depreciation for all investments in
which there was an excess of cost over value .......... (778,822)
----------
Net unrealized appreciation ........................... $3,011,368
==========
* Non-income producing security.
^ Priced at fair value as determined by the Board of Directors.
</FN>
</TABLE>
<TABLE>
<CAPTION>
THE WALL STREET FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 - (Unaudited)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $12,470,444) (Note 1) ............... $ 15,482,587
Cash .......................................... 269,473
Receivables:
Interest and dividends ............... 29,366
Other assets .................................. 2,517
-------------
Total Assets ......................... 15,783,943
LIABILITIES:
Payables:
Investment securities purchased ...... 119,455
Investment adviser fee ............... 9,106
Fund shares repurchased .............. 1,135
Other payables and accrued
expenses .................... 5,291
Total Liabilities ........... ------- 134,987
-------------
Net Assets ......... $ 15,648,956
=============
Net Assets Consist of:
Capital stock at par value ........... $ 1,913,538
Additional paid in capital ........... 10,293,678
Unrealized appreciation on
investments ................. 3,012,143
Accumulated net realized gain
on investments .............. 502,255
Accumulated net investment loss ...... 72,658)
Net Assets ......... $ 15,648,956
=============
Net asset value and
redemption price per share
($15,648,956/1,913,538 shares
of capital stock outstanding)
(Note 4) ............................. $ 8.18
=============
Maximum offering price per share
(100/96 of $8.18) .................... $ 8.52
=============
</TABLE>
Page 2 See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE WALL STREET FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends ..................... $ 20,195
Interest ...................... 49,021
---------
Total income 69,216
Expenses:
Investment adviser fees
(Note 3) .................... $ 58,856
Transfer agent fees and
dividend paying expenses ... 11,645
Custodian fees ................ 8,451
Accounting services ........... 24,500
Reports to shareholders ....... 5,109
Professional fees ............. 10,760
Directors fees and expenses ... 13,908
Registration fees ............. 4,215
Miscellaneous ................. 6,084
---------
Total Expenses .................... 143,528
Less:
Reimbursed expenses
(Note 3) ................... (1,654)
---------
Net expenses ............... 141,874
---------
Net investment loss ........ (72,658)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 1)
Net realized gains from
investment transactions ....... 496,712
Net increase in unrealized
appreciation of investments ... 4,745
---------
Net realized and unrealized gains
on investments ................ 501,457
---------
Net increase in net assets
resulting from operations ..... $ 428,799
=========
</TABLE>
<TABLE>
<CAPTION>
THE WALL STREET FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Net investment loss ........................ $ (72,658) $ (105,420)
Net realized gains from
investment transactions ........... 496,712 2,067,893
Net increase (decrease) in unrealized
appreciation of investments ....... 4,745 (333,671)
------------ ------------
Net increase in net assets
resulting from operations ......... 428,799 1,628,802
Distributions to shareholders
from:
Net realized gains from
investment transactions
($0.00 and $1.15 per share,
respectively) ..................... 0 (2,009,946)
Net capital share transactions
(Note 4) .......................... (719,156) 1,937,669
------------ ------------
Total increase (decrease) in net assets .... (290,357) 1,556,525
NET ASSETS:
Beginning of period ........................ 15,939,313 14,382,788
------------ ------------
End of period .............................. $ 15,648,956 $ 15,939,313
============ ============
</TABLE>
See notes to financial statements. Page 3
<PAGE>
THE WALL STREET FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 - (Unaudited)
(1) Summary of significant accounting policies:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. These policies are in conformity
with generally accepted accounting principles for investment companies. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(A) Securities Valuations - The value of investments is based on the published
last sale prices on national securities exchanges, or, in the absence of
recorded sales, at the mean between the closing bid and asked prices on such
exchanges or over-the-counter. At June 30, 1997, the Fund held a security for
which a market quotation was not readily available and which was valued in good
faith by the Board of Directors. This security had a value of $274,000
representing 1.75% of the Fund's net assets.
(B) Federal Income Taxes - No provision for federal income taxes has been made
in the accompanying financial statements, since the Fund intends to continue to
comply with the provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to its shareholders substantially all of
its net investment income and net realized gains on investments.
(C) Other - Security transactions are accounted for on the date securities are
purchased or sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. The net realized gains and losses are
determined on the identified cost basis. The Fund may periodically make
reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
(2) Purchases and sales of securities:
Purchases and sales of investment securities, during the six months ended
June 30, 1997 aggregated $8,904,645 and $9,755,050, respectively.
(3) Investment advisory fees and other:
The advisory agreement provides for advisory fees of 1/16 of 1% monthly
(equivalent to 3/4 of 1% per annum) of the first $125,000,000 of average net
assets of the Fund. The present advisory agreement also provides for the adviser
to reimburse the Fund for any expenses (including the advisory fee but excluding
taxes, interest and brokerage fees and extraordinary expenses incurred in
connection with any matter not in the ordinary course of business of the Fund)
over 2% of the first $10,00,000, 1 1/2% of the next $20,000,000 and 1% of any
balance of the average daily net asset value.
For the six months ended June 30, 1997, Wall Street Management Corporation
(WSMC) earned investment advisory fees of $58,856 and reimbursed the Fund $1,654
for expenses.
The adviser also serves as the Fund's principal underwriter. For the six
months ended June 30, 1997, WSMC received $36 as its portion of the sales charge
on sales of shares of the Fund. Certain of the officers and directors of the
Fund are officers and directors of WSMC.
The Fund has arranged for American Data Services, Inc., of which the Fund's
Secretary and Treasurer is a principal, to prepare the accounting records and
perform administrative and transfer agent services for the Fund. Costs incurred
totalled $36,145 for the six months ended June 30, 1997.
Morse, Williams & Co., Inc. (MWC), 100% owner of WSMC, performs
administrative services for the Fund. This includes costs of shared office
expenses, rent, telephone charges and supply expenses. For the six months ended
June 30, 1997, no remuneration was paid by the Fund to MWC.
(4) CAPITAL STOCK:
At June 30, 1997 there were 5,000,000 shares of $1 par value capital stock
authorized. Transactions in capital stock during the six months ended June 30,
1997 and the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 6/30/97 1996
------------------------ ----
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .............. 36,221 $ 291,396 78,951 $ 698,614
Shares issued for
reinvestment of
distribution from
realized gains .. 0 0 243,015 1,905,236
Shares redeemed .......... (125,728) (1,010,552) (76,029) (666,181)
-------- ---------- ------- -----------
Net increase/(decrease) .. (89,507) $ (719,156) 245,937 $ 1,937,669
======== =========== ======= ===========
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout each period)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995 1994
------------- ---- ---- ----
(UNAUDITED)
-----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $ 7.96 $ 8.19 $ 7.42 $ 8.03
------------- ------------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) ................................ (0.04) (0.06) (0.03) (0.02)
Net realized and unrealized gains (losses)
on investments ..................................... 0.26 0.98 2.60 (0.38)
------------- ------------- ----------- -----------
Total from investment operations ............................ 0.22 0.92 2.57 (0.40)
------------- ------------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income ........................ 0.00 0.00 0.00 0.00
Distribution from realized gains
from security transactions ......................... 0.00 (1.15) (1.80) (0.21)
------------- ------------- ----------- -----------
Return of capital distribution .............................. 0.00 0.00 0.00 0.00
------------- ------------- ----------- -----------
Total distributions ......................................... 0.00 (1.15) (1.80) (0.21)
------------- ------------- ----------- -----------
Net asset value, end of period .............................. $ 8.18 $ 7.96 $ 8.19 $ 7.42
============= ============= =========== ============
Total return** .............................................. 5.65%* 11.45% 36.50% (4.86%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........................ 15,649 15,939 14,383 11,080
Ratio of expenses to average net assets ..................... 1.84%* 1.84% 2.02% 2.12%
Ratio of expenses to average net assets, net of reimbursement 1.82%* 1.82% 1.90% 1.96%
Ratio of net investment income (loss) to average net assets . (0.96%)* (0.70%) (0.50%) (0.47%)
Ratio of net investment income (loss)
to average net assets, net of reimbursement ........ (0.93%)* (0.68%) (0.38%) (0.31%)
Portfolio turnover rate ..................................... 57.58% 142.11% 143.27% 89.01%
Average commission rate paid+ ............................... .0520 .0666 -- --
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net asset value, beginning of period ........................ $ 7.60 $ 7.27 $ 5.54
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) ................................ (0.02) 0.01 0.03
Net realized and unrealized gains (losses)
on investments ..................................... 1.00 0.54 2.95
----------- ----------- -----------
Total from investment operations ............................ 0.98 0.55 2.98
----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income ........................ 0.00 (0.01) (0.03)
Distribution from realized gains
from security transactions ......................... (0.55) (0.21) (1.21)
----------- ----------- -----------
Return of capital distribution .............................. 0.00 0.00 (0.01)
----------- ----------- -----------
Total distributions ......................................... (0.55) (0.22) (1.25)
----------- ----------- -----------
Net asset value, end of period .............................. $ 8.03 $ 7.60 $ 7.27
=========== =========== ===========
Total return** .............................................. 13.17% 7.61% 54.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........................ 11,561 11,202 11,032
Ratio of expenses to average net assets ..................... 2.04% 2.15% 2.10%
Ratio of expenses to average net assets, net of reimbursement 1.96% 1.97% 1.98%
Ratio of net investment income (loss) to average net assets . (0.31%) (0.08%) 0.30%
Ratio of net investment income (loss)
to average net assets, net of reimbursement ........ (0.23%) 0.09% 0.43%
Portfolio turnover rate ..................................... 107.22% 112.47% 159.52%
Average commission rate paid+ ............................... -- -- --
<FN>
* Annualized
** Excluding sales charge.
+ For fiscal years beginning on or after September 1, 1996, a fund is required
to disclose its average commission rate per share for trades on which a
commission is charged.
</FN>
</TABLE>
See notes to financial statements. Page 5
<PAGE>
PRINCIPAL INVESTMENT CHANGES
For the six months ended June 30, 1997
NEW POSITIONS
Advanced Digital Information Corp., Automatic Data Processing, CUC International
Inc., Electronic Processing, Ergo Science Corp., Gateway 2000, Hilton Hotels
Corp., Incyte Pharmaceutics, Lernout & Hauspie, Nuevo Energy Co., Object Design
Inc., Officemax Inc., Qualcomm Inc., Segue Software, Inc., Spacehab, Tommy
Hilfiger, Transwitch Corporation, USA Waste Services Inc., Viasoft, Inc.
ELIMINATIONS
Barrick Gold Corp., Amway Japan Ltd. ADR, Altera Corp., Amgen Inc., Apac
Teleservices, Anadarko Petroleum Corporation, Astea International Inc., Avant
Corporation, Cellpro Inc., Comp USA Inc., Cisco Systems Inc., Dresser
Industries, Electronics for Imaging Inc., ESS Technology, Federation Resources,
Fusion Systems Corp., Gap Inc., GTE Corp., ICC Technologies Inc., IdeXX
Laboratories Inc., IMC Global Inc., ISIS Pharmaceutical, Jilin Chemical Ind.,
Johnson & Johnson, McDonalds Corp., Millicom Int'l. Cellular S.A., Metromedia
International Group, Nematron Corp., On Technology Corp., Paging Network Inc.,
Premis Corporation, Qualmark Corporation, Raptor Systems Inc., Retirement Care
Associates Inc., Saks Holdings Inc., Sport-Haley Inc., Strategic Distribution
Inc., Wisconsin Central Trans, Zygo Corp., Zoltek Companies Inc.
This report is not to be construed as an offering for the sale of The Wall
Street Fund, Inc., or as a solicitation of an offer to buy any such shares,
unless accompanied by an effective prospectus setting forth details of the Fund
including the sales charge and other material information.Dear
Page 6
<PAGE>
Fellow Shareholders:
A pundit recently commented that there is nothing wrong with the markets,
only that indexes are overvalued. The amount of investment funds flooding into
the large company shares and index funds over the last twelve months has
overwhelmed this sector, creating a price risk and opportunity in other sectors
where valuations have remained more sober.
Over the past three years, from June 30, 1994, your funds' total return has
been over 75%. During the past six months, the total return has been positive,
just under 6%. Many of our investments have been ignored by the investment flows
this year, but the average annual earnings growth we expect from our investments
of 20% to 30% for the next several years compares to estimates of 7% to 8%
earnings growth for the larger, S&P 500 companies. Sooner or later, prices track
earnings.
Especially noteworthy and illustrative of the unusual price pattern of
today's market is the Montgomery Securities 500 Index of the fastest growing
companies in the United States. This index was down 21.8% as of April 25th, yet
closed unchanged on June 30th. For the first half of 1996, the S&P 500 total
gain for the year to date was 20.6%, the Russell 2000 was up 9.3% year to date,
reversing the first quarter's losses. The Lehman Government/Corporate Bond Index
likewise was up 2.7% year to date. During the first half, only about one third
of all stocks listed on the NYSE and NASDAQ were up at all, two thirds were
unchanged or down according to data from Merrill Lynch and Morgan Stanley. About
25 stocks, or 5% of the S&P 500, account for one third of index movement due to
it being a capitalization or company size weighted index.
The market continues to be fueled by massive cash flows from corporate share
buy-backs and retirement oriented investments in large capitalization and index
stocks. Federal Reserve policy is accommodative and the economic outlook benign,
with neither excessive strength or weakness in evidence. As might be expected,
the scenario which ends this environment is difficult to forecast. We expect
that if economic weakness develops, it may be in consumer spending for large
ticket durables, not so much as a function of falling consumer confidence, but
rather as a result of fulfilled demand and leveraged consumer balance sheets. We
also are considering whether the massive costs of addressing the Year 2000
technology issue will cause a near term slowdown in capital spending, as
technology budgets are redirected rather than enhanced. The greatest risk to the
market probably lies in the potential for sustained earnings disappointments
registered by some bellwether names. Current valuation levels for the large
index stocks do not allow much room for disappointment or for a slackening in
cash flows.
Our strategy for enhancing our shareholders' wealth while preserving capital
in such an environment remains unchanged. We believe that we can successfully
exploit the pronounced valuation differentials between certain large cap names
whose prices have been bid up to significant premiums to their growth rates, by
investing in select small capitalization names, which sell at significant
discounts to their respective growth rates. The recent phenomena of large
capitalization indexes outperforming smaller stocks has created a deep relative
and absolute undervaluation for this investment category. According to Ibbotson
and Associates, one dollar invested in 1925 in large caps would equal $1,400
today, an average annual return of 10.7%. A dollar invested in small cap stocks
for the same period would be worth $4,500 or 12.6% per year. This is one reason
we like to have a blend of smaller/medium size companies. During the next three
to five years, the "coiled spring" represented by the undervaluation of small
cap stocks is likely to create a powerful upward move in this investment
category as revaluation is combined with superior earnings growth.
We expect considerable growth from companies we favor and they should
perform well in this context, especially the smaller capitalization stocks of
companies with innovative technologies in major growth areas with large market
potentials, such as the internet and applied biotechnology. If we are the owners
of companies with superior growth prospects, as the numbers come through, the
stock prices should follow.
We also view the United States economy as being the one market with
sufficiently sound fundamentals to be able to attract and retain worldwide
investment flows. We believe that this trend, combined with the relentless money
flows seeking higher return investments that we have previously discussed,
provides a solid long term footing to our equities. We anticipate continued
improvement in net asset value by year end as well as a capital gain
distribution in December.
You may wish to visit our website, "www.thewallstreetfund.com" to see some
of our history or e-mail me directly.
Sincerely,
/s/ Robert P. Morse
Robert P. Morse
President
July 31, 1997
Page 7
<PAGE>
DIRECTORS
John F. Carr, Emeritus
Clifton H.W. Maloney
Robert P. Morse, Chairman
Sharon A. Queeney
Harlan K. Ullman
OFFICERS
Robert P. Morse, President
Michael R. Linburn, Vice President
Allen C. Post, Vice President
Michael Miola, Secretary, Treasurer
INVESTMENT ADVISER
WALL STREET MANAGEMENT CORPORATION
230 Park Avenue
New York, New York 10169
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street, 11th Floor
New York, New York 10286
TRANSFER AGENT
AMERICAN DATA SERVICES
24 West Carver Street
Huntington, New York 11743
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York 10019
