The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Distributor
59 Wall Street Distributors, Inc.
21 Milk Street
Boston, Massachusetts 02109
Shareholder Servicing Agent
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(800) 625-5759
This report is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus. Nothing herein contained is to be
considered an offer of sale or a solicitation of an offer to buy shares of the
Funds. Such offering is made only by prospectus, which includes details as to
offering price and other material information.
Small Company Fund
SEMI-ANNUAL REPORT
April 30, 1999
<PAGE>
THE 59 WALL STREET SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999
(unaudited)
ASSETS:
Investments in U.S. Small Company Portfolio
(the "Portfolio"), at value (Note 1) ................ $ 21,028,967
------------
LIABILITIES:
Payables for:
Shareholder servicing/eligible institution fees (Note 2) 4,314
Administrative fee (Note 2) ............................ 2,157
Accrued expenses and other liabilities ................. 43,086
------------
Total Liabilities .................................. 49,557
------------
NET ASSETS ..................................................... $ 20,979,410
============
Net Assets Consist of:
Paid-in capital ........................................ $ 22,405,011
Accumulated undistributed net investment loss .......... (96,601)
Accumulated net realized loss on investments ........... (5,153,743)
Net unrealized appreciation ............................ 3,824,743
------------
Net Assets ..................................................... $ 20,979,410
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($20,979,410 / 2,231,035 shares) .......................... $ 9.40
============
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET SMALL COMPANY FUND
STATEMENT OF OPERATIONS
For the period ended April 30, 1999
(unaudited)
INVESTMENT INCOME:
Income:
Dividends income allocated from Portfolio ............... $ 93,532
Interest income allocated from Portfolio ................ 18,152
Expenses allocated from Portfolio ....................... (108,854)
-----------
Total Income ........................................ 2,830
-----------
Expenses:
Shareholder servicing/eligible institution fee (Note 2) . 32,343
Administrative fee (Note 2) ............................. 16,172
Directors' fees (Note 2) ................................ 3,287
Professional fees ....................................... 9,606
Miscellaneous expenses .................................. 38,023
-----------
Total Expenses ...................................... 99,431
-----------
Net Investment Loss ................................. (96,601)
-----------
NET REALIZED AND UNREALIZED GAIN/LOSS (Notes 1 and 3):
Net realized loss on investments ........................ (5,714,871)
Net change in unrealized depreciation on investments .... 5,393,393
-----------
Net Realized and Unrealized Loss .................... (321,478)
-----------
Net Decrease in Net Assets Resulting from Operations .... $ (418,079)
===========
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
THE 59 WALL STREET SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
period ended For the
April 30, 1999 year ended
(unaudited) October 31, 1998
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ...................................... $ (96,601) $ (188,745)
Net realized gain (loss) on investments .................. (5,714,871) 7,590,002
Net change in unrealized appreciation/depreciation
on investments ......................................... 5,393,393 (12,624,297)
------------ ------------
Net decrease in net assets resulting from operations .. (418,079) (5,223,040)
------------ ------------
Dividends and distributions declared (Note 1):
From net realized gains .................................. (3,814,686) (3,203,180)
In excess of net realized gains .......................... (5,153,743) --
------------ ------------
Total dividends and distributions declared ............ (8,968,429) (3,203,180)
------------ ------------
Capital stock transactions (Note 4):
Net proceeds from sales of capital stock ................. 1,396,625 6,589,986
Net asset value of capital stock issued to shareholders in
reinvestment of dividends and distributions ............ 6,536,359 241,141
Net cost of capital stock redeemed ....................... (7,409,140) (7,230,694)
------------ ------------
Net increase (decrease) in net assets resulting from
capital stock transactions ......................... 523,844 (399,567)
------------ ------------
Total decrease in net assets ....................... (8,862,664) (8,825,787)
NET ASSETS:
Beginning of period ........................................ 29,842,074 38,667,861
------------ ------------
End of period .............................................. $ 20,979,410 $ 29,842,074
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each
period
<TABLE>
<CAPTION>
For the
period ended
April 30,
1999 For the years ended October 31,
------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
----------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 13.84 $ 17.79 $ 14.85 $ 12.81 $ 11.54 $ 12.92
Income from investment operations:
Net investment income (loss) ............... (0.04) (0.09) (0.04) 0.01 0.03 0.05
Net realized and unrealized gain (loss) .... (0.02) 2.35 3.60 2.05 1.31 (1.04)
Less dividends and distributions (Note 1):
From net investment income ................. -- -- -- (0.02) (0.07) (0.01)
In excess of net investment income ......... -- -- (0.01) -- -- --
From net realized gains .................... (1.86) (1.51) (0.61) -- -- (0.38)
In excess of net realized gains ............ (2.52) -- -- -- -- (0.00)(1)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............. $ 9.40 $ 13.84 $ 17.79 $ 14.85 $ 12.81 $ 11.54
======= ======= ======= ======= ======= =======
Total Return2 ................................ (2.02)% (14.94)% 24.65% 16.10% 11.69% (7.81)%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .. $ 20,979 $29,842 $38,668 $35,102 $29,408 $39,401
Ratio of expenses to average net assets(2).. 1.61%(4) 1.41% 1.12% 1.10% 1.10% 1.10%
Ratio of net investment income to average
net assets ............................... (0.75)%(4) (0.52)% (0.23)% 0.08% 0.25% 0.40%
Portfolio turnover rate .................... N/A N/A N/A N/A 16%(3) 140%
</TABLE>
- ----------
1 Less than $0.01 per share.
2 The expense payment agreement terminated on July 1, 1997. Had the expense
payment agreement not been in place, the ratio of expenses to average net
assets and total return would have been as follows:
Ratio of expenses to average
net assets ............... N/A N/A 1.33% 1.32% 1.27% 1.21%
Total Return ............... N/A N/A 24.44% 15.88% 11.52% (7.94)%
Furthermore, the ratio of expenses to average net assets for the year ended
October 31, 1995 reflects fees paid with brokerage commissions and fees
reduced in connection with specific agreements. Had these arrangements not
been in place, the ratio would have been 1.39%.
3 Portfolio turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred all of its
investable assets to the Portfolio is shown in the Portfolio's Financial
Highlights which is included elsewhere in this report.
4 Annualized.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Organization and Significant Accounting Policies. The 59 Wall Street
Small Company Fund (the "Fund") is a separate series of The 59 Wall Street Fund,
Inc. (the "Corporation") which is registered under the Investment Company Act of
1940, as amended. The Fund is a separate diversified portfolio of the
Corporation. 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 April 23, 1991.
The Fund invests all of its investable assets in the U.S. Small Company
Portfolio (the "Portfolio"), a diversified, open-end management investment
company having the same investment objectives as the Fund. The value of such
investment reflects the Fund's porportionate interest in the net assets of the
Portfolio (approximately 90% at April 30, 1999). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial statements
of the Portfolio, including the schedule of investments, are included elsewhere
in this report and should be read in connection with the Fund's financial
statements.
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. Valuation of investments by the
Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report.
B. Accounting for Investments. The Fund records its share of net
investment income, realized and unrealized gain and loss and adjusts its
investment in the Portfolio each day. All the net investment income and
realized and unrealized gain and loss of the Portfolio is allocated pro
rata among the Fund and other investors in the Portfolio at the time of
such determination.
C. 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 timing differences such as losses deferred due to
"wash sale" transactions and utilization of capital loss carryforwards.
These timing differences 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.
D. Dividends and Distributions to Shareholders. Dividends and
distributions to shareholders are recorded on the ex-dividend date.
2. Transactions with Affiliates.
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 0.125% 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 six months ended April 30, 1999, the Fund incurred
$16,172 for administrative services.
<PAGE>
THE 59 WALL STREET SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
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. For the six months ended April
30, 1999, the Fund incurred $32,343 for shareholder servicing/eligible
institutional services.
Board of Directors' Fees. Each Director receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the six
months ended April 30, 1999, the Fund incurred $3,287 for these fees.
3. Investment Transactions. Investment transactions of the portfolio are
discussed in Note 3 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
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
six months ended For the year ended
April 30, 1999 October 31, 1998
---------------- ---------------
<S> <C> <C>
Capital stock sold ......................................... 129,780 397,132
Capital stock issued in connection with reinvestment
of dividends and distributions............................ 660,238 14,904
Capital stock repurchased................................... (714,712) (430,436)
------- -------
Net increase (decrease)..................................... 75,306 (18,400)
======= =======
</TABLE>
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1998
(unaudited)
(expressed in U.S. dollars)
Shares Value
------ ----------
COMMON STOCKS (85.5%)
COMMERCIAL SERVICES (4.5%)
12,600 Boise Cascade Office Products
Corp.*..................... $ 155,925
23,100 Century Business Services,
Inc.* ..................... 278,644
600 Doubleclick, Inc.*........... 83,869
7,900 Labor Ready, Inc.*........... 310,075
23,300 Moore Corp., Ltd............. 233,000
----------
1,061,513
----------
CONSUMER DURABLES (2.4%)
6,800 Fossil, Inc.*................ 209,525
7,200 NVR Inc.*.................... 346,500
----------
556,025
----------
CONSUMER NON-DURABLES (1.8%)
1,900 Canandaigua Brands, Inc.*.... 98,088
7,500 International Multifoods Corp. 165,938
3,200 Tarrant Apparel Group*....... 151,600
----------
415,626
----------
CONSUMER SERVICES (3.1%)
7,000 CD Radio, Inc.*.............. 174,125
21,300 Extended Stay America*....... 223,650
10,100 Foodmaker, Inc.*............. 243,663
18,900 Protection One, Inc.*........ 89,775
----------
731,213
----------
ELECTRONIC TECHNOLOGY (10.8%)
4,800 Aware, Inc.*................. 267,450
11,100 Comverse Technology, Inc. *.. 715,950
1,200 Cordant Technologies......... 55,350
12,600 Cymer, Inc.*................. 231,525
10,900 DSP Communications*.......... 297,025
31,500 Mentor Graphics Corp.*....... 382,922
20,000 Neomagic Corp.*.............. 233,125
4,100 Network Appliance, Inc....... 206,409
4,600 Semtech Corp.*............... 149,500
----------
2,539,256
----------
ENERGY MINERALS (1.7%)
33,200 Pioneer National Resources Co.* 388,025
----------
FINANCE (17.3%)
15,000 Avis Rent A Car, Inc.*....... 470,625
800 Bank United Corp............. 32,450
4,300 Cornerstone Property's, Inc.. 70,144
3,400 E-Trade Group, Inc.*......... 392,913
7,300 Everen Capital Corp.......... 214,438
6,500 First Bancorp................ 167,781
3,300 FirstMerit Corp.............. 91,678
4,100 Forest City Enterprises, Inc. 101,219
11,000 Imperial Bancorp*............ 211,750
16,500 LNR Property Corp............ 323,813
18,100 Meristar Hospitality Corp.... 416,300
3,100 PMI Group, Inc. (The)........ 173,019
15,500 Prison Realty Trust.......... 302,250
16,000 Republic Securities Financial
Corp....................... 139,250
8,800 Sky Financial Group, Inc.*... 247,775
5,620 Sovereign Bancorp, Inc....... 76,748
14,100 Trammell Crow Co.*........... 253,800
12,300 United Rental, Inc.*......... 366,694
----------
4,052,647
----------
HEALTH SERVICES (2.0%)
1,200 Alternative Living Services,
Inc.* ..................... 26,700
19,600 Apria Healthcare Group, Inc.* 306,250
10,260 Orthodontic Centers of
America, Inc.*............. 126,968
----------
459,918
----------
HEALTH TECHNOLOGY (3.4%)
1,900 Andrx Corp.*................. 149,862
2,600 Idec Pharmaceuticals Corp.*.. 131,625
10,700 Liposome, Inc.*.............. 135,756
12,500 Wesley Jessen VisionCare,
Inc.*...................... 383,594
----------
800,837
----------
INDUSTRIAL SERVICES (1.2%)
15,700 Integrated Electrical
Services, Inc.*............ 269,844
----------
MISCELLANEOUS (0.6%)
600 CMG Information Services, Inc. 152,419
----------
NON-ENERGY MINERALS (3.5%)
57,300 Armco, Inc.*................. 293,662
7,200 Centex Construction Products,
Inc........................ 254,700
4,400 Southdown, Inc............... 281,875
----------
830,237
----------
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1998 (continued)
(unaudited)
(expressed in U.S. dollars)
Shares Value
------ ----------
PROCESS INDUSTRIES (2.1%)
16,600 Crompton & Knowles Corp.*.... $ 336,150
7,100 Myers Industries............. 160,637
----------
496,787
----------
PRODUCER MANUFACTURING (9.6%)
9,300 Astec Industries, Inc.*...... 362,119
4,600 Coltec Industries, Inc.*..... 99,475
16,900 Dal-Tile International, Inc.* 190,125
9,100 Hanover Compressor Co.*...... 261,056
7,500 Lincoln Electronics Holdings
Corp....................... 154,219
19,400 Meritor Automotive, Inc...... 411,037
7,800 Polycom, Inc.*............... 190,856
9,625 Superior Telecom, Inc........ 240,023
10,700 Terex Corp.*................. 338,387
----------
2,247,297
----------
RETAIL TRADE (5.2%)
4,000 American Eagle Outfitters*... 299,375
11,100 Ann Taylor Stores Corp.*..... 527,250
14,700 Central Garden & Pet Co.*.... 208,556
78,900 Southland Corp.*............. 193,552
----------
1,228,733
----------
TECHNOLOGY SERVICES (5.3%)
3,900 Broadvision, Inc.*........... 226,566
2,200 CNET, Inc.*.................. 282,081
7,800 Entrust Technologies, Inc.*.. 191,587
800 Excite, Inc.*................ 117,050
800 Exodus Communications, Inc.*. 72,075
700 Infoseek Corp.*.............. 35,853
1,800 Lycos, Inc.*................. 179,719
500 Mindspring Enterprises, Inc.* 48,484
1,200 PSInet, Inc.*................ 61,125
1,400 USweb Corp.*................. 31,544
----------
1,246,084
----------
TRANSPORTATION (1.8%)
23,500 American Freightways Corp.*.. 404,641
400 USFreightways Corp........... 15,013
----------
419,654
----------
UTILITIES (9.2%)
8,100 CMP Group Inc.*.............. 156,937
17,100 Omnipoint Corp.*............. 305,662
8,800 ONEOK, Inc................... 245,850
6,000 Pacific Gateway Exchange,
Inc.* ..................... 240,187
10,500 Philadelphia Suburban Corp... 236,906
7,900 TNP Enterprises, Inc......... 246,875
16,400 Vanguard Cellular Systems,
Inc.* ..................... 374,637
7,600 Viatel, Inc.*................ 349,125
----------
2,156,179
----------
TOTAL COMMON STOCKS
(identified cost $18,098,649) $20,052,294
-----------
Principal
Amount
---------
TIME DEPOSIT (4.3%)
$1,000,000 State Street Bank (Cayman)
4.50%, 05/04/99
(identified cost $1,000,000) $1,000,000
-----------
TOTAL INVESTMENTS
(identified cost $19,098,649) (a) .................. 89.8% $21,052,294
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ..... 10.2 2,397,588
---- -----------
NET ASSETS ........................................ 100.0% $23,449,882
===== ===========
- ----------
* Non-income producing security
(a) The aggregate cost for federal income tax purposes is $19,098,649, the
aggregate gross unrealized appreciation is $3,027,640, and the aggregate
gross unrealized depreciation is $1,073,995, resulting in net unrealized
appreciation of $1,953,645.
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999
(expressed in U.S. dollars)
(unaudited)
ASSETS:
Investments in securities, at value
(identified cost $19,098,649) (Note 1) ............ $21,052,294
Cash ................................................ 2,187,801
Receivables for:
Contributions .................................... 366,675
Dividends and other receivables .................. 7,081
-----------
Total Assets ................................ 23,613,851
-----------
LIABILITIES:
Payables for:
Withdrawals ...................................... 104,799
Investment advisory fee (Note 2) ................. 12,543
Administrative fee (Note 2) ...................... 675
Foreign withholding taxes ........................ 10,919
Margin variation on futures ...................... 5,250
Accrued expenses and other liabilities ........... 29,783
-----------
Total Liabilities ........................... 163,969
-----------
NET ASSETS ............................................. $23,449,882
===========
Net Assets Consist of:
Paid-in capital...................................... $21,189,243
Net unrealized appreciation.......................... 2,260,639
-----------
Net Assets ............................................. $23,449,882
===========
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
For the six months ended April 30, 1999
(expressed in U.S. dollars)
(unaudited)
INVESTMENT INCOME:
Income:
Dividends ............................................. $ 100,783
Interest .............................................. 20,160
-----------
Total Income ...................................... 120,943
-----------
Expenses:
Investment advisory fee (Note 2) ...................... 94,077
Custody fee (Note 3) .................................. 17,698
Administrative fee (Note 2) ........................... 5,066
Trustees' fees and expenses (Note 2) .................. 3,747
Amortization of organization expenses (Note 1) ........ 1,260
Miscellaneous expenses ................................ 5,129
-----------
Total Expenses ........................................ 126,977
Fees paid indirectly (Note 3) ..................... (16,135)
-----------
Net Expenses ...................................... 110,842
-----------
Net Investment Income ............................. 10,101
-----------
NET REALIZED AND UNREALIZED GAIN/LOSS (Notes 1 and 3):
Net realized loss on investments ......................... (6,329,040)
Net change in unrealized depreciation on investments ..... 5,938,022
-----------
Net Realized and Unrealized Loss ...................... (391,018)
-----------
Net Decrease in Net Assets Resulting from Operations ..... $ (380,917)
===========
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the
six months ended For the
April 30, 1999 year ended
(unaudited) October 31, 1998
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income........................................... $ 10,101 $ 29,501
Net realized gain (loss) on investments.......................... (6,329,040) 11,223,450
Net change in unrealized appreciation on investments............. 5,938,022 (16,859,557)
----------- ------------
Net decrease in net assets resulting from operations .......... (380,917) (5,606,606)
----------- ------------
Capital transactions:
Proceeds from contributions...................................... 7,241,680 4,897,021
Value of withdrawals............................................. (16,201,528) (10,950,104)
----------- ------------
Net decrease in net assets resulting from capital
transactions................................................ (8,959,848) (6,053,083)
----------- ------------
Total decrease in net assets................................. (9,340,765) (11,659,689)
NET ASSETS:
Beginning of period.................................................. 32,790,647 44,450,336
----------- ------------
End of period ....................................................... $23,449,882 $ 32,790,647
=========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
For the January 17, 1995
six months ended For the years ended October 31, (commencement of
April 30, 1999 ------------------------------------ operations) to
(unaudited) 1998 1997 1996 October 31, 1995
---------------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period
(000's omitted) ...................... $23,450 $32,791 $44,450 $57,934 $51,226
Ratios as a percentage of
average net assets:
Expenses paid by
Portfolio ........................ 0.77%1 0.79% 0.77% 0.77% 0.77%1
Expenses paid by
commissions2 ..................... -- -- -- 0.05% 0.05%1
Expenses offset
arrangements ..................... 0.11%1 0.10% 0.09% 0.08% 0.05%1
------- ------- ------- ------- -------
Total expenses .................. 0.88%1 0.89% 0.86% 0.90% 0.87%1
======= ======= ======= ======= =======
Ratio of net investment
income to average
net assets ........................... 0.07%1 0.07% 0.10% 0.26% 0.25%1
Portfolio turnover rate ............... 105% 158% 63% 51% 115%
</TABLE>
- ----------
1 Annualized.
2 A portion of the Portfolio's security transactions are directed to certain
unaffiliated brokers which in turn use a portion of the commissions they
received from the Portfolio to pay other unaffiliated service providers on
behalf of the Portfolio for services provided for which the Portfolio would
otherwise be obligated to pay.
See Notes to Financial Statements.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
(unaudited)
1. Organization and Significant Accounting Policies. U.S. Small Company
Portfolio (the "Portfolio") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company which was
organized as a trust under the laws of the State of New York on June 15, 1993.
The Portfolio commenced operations on January 17, 1995 and received a
contribution of certain assets and liabilities, including securities, with a
value of $33,464,236 (including $1,223,663 of unrealized appreciation) on that
date from the 59 Wall Street Company Fund in exchange for a beneficial interest
in the Portfolio. The Declaration of Trust permits the Trustees to create an
unlimited number of beneficial interests in the Portfolio.
The Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
A. Valuation of Investments. (1) The value of investments listed on
a securities exchange is based on the last price on that exchange prior to
the time when assets are valued, or in the absence of recorded sales, at
the average of readily available closing bid and asked prices on such
exchange; (2) unlisted securities are valued at the average of the quoted
bid and asked prices in the over-the-counter market; (3) securities or
other assets for which market quotations are not readily available are
valued at fair value in accordance with procedures established by and
under the general supervision and responsibility of the Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to the value from dealers; and
general market conditions; (4) short-term investments which mature in 60
days or less are valued at amortized cost if their original maturity was
60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their original maturity when acquired by the Portfolio was
more than 60 days, unless this is determined not to represent fair value
by the Trustees.
B. Futures Contracts. To hedge against anticipated future changes in
interest rates or securities prices, U.S. Small Company Portfolio may
enter into financial futures contracts for the delayed delivery of
securities or contracts based on financial indices at a fixed price on a
future date. The Portfolio is required to deposit either in cash or
securities an amount equal to a certain percentage of the contract amount.
Subsequent payments are made or received by the Portfolio each day,
dependent on the daily fluctuations in the value of amount. Subsequent
payments are made or received by the Portfolio each day, dependent on the
daily fluctuations in the value of the underlying security or securities
or index, and are recorded for financial statement purposes as unrealized
gains or losses by the Portfolio. The Portfolio recognizes a realized gain
or loss when the contract is closed or expires. Should interest rates or
securities prices move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there is risk that the positions may
correlate imperfectly with the asset or liability being hedged. Other
risks of entering into these transactions are that a liquid secondary
market may not always exist, or that another party to a transaction may
not perform.
C. Accounting for Investments. Security transactions are accounted
for on the trade date. Realized gains and losses on security transactions
are determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend
date. Dividend income is recorded net of foreign taxes withheld where
recovery of such taxes is not assured. Interest income is accrued daily.
<PAGE>
U.S. SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
(unaudited)
D. Federal Income Taxes. The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of the Portfolio's
ordinary income and capital gains. It is intended that the Portfolio's
assets will be managed in such a way that an investor in the Portfolio
will be able to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provisions
for federal income taxes is necessary.
E. Deferred Organization Expenses. Expenses incurred by the
Portfolio in connection with its organization are being amortized on a
straight-line basis over a five-year period.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory
agreement with Brown Brothers Harriman & Co. (the "Adviser") for which it pays
the Adviser a fee calculated daily and paid monthly at an annual rate equivalent
to 0.65% of the Portfolio's average daily net assets. For the six months ended
April 30, 1999, the Portfolio incurred $94,077 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (the "Administrator") for which it pays
the Administrator a fee calculated daily and paid monthly at an annual rate
equivalent to 0.035% of the Portfolio's average daily net assets. The
Administrator has a subadministration agreement with 59 Wall Street
Administrators for which 59 Wall Street Administrators receives such
compensation as is from time to time agreed upon. For the six months ended April
30, 1999, the Portfolio incurred $5,066 for administrative services.
Trustees Fee. Each Trustee of the Portfolio receives an annual retainer
paid by the Portfolio. Each Trustee is also reimbursed for out-of-pocket
expenses incurred in connection with board meetings. For the six months ended
April 30, 1999, the Portfolio incurred $3,747 for Trustee fees.
3. Investment Transactions. For the six months ended April 30, 1999, the
cost of purchases and the proceeds of sales of investment securities other than
short-term investments were $27,928,075 and $38,639,676, respectively. For that
same period, the portfolio paid brokerage commissions of $57,621 to Brown
Brothers Harriman & Co. for transactions executed on its behalf. Custody fees
for the portfolio were reduced by $16,135 as a result of an expense offset
arrangement with the Portfolio's custodian.
4. Financial Futures Contracts. As of April 30, 1999, U.S. Small Company
Portfolio held open futures contracts. The contractual amount of a futures
contract represents the investment the Portfolio has in a particular contract
and does not necessarily represent the amounts potentially subject to risk. The
measurements of futures contracts is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under open
futures contracts at April 30,1999 is as follows:
Unrealized
Position Contracts Index Depreciation
------- --------- ----- -----------
Long 15 Russell 2000 $306,994
As of April 30, 1999, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
