THE
WALL
STREET
FUND INC.
SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----
COMMON STOCKS - 94.57
BASIC MATERIALS - 3.24%
<C> <S> <C>
25,000+ Arqule Inc. ................................... $ 324,219
5,000 Barrick Gold Corp. ............................ 95,938
2,000+ Monsanto & Co. ................................ 111,750
----------
531,907
----------
CAPITAL GOODS - 6.47%
70,000+ Flow Intl. Corp. .............................. 809,375
3,000+ Solectron Corp. ............................... 126,188
8,500+ Zygo Corp. .................................... 126,171
----------
1,061,734
----------
CONSUMER - CYCLICAL - 10.15%
5,000+ Abercrombie & Fitch Co. ....................... 220,000
3,500 Home Depot Inc. ............................... 290,719
9,000+ Metromedia International Group ................ 107,438
10,000+ Office Depot Inc. ............................. 315,625
4,000+ Pixar ......................................... 241,500
10,000+ Polo Ralph Lauren Corp. - Class A ............. 280,000
2,500+ Walgreen Co. .................................. 103,280
7,000+ Zomax Optical Media ........................... 108,063
----------
1,666,625
----------
CONSUMER NON-CYCLICAL - 15.41%
4,000+ Aviron ........................................ 124,875
3,000+ Biochem Pharma. Inc. .......................... 79,219
5,000+ Centocor Inc. ................................. 181,406
5,000+ Chiron Corp. .................................. 78,594
6,000+ First Health Group Corp. ...................... 171,750
10,000+ Genzyme Corp. ................................. 254,375
6,000+ Healthsouth Rehabilitation Corp. .............. 160,125
6,000+ Incyte Pharmaceutics Inc. ..................... 205,125
10,000+ ISIS Pharmaceuticals .......................... 137,188
1,000+ Johnson & Johnson ............................. 73,750
8,000+ Ligand Pharmaceuticals - Class B .............. 102,250
10,000+ Mariner Health Co. ............................ 166,563
25,000+ Martek Biosciences Corp. ...................... 364,844
3,000 Pfizer Inc. ................................... 326,061
4,000+ Transkaryotic Therapies Inc. .................. 103,750
----------
2,529,875
----------
DIVERSIFIED - 0.49%
400,000+ International UNP Holdings Ltd. ............... 80,242
----------
ENERGY - 1.49%
8,000+ Petroleum Geo- ADR ............................ 244,000
----------
FINANCIAL - 2.62%
4,000 Allmerica Financial Corp. ..................... 260,000
10,000+ CCC Information Services Group ................ 170,625
----------
430,625
----------
SERVICES - 19.05%
3,000+ America Online Inc. ........................... 318,000
4,000+ Answerthink Consulting Group .................. 85,750
5,000+ At Home Corp. ................................. 236,406
6,000 Cintas Corp. .................................. 305,438
5,000+ Electronic Processing ......................... 59,688
35,000+ Faxsav Inc. ................................... 125,781
5,000 First Data Corp. .............................. 166,563
20,000+ Flexinternational Software .................... 141,875
3,000+ J.D. Edwards & Co. ............................ 128,811
7,500+ Labor Ready Inc. .............................. 226,641
8,000+ Lernout & Hauspie Speech ...................... 477,500
4,000+ Network Solutions ............................. 179,750
6,000+ Renaissance Worldwide Inc. .................... 130,688
30,000+ Spacehab Inc. ................................. 346,875
4,000+ USA Waste Services Inc. ....................... 197,500
----------
3,127,266
----------
TECHNOLOGY - 35.65%
6,000+ Analog Devices Inc. ........................... 147,375
5,000+ Ascend Communications Inc. .................... 247,650
10,000+ Avant Corporation ............................. 247,188
3,000+ Ciena Corp. ................................... 208,688
10,000+ Datastream Systems, Inc. ...................... 190,313
3,000+ EMC Corporation ............................... 134,438
3,500+ Excite Inc. ................................... 327,359
4,500+ Harbinger Corp. ............................... 109,125
5,000+ Legato Systems Inc. ........................... 195,313
11,050 Netscape Communications Corp. ................. 298,005
6,000+ Network Associates ............................ 287,063
10,000+ New Era of Networks, Inc. ..................... 306,875
85,000 Object Design Inc. ............................ 512,656
5,000 Parametric Technologies ....................... 135,469
2,000+ Peoplesoft Inc. ............................... 93,938
15,000+ Rational Software Corp. ....................... 229,219
15,000+ RF Micro Devices .............................. 163,594
9,000+ Rogue Wave Software Inc. ...................... 70,313
75,000+ Select Software Tools Ltd. Sponsored ADR ...... 349,219
3,000+ Sterling Commerce ............................. 145,500
100,000+ Treev Inc. .................................... 82,813
16,000+ Vitesse Semi-Conductor Corp. .................. 495,000
10,000+ Wavephore Inc. ................................ 115,313
10,000+ World Access Inc. ............................. 300,625
9,500+ Worldcom Inc. ................................. 459,266
----------
5,852,317
----------
WARRANTS - 0.00%
875 American Satellite Network Inc. Warrants....... 0
----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $12,380,098)............................. 15,524,591
----------
</TABLE>
See notes to financial statements. Page 1
<PAGE>
THE WALL STREET FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
BONDS-2.45%
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
<C> <S> <C>
CONVERTIBLE BONDS - 2.45%
$500,000 Executone Information Systems 7.50% 03/15/2011. $ 402,500
------------
TOTAL INVESTMENTS
(Cost $12,544,802) 97.02%........ 15,927,091
OTHER ASSETS LESS LIABILITIES 2.98%........ 489,786
------------
TOTAL NET ASSETS 100.00%........ $16,416,877
============
<FN>
(1) Federal Tax Information: At June 30, 1998 the net unrealized appreciation
based on cost for Federal Income tax purposes of $12,611,390 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over cost........................................ $ 4,299,990
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
cost over value........................................ (984,289)
------------
Net unrealized appreciation............................ $ 3,315,701
============
+ Non-income producing security.
</FN>
</TABLE>
THE WALL STREET FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
ASSETS:
Investments in securities, at value
<S> <C>
(cost $12,544,802) (Note 1) .............. $ 15,927,091
Cash ......................................... 82,370
Receivables:
Investment securities sold ........... $ 387,904
Fund shares sold ..................... 3,096
Interest and dividends ............... 13,275
------------
404,275
Other assets ................................. 23,833
----------
Total Assets ......................... 16,437,569
LIABILITIES:
Payables:
Investment adviser fee ............... 10,754
Other payables and accrued
expenses ..................... 9,938
------------
Total Liabilities ............ 20,692
-----------
Net Assets ........... $16,416,877
===========
Net Assets Consist of:
Capital stock at par value ........... $ 1,932,342
Additional paid in capital ........... 9,864,907
Unrealized appreciation on
investments .................. 3,382,289
Accumulated net investment loss ...... (110,235)
Accumulated net realized gain
on investments ............... 1,347,574
-----------
Net Assets ........... $16,416,877
===========
Net asset value and
redemption price per share
($16,416,877/1,932,342 shares
of capital stock outstanding)
(Note 4) ............................. $8.50
============
Maximum offering price per share
(100/96 of $8.50) .................... $8.85
============
</TABLE>
Page 2 See notes to financial statements.
<PAGE>
THE WALL STREET FUND, INC.
STATEMENT OF OPERATIONS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
INVESTMENT INCOME:
Income:
<S> <C>
Dividends .......................................... $ 9,579
Interest ........................................... 37,242
-----------
Total income ............................................... 46,821
Expenses:
Investment adviser fees
(Note 3) ......................................... 70,365
Transfer agent fees and
dividend paying expenses (Note 3) ............... 12,397
Custodian fees ..................................... 7,562
Accounting services (Note 3) ....................... 24,299
Reports to shareholders ............................ 5,951
Professional fees .................................. 12,681
Directors fees and expenses ........................ 13,884
Registration fees .................................. 4,215
Miscellaneous ...................................... 5,702
-----------
Total Expenses ............................................. 157,056
-----------
Net investment loss ............................. (110,235)
-----------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS
(Note 1)
Net realized gains from
investment transactions ............................ 1,360,419
Net increase in unrealized
appreciation of investments ........................ 1,429,087
-----------
Net realized and unrealized gains
on investments ..................................... 2,789,506
-----------
Net increase in net assets
resulting from operations .......................... $ 2,679,271
===========
</TABLE>
THE WALL STREET FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
----------- -----------------
<S> <C> <C>
Net investment loss ................... $ (110,235) $ (151,434)
Net realized gains from
investment transactions ....... 1,360,419 868,636
Net increase(decrease) in unrealized
appreciation of investments ... 1,429,087 (1,054,196)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ..... 2,679,271 (336,994)
Distributions to shareholders from:
Net realized gains from
investment transactions
($0.00 and $0.41 per share,
respectively) ................. 0 (834,155)
Net capital share transactions
(Note 4) ...................... (1,839,221) 808,663
------------ ------------
Total increase (decrease) in net assets 840,050
NET ASSETS:
Beginning of period ................... 15,576,827 15,939,313
------------ ------------
End of period ......................... $ 16,416,877 $ 15,576,827
============ ============
</TABLE>
See notes to financial statements. Page 3
<PAGE>
THE WALL STREET FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (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.
(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, 1998 aggregated $16,499,694 and $18,747,629, 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, 1998, Wall Street Management Corporation
(WSMC) earned investment advisory fees of $70,365 with no reimbursement to the
Fund for expenses.
The adviser also serves as the Fund's principal underwriter. For the six
months ended June 30, 1998, WSMC received $5,353 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 $36,696 for the six months ended June 30,1998.
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, 1998, no remuneration was paid by the Fund to MWC.
(4) CAPITAL STOCK:
At June 30, 1998 there were 5,000,000 shares of $1 par value capital stock
authorized. Transactions in capital stock during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 6/30/98 1997
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold ............. 281,113 $ 2,097,190 293,230 $ 2,360,707
Shares issued for
reinvestment of
distribution from
realized gains .. 0 0 100,096 705,679
Shares redeemed ......... (471,567) (3,936,411) (273,575) (2,257,723)
-------- ----------- -------- -----------
Net increase(decrease) . (190,454) ($1,839,221) 119,751 $ 808,663
======== =========== ======== ===========
</TABLE>
Page 4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 1997 1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $ 7.34 $ 7.96 $ 8.19 $ 7.42 $ 8.03 $ 7.60 $ 7.27 $ 5.54
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income (loss) ................ (.05) (0.08) (0.06) (0.03) (0.02) (0.02) 0.01 0.03
Net realized and unrealized gains (losses)
on investments ...................... 1.21 (0.13) 0.98 2.60 (0.38) 1.00 0.54 2.95
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations ............ 1.16 (0.21) 0.92 2.57 (0.40) 0.98 0.55 2.98
------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Dividends from net investment income ........ 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) (0.03)
Distribution from realized gains
from security transactions .......... 0.00 (0.41) (1.15) (1.80) (0.21) (0.55) (0.21) (1.21)
Return of capital distribution .............. 0.00 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total distributions ......................... 0.00 (0.41) (1.15) (1.80) (0.21) (0.55) (0.22) (1.25)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period .............. $ 8.50 $ 7.34 $ 7.96 $ 8.19 $ 7.42 $ 8.03 $ 7.60 $ 7.27
====== ====== ====== ====== ====== ====== ====== ======
Total return** .............................. 15.80% (2.37%) 11.45 36.50% (4.86%) 13.17 7.61% 54.36%
Ratios/supplemental data
Net assets, end of period (in 000's) ........ 16,417 15,577 15,939 14,383 11,080 11,561 11,202 11,032
Ratio of expenses to average net assets ..... 1.69%* 1.82% 1.84% 2.02% 2.12% 2.04% 2.15% 2.10%
Ratio of expenses to average net assets,
net of reimbursement ................ 1.69%* 1.82% 1.82% 1.90% 1.96% 1.96% 1.97% 1.98%
Ratio of net investment income (loss) to
average net assets ................. (1.18%)* (0.96%) (0.70%) (0.50%) (0.47%) (0.31%) (0.08%) 0.30%
Ratio of net investment income (loss)
to average net assets, net of
reimbursement........................ (1.18%)* (0.96%) (0.68%) (0.38%) (0.31%) (0.23%) 0.09% 0.43%
Portfolio turnover rate ..................... 91.06% 121.12% 142.11% 143.27% 89.01% 107.22% 112.47% 159.52%
<FN>
*Annualized
**Excluding Sales Charge
</FN>
</TABLE>
See notes to financial statements.
Page 5
<PAGE>
PRINCIPAL INVESTMENT CHANGES
For the six months ended June 30, 1998
NEW POSITIONS
Answerthink Consulting Group, America OnLine Inc., Aviron, Datastream
Systems, Inc., EMC Corporation, J.D. Edwards & Co., Labor Ready Inc., Legato
Systems Inc., Monsanto & Co., New Era of Networks, Inc., Network Associates
Inc., Petroleum Geo ADR, RF Micro Devices, Sterling Commerce, Tekelec, Wavephore
Inc., World Access Inc.
ELIMINATIONS
Adaptec Inc., Anadarko Petroleum Corporation, Alza Corp., Biogen Inc.,
Bristol Myers Squibb, Cendant Corp., Celeritek Inc., 3 Com Corp., Corixa Corp.,
Cybermedia, Inc., Genzyme Tissue Repair, Gulf Canada Resources, Hewlett Packard
Co., Intel Corp., International Precious Metal Corp., Jilin Chemical Ind.,
Liposome Co., Inc. Manugistics Group Inc., Metacreations Corp., Merck & Co.,
Micron Technology Inc., Newmont Mining, New Plan Realty Trust, Ogden Corp., Play
by Play Toys & Novelties, Perclose Inc., Qualco mm Inc., Sawtek Inc., SCM
Microsystems, Sequent Computer Systems Inc., Tellabs Inc., Telxon Corp, North
Face Inc., Unocal Corp., Vantive, Inc., Xilinx Inc., Executone Information
Systems convertible bonds: Alza Corp, 5.00%, 05/01/2006, Bonneville Pacific
Corp, 7.75%, 08/15/2009, VLSI Technology, 8.25%, 10/01/2005 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.
- --------------------------------------------------------------------------------
Page 6
<PAGE>
July 10, 1998
Dear Shareholders:
For the first half of the year your Fund had a positive return of +15.8%. The
results were excellent during a period of excessive volatility within the
markets. Selected large cap stocks as well as medium and smaller size companies
ceded a considerable amount of ground, as "pre-announcements" of earnings
disappointments, downward estimate revisions, and most notably, the impact of
the burgeoning Asian market crisis took their respective tolls. The Fund's
performance was much better than the Russell 2000 Index which showed a return of
+4.7% for the same period.
The Asian crisis has now been "discounted" in the market twice: first late last
fall, when the turmoil first became widely known, and then again this spring as
the impact on specific companies' earnings began to crystallize. We believe that
the impact of weaker exports will be felt here, as well as the effect of weaker
multinational earnings. We also view Asia as a crisis in confidence; one that
could spread to our shores if left unchecked. We see Japan as being the linchpin
of this turmoil. Japanese financial institutions have repeatedly and continually
papered over losses through accounting machinations. We believe that only a
"come-clean" policy, similar to the stance that the U.S. institutions took in
recognizing our real estate crisis in the late 1980's by establishing the
Resolution Trust Corporation, coupled with "Reaganomics" style tax cuts will put
this situation behind us. The Japanese have about exhausted the monetary stimuli
available, and must resort to an unprecedented fiscal stimulus to have any
lasting efficacy.
What will be the likely impact of all of this on our markets? As we write this
letter we appear to be in a typical summer rally; however, we see a full blown
correction of 10% as a probable but not certain occurrence sometime in the near
future. A long-term fix in Japan may ironically siphon funds from the U.S.
markets. Valuations in many U.S. large capitalization global consumer companies
are too high and will not support earnings disappointments. We believe that such
disparate cases as the prolonged GM parts strike and Gateway Computer's
relocation from bucolic prairie to Southern California in search of a better
labor pool, are indicative of cost push inflationary pressures lurking just
below the surface. We are of the opinion that the Federal Reserve is actually
inclined to raise interest rates slightly here, but is foreclosed from that
action by the Asian situation and also by the current fiscal surplus in the U.S.
budget which creates a slight drag on the U.S. economy.
We believe that we can best serve our shareholders and investment performance by
maintaining appropriate cash reserves, identifying sale candidates of overvalued
situations where the future prospects are cloudy, and by maintaining and
increasing investment positions in visible earnings growth situations, where the
rate and quality of earnings growth is likely to exceed that of the average
company. Of course, we continue to believe that the rapid growth, smaller
capitalization names with minimal overseas exposure will perform well in the
current and future market environment.
Sincerely,
/s/
--------------------
Robert P. Morse
President
Page 7
<PAGE>
DIRECTORS
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
150 Motor Parkway
Hauppauge, New York 11788
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York 10019
