[LOGO]
U.S. Equity Fund
ANNUAL REPORT
October 31, 1996
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996
Shares Value
------ -----
COMMON STOCKS (98.8%)
AEROSPACE/DEFENSE (1.8%)
9,800 Boeing Co. ..................................... $ 934,675
----------
APPLIANCES (2.4%)
50,000 Sunbeam Corp., Inc. ............................ 1,231,250
----------
BANKING (1.7%)
19,000 SunTrust Banks, Inc. ........................... 885,875
----------
CHEMICALS (2.4%)
8,500 FMC Corp.* ..................................... 625,812
13,000 Praxair, Inc. .................................. 575,250
----------
1,201,062
----------
COMPUTER RELATED (6.6%)
22,500 Computer Associates
International, Inc. .......................... 1,330,313
10,000 International Business
Machines Corp. ............................... 1,290,000
33,000 Stratus Computer, Inc.* ........................ 738,375
----------
3,358,688
----------
COMPUTER SOFTWARE (4.5%)
36,500 Bay Networks, Inc.* ............................ 739,125
42,750 Cadence Design
Systems, Inc.* ............................... 1,560,375
----------
2,299,500
----------
COSMETICS & TOILETRIES (3.6%)
17,000 Avon Products, Inc. ............................ 922,250
9,000 Procter & Gamble Co. (The) .................... 891,000
----------
1,813,250
----------
ELECTRICAL EQUIPMENT (6.3%)
19,000 Duracell International, Inc. ................... 1,268,250
10,500 General Electric Co. ........................... 1,015,875
12,000 Raychem Corp. .................................. 937,500
----------
3,221,625
----------
ELECTRIC POWER (1.0%)
17,000 DTE Energy Co. ................................. 512,125
----------
EXPLORATION/DRILLING (2.4%)
28,000 Noble Affiliates, Inc. ......................... 1,218,000
----------
FINANCIAL SERVICES (4.8%)
31,000 Federal National
Mortgage Assoc ............................... 1,212,875
21,000 PMI Group, Inc. (The) .......................... 1,199,625
----------
2,412,500
----------
FOOD & BEVERAGES (6.0%)
11,500 Campbell Soup Co. .............................. 920,000
38,000 PepsiCo, Inc. .................................. 1,125,750
28,000 Quaker Oats Co. ................................ 994,000
----------
3,039,750
----------
INSURANCE (3.8%)
9,500 American International
Group, Inc. .................................. 1,031,937
35,000 Everest Reinsurance
Hldgs., Inc. ................................. 892,500
----------
1,924,437
----------
MACHINERY/EQUIPMENT (5.3%)
10,000 Caterpillar, Inc. ............................... 686,250
25,200 Deere & Co. ..................................... 1,052,100
24,000 Sundstrand Corp. ................................ 966,000
----------
2,704,350
----------
MEDIA (1.6%)
65,000 Tele-Communications,
Inc.-Class A* ................................. 808,438
----------
MEDICAL SUPPLIES & SERVICES (9.7%)
16,000 Bausch & Lomb, Inc. ............................. 540,000
20,000 Baxter International, Inc. ...................... 832,500
20,000 Beckman Instruments, Inc. ....................... 735,000
24,000 Guidant Corp. ................................... 1,107,000
14,000 Medtronic, Inc. ................................. 901,250
21,000 St. Jude Medical, Inc.* ......................... 828,187
----------
4,943,937
----------
METALS & MINING (1.4%)
12,000 Aluminum Company
of America .................................... 703,500
----------
NATURAL GAS (2.6%)
10,000 Consolidated Natural
Gas Co. ....................................... 531,250
28,000 MCN Corp. ....................................... 770,000
----------
1,301,250
----------
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996
Shares Value
------ -----
OIL (5.4%)
12,000 Amoco Corp. ..................................... $ 909,000
17,000 Halliburton Co. ................................. 962,625
7,300 Mobil Corp. ..................................... 852,275
----------
2,723,900
----------
PAPER/FOREST PRODUCTS (4.1%)
23,000 Bowater, Inc. ................................... 813,625
12,000 Consolidated Papers, Inc. ....................... 601,500
10,000 Willamette Industries, Inc. ..................... 672,500
----------
2,087,625
----------
PHARMACEUTICALS (1.7%)
12,230 Lilly (Eli) & Co. ............................... 862,215
----------
PHOTO & OPTICAL (2.1%)
13,500 Eastman Kodak Co. ............................... 1,076,625
----------
PRINTING & PUBLISHING (1.1%)
15,000 Time Warner, Inc. ............................... 558,750
----------
REAL ESTATE (2.0%)
45,000 Security Capital
Pacific Trust ................................. 1,012,500
----------
RECREATION (3.6%)
14,000 Disney (Walt) Co. .............................. 922,250
31,250 Mattel, Inc. ................................... 902,344
----------
1,824,594
----------
RESTAURANT/LODGING (3.8%)
35,000 Hilton Hotels Corp. ............................ 1,063,125
15,000 Marriott International, Inc. ................... 853,125
----------
1,916,250
----------
RETAIL (3.8%)
25,000 Lowe's Companies, Inc. ......................... 1,009,375
47,000 Price/Costco, Inc.* ............................ 931,188
----------
1,940,563
----------
STEEL (1.7%)
40,000 Allegheny Teledyne, Inc. ....................... 855,000
----------
TELECOMMUNICATIONS (1.6%)
16,000 MFS Communications
Co., Inc.* ................................... 803,000
----------
TOTAL INVESTMENTS (identified cost $38,580,181) (a) ..... 98.8% $50,175,234
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......... 1.2 597,462
----- -----------
NET ASSETS ............................................. 100.0% $50,772,696
===== ===========
- -----------------------
* Non-income producing security
(a) The aggregate cost for federal income tax purposes is $38,650,669, the
aggregate gross unrealized appreciation is $12,590,121, and the aggregate
gross unrealized depreciation is $1,065,556, resulting in net unrealized
appreciation of $11,524,565.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
ASSETS:
Investments in securities, at value (identified cost
$38,580,181) (Note 1) .................................. $50,175,234
Cash ..................................................... 521,554
Receivables for:
Capital stock sold ..................................... 134,314
Dividends .............................................. 35,630
Deferred organization expenses (Note 1) .................. 3,260
-----------
Total Assets ....................................... 50,869,992
-----------
LIABILITIES:
Payables for:
Expense payment fee (Note 2) ........................... 84,252
Administrative fee (Note 2) ............................ 12,216
Fund shares redeemed ................................... 828
-----------
Total Liabilities .................................. 97,296
-----------
NET ASSETS ..................................................... $50,772,696
===========
Net Assets Consist of:
Paid-in capital .......................................... $37,640,923
Accumulated undistributed net investment income .......... 33,631
Accumulated net realized gain on investments ............. 1,503,089
Net unrealized appreciation .............................. 11,595,053
-----------
Net Assets ..................................................... $50,772,696
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($50,772,696 / 1,200,204 shares) ......................... $42.30
======
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
INVESTMENT INCOME:
Income:
Dividends (net of withholding tax of $2,067) ............. $ 684,147
----------
Expenses:
Expense payment fee (Note 2) ............................. 443,801
Administrative fee (Note 2) .............................. 64,069
Amortization of organization expenses (Note 1) ........... 4,480
----------
Total Expenses ....................................... 512,350
----------
Net Investment Income ................................ 171,797
----------
NET REALIZED AND UNREALIZED GAIN (Notes 1 and 3):
Net realized gain on investments ......................... 1,528,243
Net change in unrealized appreciation on investments ..... 5,413,968
----------
Net Realized and Unrealized Gain ..................... 6,942,211
----------
Net Increase in Net Assets Resulting from Operations ..... $7,114,008
==========
See Notes to Financial Statemetns.
<PAGE>
THE 59 WALL STREET U. S. EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
-----------------------------------
1996 1995
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income..................................... $ 171,797 $ 216,218
Net realized gain on investments.......................... 1,528,243 667,354
Net change in unrealized appreciation on investments...... 5,413,968 5,189,897
----------- ------------
Net increase in net assets resulting from operations . 7,114,008 6,073,469
----------- ------------
Dividends and distributions declared from (Note 1):
Net investment income..................................... (199,768) (223,291)
Net realized gains........................................ (781,118) (377,049)
----------- ------------
Total dividends and distributions declared............ (980,886) (600,340)
----------- ------------
Capital stock transactions (Note 4):
Net proceeds from sales of capital stock.................. 20,795,408 9,618,272
Net asset value of capital stock issued to shareholders
in reinvestment of dividends and distributions ........ 662,852 393,829
Net cost of capital stock redeemed........................ (8,818,369) (5,609,953)
----------- ------------
Net increase in net assets resulting from capital
stock transactions .................................. 12,639,891 4,402,148
----------- ------------
Total increase in net assets........................ 18,773,013 9,875,277
NET ASSETS:
Beginning of year............................................. 31,999,683 22,124,406
----------- ------------
End of year (including undistributed net investment
income of $33,631 and $61,602, respectively)............. $50,772,696 $ 31,999,683
=========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U. S. EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share
outstanding throughout each period
<TABLE>
<CAPTION>
For the period
July 23, 1992
For the years ended October 31, (commencement of
------------------------------------------- operations) to
1996 1995 1994 1993 October 31, 1992
-------- -------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 36.46 $ 29.84 $28.80 $ 25.77 $ 25.00
Income from investment operations:
Net investment income............................. 0.16 0.26 0.26 0.28 0.07
Net realized and unrealized gain ................. 6.75 7.15 1.05 3.04 0.76
Less dividends and distributions from (Note 1):
Net investment income............................. (0.20) (0.28) (0.17) (0.29) (0.06)
Net realized gains ............................... (0.87) (0.51) (0.10) -- --
------- ------- ------ ------- ---------
Net asset value, end of period...................... $ 42.30 $ 36.46 $29.84 $ 28.80 $ 25.77
======= ======= ====== ======= =========
Total Return**...................................... 19.32% 25.50% 4.61% 12.91% 3.32%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted)......... $ 50,773 $ 32,000 $ 22,124 $10,992 $ 2,378
Ratio of expenses to average
net assets (Note 2)**............................ 1.20% 1.20% 1.20% 1.20% 1.20%*
Ratio of net investment income to average
net assets...................................... 0.40% 0.84% 1.06% 1.07% 1.20%*
Portfolio turnover rate........................... 42% 69% 61% 52% 2%
Average commission rate paid per share............ $0.08 $0.08 -- -- --
</TABLE>
- --------------------------
* Annualized.
** Had the expense payment agreement not been in place, the ratio of expenses to
average net assets for the years ended October 31, 1996, 1995, 1994 and 1993
and for the period ended October 31, 1992 would have been 1.21%, 1.28%,
1.46%, 2.09% and 5.58%, respectively. For the same periods, the total return
of the Fund would have been 19.31%, 25.42%, 4.35%, 12.02% and (1.06)%,
respectively. The expense payment agreement will terminate on July 1, 1997.
At current asset levels, management believes that the ratio of expenses to
average net assets would be at least 1.20% Furthermore, the ratio of expenses
to average net assets for the years ended October 31, 1996 and 1995 reflects
fees paid with brokerage commissions and fees reduced in connection with
specific agreements. Had these arrangements not been in place, this ratio
would have been 1.30% and 1.38%, respectively.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
U.S. Equity Fund (the "Fund") is a separate diversified series of The 59 Wall
Street Fund, Inc. (the "Corporation") which is registered under the Investment
Company Act of 1940, as amended. The Corporation is an open-end management
investment company organized under the laws of the State of Maryland on July 16,
1990. The Fund commenced operations on July 23, 1992.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles 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 sale 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 Corporation's Board of
Directors. 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 Fund was
more than 60 days, unless this is determined not to represent fair value by
the Board of Directors.
B. 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.
C. Deferred Organization Expenses. Expenses incurred by the Fund in
connection with its organization and initial public offering of its shares
are being amortized on a straight-line basis over a five-year period.
D. Federal Income Taxes. It is the Corporation's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required. The
Fund files a tax return annually using tax accounting methods required
under provisions of the Internal Revenue Code which may differ from
generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on the Fund's tax return due to
certain book-to-tax differences such as losses deferred due to "wash sale"
transactions and utilization of capital loss carryforwards. These
differences may result in temporary over-distributions for financial
statement purposes. As such, the character of distributions to shareholders
reported in the Financial Highlights table may differ from that reported to
shareholders on Form 1099-DIV. These distributions do not constitute a
return of capital.
E. Dividends and Distributions to Shareholders. Dividends to
shareholders from net investment income are paid semi-annually and are
recorded on the ex-dividend date. Distributions from net capital gains, if
any, are paid annually and are recorded on the ex-dividend date.
<PAGE>
THE 59 WALL STREET U.S. EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
2. Transactions with Affiliates.
Investment Advisory Agreement. The Corporation has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which the
Adviser receives a fee from the Fund calculated daily and paid monthly at an
annual rate equivalent to 0.65% of the Fund's average daily net assets.
Administrative Fee. The Corporation has an administrative agreement with
Brown Brothers Harriman & Co. (the "Administrator") for which the Administrator
receives a fee from the Fund calculated daily and paid monthly at an annual rate
equivalent to 0.15% of the Fund's average daily net assets. The Administrator
has a subadministration services agreement with 59 Wall Street Administrators,
Inc. for which 59 Wall Street Administrators, Inc. receives such compensation as
is from time to time agreed upon, but not in excess of the amount paid to the
Administrator. For the year ended October 31, 1996, the Fund incurred $64,069
for administrative services.
Shareholder Servicing/Eligible Institution Agreement. The Corporation has a
shareholder servicing agreement and an eligible institution agreement with Brown
Brothers Harriman & Co. for which Brown Brothers Harriman & Co. receives a fee
from the Fund calculated daily and paid monthly at an annual rate equivalent to
0.25% of the Fund's average daily net assets.
Expense Payment Fee. 59 Wall Street Administrators, Inc. pays certain
expenses of the Fund and receives a fee from the Fund, computed and paid
monthly, such that after such fee the aggregate expenses will not exceed 1.20%
of the Fund's average daily net assets. For the year ended October 31, 1996, 59
Wall Street Administrators, Inc. incurred approximately $446,527 in expenses,
including investment advisory fees of $277,632 and shareholder
servicing/eligible institution fees of $106,782, on behalf of the Fund. The
Fund's expense payment fee agreement will terminate on July 1, 1997.
3. Investment Transactions. For the year ended October 31, 1996, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $29,306,157 and $17,942,852, respectively. For that
same period, the Fund paid brokerage commissions of $50,078 to Brown Brothers
Harriman & Co. for transactions executed on its behalf. Certain expenses of the
Fund paid pursuant to the expense payment agreement (see Note 2) were reduced by
$15,130 as a result of the Fund directing a portion of its portfolio
transactions to certain brokers. Additionally, custody fees for the Fund paid
pursuant to the expense payment agreement were reduced by $22,416 as a result of
an expense offset arrangement with the Funds' custodian.
4. Capital Stock. The Corporation is permitted to issue 2,500,000,000
shares of capital stock, par value $.001 per share, of which 25,000,000 shares
have been classified as shares of the Fund. Transactions in shares of capital
stock were as follows:
<TABLE>
<CAPTION>
For the years ended October 31,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Capital stock sold......................................... 528,010 300,861
Capital stock issued in connection with
reinvestment of dividends and distributions............. 17,456 13,641
Capital stock repurchased.................................. (222,860) (178,354)
------- -------
Net increase............................................... 322,606 136,148
======= =======
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The 59 Wall Street U.S. Equity Fund (a series of The 59 Wall Street Fund, Inc.):
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The 59 Wall Street U. S. Equity Fund
(a series of The 59 Wall Street Fund, Inc.) as of October 31, 1996, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended October 31, 1996 and 1995, and the financial
highlights for each of the years in the five-year period ended October 31, 1996.
These financial statements and financial highlights are the responsibility of
the Fund'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 generally accepted auditing
standards. 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, 1996 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 The 59 Wall Street
U.S. Equity Fund at October 31, 1996, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 17, 1996
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The following investment management strategies and techniques have
materially affected the Funds' performance for the fiscal year ended October 31,
1996.
U.S. Equity Fund
The U.S. Equity Fund surged 19.3% for the twelve months ended October 31,
1996. The Fund was negatively effected by stock selection in the technology and
an overweighting in the basic materials and intermediate goods sector.
[The following table was depicted as a line graph in the printed material]
U.S. Equity Fund Growth of $10,000
Line graph with two axes: the X-axis represents years of operations; the Y-axis
represents dollar value. The graph plots two lines: the first line represents
the growth of a ten thousand dollar investment in the Fund from July 23, 1992 to
October 31, 1996; the second line represents the growth of a ten thousand dollar
investment in a portfolio of securities reflecting the composition of the
Standard & Poor's 500 Index for the same time period. The graph points are as
follows:
DATE U.S. Equity Fund* S&P 500 Index
---- ----------------- -------------
7/23/92 $10,000 $10,000
7/31/92 $10,320 $10,328
8/31/92 $10,076 $10,105
9/30/92 $10,284 $10,236
10/31/92 $10,336 $10,271
11/30/92 $10,837 $10,620
12/31/92 $10,747 $10,750
1/31/93 $10,872 $10,840
2/28/93 $10,892 $10,988
3/31/93 $11,055 $11,220
4/30/93 $10,615 $10,948
5/31/93 $10,890 $11,241
6/30/93 $10,974 $11,273
7/31/93 $10,893 $11,228
8/31/93 $11,374 $11,653
9/30/93 $11,326 $11,564
10/31/93 $11,670 $11,803
11/30/93 $11,638 $11,690
12/31/93 $11,859 $11,832
1/31/94 $12,042 $12,233
2/28/94 $11,802 $11,902
3/31/94 $11,297 $11,384
4/30/94 $11,382 $11,530
5/31/94 $11,614 $11,718
6/30/94 $11,496 $11,431
7/31/94 $11,844 $11,806
8/31/94 $12,294 $12,289
9/30/94 $12,109 $11,989
10/31/94 $12,208 $12,258
11/30/94 $11,745 $11,812
12/31/94 $11,939 $11,987
1/31/95 $11,977 $12,298
2/28/95 $12,441 $12,777
3/31/95 $13,044 $13,153
4/30/95 $13,332 $13,540
5/31/95 $13,667 $14,080
6/30/95 $14,039 $14,407
7/31/95 $14,582 $14,884
8/31/95 $14,590 $14,921
9/30/95 $15,044 $15,551
10/31/95 $15,321 $15,495
11/30/95 $16,288 $16,175
12/31/95 $16,524 $16,486
1/31/96 $16,921 $17,047
2/29/96 $17,292 $17,205
3/31/96 $17,331 $17,371
4/30/96 $17,249 $17,627
5/31/96 $17,421 $18,081
6/30/96 $17,286 $18,150
7/31/96 $16,253 $17,348
8/31/96 $16,763 $17,714
9/30/96 $17,964 $18,710
10/31/96 $18,280 $19,226
* net of fees and expenses
Past performance is not predictive of future performance.
<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.
6 St. James Avenue
Boston, Massachusetts 02116
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.
