THE 59 WALL STREET SHORT/INTERMEDIATE
FIXED INCOME FUND
ANNUAL REPORT
October 31, 1996
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996
Principal
Amount Value
- --------- ----------
U.S. TREASURY NOTES (72.8%)
$5,060,000 5.625%, 11/30/2000 ................................ $ 4,985,669
1,095,000 5.875%, 3/31/99 ................................... 1,096,369
1,100,000 6.375%, 5/15/99 ................................... 1,113,233
3,290,000 7.125%, 9/30/99 ................................... 3,395,379
1,560,000 7.50%, 11/15/2001 ................................. 1,652,134
Total U.S. Treasury Notes -----------
(identified cost $12,183,712)................ $12,242,783
-----------
CORPORATE NOTES AND BONDS (9.2%)
BANKING (1.3%)
$200,000 Citicorp, 8.00%, 2/1/2003 ......................... $ 212,726
-----------
BEVERAGES (1.5%)
250,000 PepsiCo, Inc., 6.80%, 5/15/2000 ................... 253,170
-----------
FINANCE (3.8%)
300,000 Ford Motor Credit, 7.4%, 7/7/99.................... 308,166
325,000 General Motors Acceptance
Corp., 5.375%, 3/9/98 .......................... 322,849
-----------
631,015
-----------
UTILITIES (2.6%)
250,000 GTE Florida, Inc., 6.31%, 12/15/2002 .............. 245,135
200,000 Southwestern Bell Telephone
Co., 6.375%, 4/1/2001 .......................... 199,192
-----------
444,327
-----------
Total Corporate Notes and
Bonds (identified cost $1,520,422).......... $ 1,541,238
-----------
ASSET BACKED (3.2%)
$250,000 Capital Equipment Receivables Trust 6.57%, 3/15/2001 $ 251,719
295,000 Chemical Master Credit Card Trust 5.55%, 9/15/2003.. 286,424
-----------
Total Asset Backed (identified cost $535,228).... $ 538,143
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (4.6%)
$279,648 7.00%, 12/1/2007.................................... $ 281,832
290,000 7.00%, 12/1/2008.................................... 292,265
200,000 7.25%, 1/15/2017.................................... 203,750
-----------
Total Federal Home Loan Mortgage Corporation
(identified cost $747,931)................. $ 777,847
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (2.1%)
$351,246 6.00%, 9/1/2004 (identified cost $353,304).......... $ 344,952
-----------
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996(continued)
Principal
Amount Value
- --------- ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (1.1%)
$ 173,936 10.00%, 2/15/2025 (identified cost $191,058)..... $ 190,963
-----------
$1,200,000 REPURCHASE AGREEMENT (7.1%)
J.P. Morgan & Co., 5.55%, 11/1/96
(Agreement dated 10/31/96 collateralized
by $1,215,000 U.S. Treasury Notes 6.125%,
due 9/30/2000; $1,200,183 to be received
upon maturity) (identified cost $1,200,000) .. $ 1,200,000
-----------
TOTAL INVESTMENTS (identified cost $16,731,655)(a)...... 100.1% $16,835,925
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.......... (0.1) (15,206)
----- -----------
NET ASSETS.............................................. 100.0% $16,820,719
===== ===========
(a) The aggregate cost for federal income tax purposes is $16,731,655, the
aggregate gross unrealized appreciation is $154,767 and the aggregate gross
unrealized depreciation is $50,497, resulting in net unrealized
appreciation of $104,270.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
ASSETS:
Investments in securities, at value (identified
cost $16,731,655) (Note 1) ............................ $16,835,925
Cash ...................................................... 13,310
Receivables for:
Interest .............................................. 64,019
Capital stock sold .................................... 9,838
Deferred organization expenses (Note 1) ................... 3,239
-----------
Total Assets ....................................... 17,126,331
-----------
LIABILITIES:
Payables for:
Investments purchased ................................. 284,458
Expense payment fee (Note 2) .......................... 14,689
Administrative fee (Note 2) ........................... 3,372
Capital stock redeemed ................................ 3,093
-----------
Total Liabilities .................................. 305,612
-----------
NET ASSETS ...................................................... $16,820,719
===========
Net Assets Consist of:
Paid-in capital ........................................... $17,187,474
Accumulated undistributed net investment income ........... 406
Accumulated net realized loss ............................. (471,431)
Net unrealized appreciation ............................... 104,270
-----------
Net Assets ...................................................... $16,820,719
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($16,820,719 / 1,739,269 shares) .......................... $ 9.67
===========
See notes to financial statements.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
INVESTMENT INCOME:
Income:
Interest .............................................. $760,780
--------
Expenses:
Expense payment fee (Note 2) .......................... 76,498
Administrative fee (Note 2) ........................... 17,350
Amortization of organization expenses (Note 1) ........ 4,450
--------
Total Expenses ..................................... 98,298
--------
Net Investment Income .............................. 662,482
--------
NET REALIZED AND UNREALIZED LOSS (Notes 1 and 3)
Net realized loss on investments .......................... (38,209)
Net change in unrealized appreciation on investments ...... (14,892)
--------
Net Realized and Unrealized Loss ...................... (53,101)
--------
Net Increase in Net Assets Resulting from Operations ...... $609,381
========
See notes to financial statements.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31,
---------------------------------
1996 1995
---------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................... $ 662,482 $ 568,463
Net realized loss on investments ......... (38,209) (246,469)
Net change in unrealized appreciation/
depreciation on investments ........... (14,892) 661,339
----------- -----------
Net increase in net assets
resulting from operations ........... 609,381 983,333
----------- -----------
Dividends declared from net investment
income (Note 1) ........................ (662,076) (568,662)
----------- -----------
Capital stock transactions (Note 4):
Net proceeds from sales of capital stock . 10,617,969 5,781,933
Net asset value of capital stock
issued to shareholders in
reinvestment of dividends
and distributions ..................... 376,190 277,410
Net cost of capital stock redeemed ....... (4,950,751) (5,971,534)
----------- -----------
Net increase in net assets resulting
from capital stock transactions ... 6,043,408 87,809
----------- -----------
Total increase in net assets ...... 5,990,713 502,480
INCREASE (DECREASE) IN NET ASSETS:
Beginning of year .......................... 10,830,006 10,327,526
----------- -----------
End of year (including undistributed
net investment income of $406 and
$0, respectively) ........................ $16,820,719 $10,830,006
=========== ===========
See notes to financial statements.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a
share outstanding throughout each period
<TABLE>
<CAPTION>
For the period
For the years ended October 31, July 23, 1992
-------------------------------------------------- (commencement of
operations) to
1996 1995 1994 1993 October 31, 1992
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $9.76 $9.37 $10.17 $9.93 $10.00
Income from investment operations:
Net investment income .......................... 0.55 0.54 0.52 0.50 0.14
Net realized and unrealized (loss) gain ........ (0.09) 0.39 (0.74) 0.26 (0.09)
Less dividends and distributions (Note 1):
From net investment income ..................... (0.55) (0.54) (0.52) (0.52) (0.12)
From net realized gains ........................ -- -- (0.05) -- --
In excess of net realized gains ................ -- -- (0.01) -- --
------- ------- ------- ------ ------
Net asset value, end of period ................... $9.67 $9.76 $9.37 $10.17 $9.93
======= ======= ======= ====== ======
Total return** ................................... 4.88% 10.26% (2.23)% 7.85% 0.49%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ...... $16,821 $10,830 $10,328 $9,729 $1,648
Ratio of expenses to average net assets
(Note 2)** ................................... 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income to average
net assets ................................. 5.73% 5.66% 5.29% 5.32% 6.23%
Portfolio turnover rate ........................ 114% 228% 129% 149% 207%
</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,
1993 and for the period ended October 31, 1992 would have been 1.40%,
1.40%, 1.46%, 1.46% and 6.99%, respectively. For the same periods, the
total return of the Fund would have been 4.33%, 9.71%, (2.84)%, 7.24% and
(5.65)%, respectively.
The expense payment agreement will terminate on July 1, 1997. At the
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 reflect fees reduced in connection with
specific agreements. Had these arrangements not been in place, these ratios
would have been 1.42% and 1.43%, respectively.
See notes to financial statements.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
Short/Intermediate Fixed Income 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. Bonds and other fixed income securities
(other than short-term obligations but including listed issues) are valued
on the basis of valuations furnished by a pricing service, use of which has
been approved by the Board of Directors. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic
data processing techniques which take into account appropriate factors such
as institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data, without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities.
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. 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. Investment transactions are accounted
for on the trade date. Realized gains and losses, if any, from security
transactions are determined on the basis of identified cost. Interest
income is accrued daily and consists of interest accrued, discount earned
(including both original issue and market discount) and premium
amortization on the investments of the Fund.
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
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
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 timing differences such as losses deferred due to "wash
sale" transactions and utilization of capital loss carryforwards. These
timing differences may result in temporary over-distributions for financial
statement purposes and are classified as distributions in excess of
accumulated net realized gains. 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 monthly 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.
2. Transactions with Affiliates.
Investment Advisory Fee. 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 0.40% of the Fund's average daily net assets.
Administrative Fee. The Corporation has an administration 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 $17,350
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 0.85%
of the Fund's average daily net assets. For the year ended October 31, 1996, 59
Wall Street Administrators, Inc. incurred $140,502 in expenses, including
investment advisory fees of $46,266 and shareholder servicing/eligible
institution fees of $28,917, 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 $18,564,460 and $11,919,141, respectively. Custody
fees for the Fund paid pursuant to the expense payment agreement (see Note 2)
were reduced by approximately $2,460 as a result of an expense offset
arrangement with the Fund's custodian.
<PAGE>
THE 59 WALL STREET SHORT/INTERMEDIATE FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
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:
For the years ended October 31,
--------------------------------
1996 1995
------------- -----------
Capital stock sold ...................... 1,102,127 604,528
Capital stock issued in connection
with reinvestment of dividends ....... 38,983 29,043
Capital stock repurchased ............... (511,651) (625,878)
---------- -------
Net increase ............................ 629,459 7,693
========== =======
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The 59 Wall Street Short/Intermediate Fixed Income 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 Short/Intermediate
Fixed Income 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 audited
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 and brokers. 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
Short/Intermediate Fixed Income Fund at October 31, 1996, and the results of its
operations, the changes in its net assets, and its financial highlights for
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 Fund's performance for the fiscal year ended October 31,
1996.
Short/Intermediate Fixed Income Fund
For the year ended October 31, 1996, interest rates increased across the
yield curve. In early 1996 yields rose dramatically in response to stronger
economic growth and the lack of a balanced budget agreement. The stronger growth
witnessed in first half of the year, however, quickly diminished and the bond
market recouped some of the losses realized early in the year.
The Fund began the year in a neutral posture with an average maturity of
3.0 years. The average maturity was extended to 3.3 years in the spring after
yields had increased by approximately 100 basis points. This maturity extension
added value to the Fund as interest rates declined 20 to 25 basis points by the
end of the fiscal year.
The Fund's assets were invested in U.S. Government, corporate,
asset-backed and mortgage-backed securities. For the year, the mortgage
allocation was the best performing sector followed by asset-backed and corporate
securities. U.S. Government securities lagged the other sectors. For the
majority of the year the Fund's maturity distribution was concentrated in
short/short-intermediate maturities which performed well relative to longer
maturities.
[The following information was depicted as a line graph in the printed material]
Short/Intermediate Fixed Income 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 Three
Year Treasury Note for the same time period. The graph points are as follows:
Short Intermediate
DATE Fixed Income Fund* 3-Year T-Note
---- --------------------- -------------
7/23/92 $10,000 $10,000
7/31/92 $9,970 $9,972
8/31/92 $10,060 $10,095
9/30/92 $10,191 $10,216
10/31/92 $10,049 $10,114
11/30/92 $9,989 $10,066
12/31/92 $10,109 $10,186
1/31/93 $10,313 $10,347
2/28/93 $10,467 $10,478
3/31/93 $10,485 $10,518
4/30/93 $10,568 $10,598
5/31/93 $10,526 $10,547
6/30/93 $10,650 $10,664
7/31/93 $10,671 $10,682
8/31/93 $10,791 $10,805
9/30/93 $10,822 $10,840
10/31/93 $10,838 $10,857
11/30/93 $10,804 $10,842
12/31/93 $10,816 $10,890
1/31/94 $10,916 $10,969
2/28/94 $10,796 $10,853
3/31/94 $10,626 $10,733
4/30/94 $10,533 $10,654
5/31/94 $10,538 $10,659
6/30/94 $10,539 $10,674
7/31/94 $10,667 $10,788
8/31/94 $10,691 $10,822
9/30/94 $10,605 $10,741
10/31/94 $10,596 $10,767
11/30/94 $10,531 $10,694
12/31/94 $10,561 $10,717
1/31/95 $10,714 $10,902
2/28/95 $10,899 $11,089
3/31/95 $10,952 $11,150
4/30/95 $11,072 $11,269
5/31/95 $11,348 $11,547
6/30/95 $11,412 $11,603
7/31/95 $11,412 $11,620
8/31/95 $11,507 $11,699
9/30/95 $11,584 $11,762
10/31/95 $11,683 $11,889
11/30/95 $11,806 $12,026
12/31/95 $11,911 $12,143
1/31/96 $11,995 $12,253
2/29/96 $11,901 $12,149
3/31/96 $11,837 $12,098
4/30/96 $11,797 $12,064
5/31/96 $11,791 $12,067
6/30/96 $11,893 $12,176
7/31/96 $11,925 $12,213
8/31/96 $11,933 $12,240
9/30/96 $12,066 $12,387
10/31/96 $12,253 $12,575
Total Returns
One Year ended 10/31/96: 4.88%
Inception to 10/31/96 (Annualized): 4.87%
* 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.
