[LOGO]
International Equity Fund
ANNUAL REPORT
October 31, 1998
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
ASSETS:
Investments in International Equity Portfolio
(the "Portfolio"), at value (Note 1) ....................... $ 27,408,309
Receivable for fund shares sold .............................. 86,840
Deferred organization expense ................................ 9,465
------------
Total Assets .............................................. 27,504,614
------------
LIABILITIES:
Payables for:
Expense Payment Fee (Note 2) .............................. 21,436
Shareholder servicing/eligible institution fees (Note 2) 5,465
Administrative fee (Note 2) ............................... 2,732
------------
Total Liabilities ...................................... 29,633
------------
NET ASSETS ...................................................... $ 27,474,981
============
Net Assets Consist of:
Paid-in capital ........................................... $ 27,150,358
Accumulated net investment income ......................... 72,932
Accumulated net realized loss ............................. (428,182)
Net unrealized appreciation ............................... 679,873
------------
Net Assets ...................................................... $ 27,474,981
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($27,474,981 / 2,723,352 shares) .......................... $10.09
======
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
INVESTMENT INCOME:
Income:
Dividend income allocated from Portfolio ................... $ 291,028
Interest income allocated from Portfolio ................... 26,791
Expenses allocated from Portfolio .......................... (178,527)
-----------
Total Income ........................................... 139,292
-----------
Expenses:
Expense Payment Fee (Note 2) ............................... 143,205
Administrative fee (Note 2) ................................ 29,548
Deferred Organization Expense (Note 1) ..................... 2,369
-----------
Total Expenses ......................................... 175,122
-----------
Net Investment Loss .................................... (35,830)
-----------
NET REALIZED AND UNREALIZED GAIN (Notes 1 and 3):
Net realized loss on investments and foreign
exchange transactions .................................... (49,232)
Net change in unrealized depreciation of investments and
foreign currency translations ............................. 1,018,711
-----------
Net Realized and Unrealized Gain ....................... 969,479
-----------
Net Increase in Net Assets Resulting from Operations ....... $ 933,649
===========
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period from
June 6, 1997
(commencement of
For the year ended operations) to
October 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss.......................................... $ (35,830) $ (1,284)
Net realized loss on investments and
foreign exchange transactions............................... (49,232) (136,513)
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations............ 1,018,711 (338,838)
----------- -----------
Net increase (decrease) in net assets resulting
from operations......................................... 933,649 (476,635)
----------- -----------
Dividends declared:
In excess of net investment income........................... (49,347) --
From net realized gains...................................... (83,044) --
----------- -----------
Total dividends and distributions declared................ (132,391) --
----------- -----------
Capital Transactions:
Net proceeds from sales of capital stock..................... 22,627,003 7,516,598
Net asset value of capital stock issued to shareholders in
reinvestment of dividends and distributions................ 62,929 --
Net cost of capital stock redeemed........................... (3,056,172) --
----------- -----------
Net increase in net assets resulting from capital stock
transactions............................................. 19,633,760 7,516,598
----------- -----------
Total increase in net assets............................... 20,435,018 7,039,963
NET ASSETS:
Beginning of period.......................................... 7,039,963 --
----------- -----------
End of period (including undistributed net investment
income of $72,932 and $0, respectively).................... $27,474,981 $ 7,039,963
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding
throughout each period
<TABLE>
<CAPTION>
For the period from
June 6, 1997
(commencement of
For the year ended operations) to
October 31, 1998 October 31, 1997
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period................................. $ 9.42 $10.00
Income from investment operations:
Net investment loss................................................ 0.00(1) 0.00(1)
Net realized and unrealized gain (loss)............................ 0.75 (0.58)
Less dividends and distributions (Note 1):
In excess of net investment income................................. (0.03) --
From net realized gains............................................ (0.05) --
------ ------
Net asset value, end of period..................................... $10.09 $ 9.42
====== ======
Total Return......................................................... 8.06% (5.80%)(2)
Ratios/Supplemental Data:
Net assets, end of period (000's omitted).......................... $27,475 $7,040
Ratio of expenses to average net assets............................ 1.50%(4) 1.36%(3),(4)
Ratio of net investment loss to average net assets................. (0.15%) (0.06%)(3)
</TABLE>
- ----------------
(1) Less than $0.01
(2) Not annualized
(3) Annualized
(4) Includes the Fund's share of International Equity Portfolio expenses.
See Notes to Financial Statements.
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
International Equity 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 June 6, 1997.
The Fund invests all of its investable assets in the International Equity
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 proportionate interest in the net assets of the
Portfolio (approximately 41% at October 31, 1998). 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 are 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 or net investment income. 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.
E. Deferred Organization Expenses. Expenses incurred by the Fund in
connection with its organization are being amortized by the Fund on a
straight-line basis over a five year period.
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
<PAGE>
THE 59 WALL STREET INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
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, 1998, the Fund incurred $29,548 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 Fees. 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 1.50%
of the Fund's average daily net assets. For the year ended October 31, 1998, 59
Wall Street Administrators, Inc. incurred approximately $174,124 in expenses,
including shareholder servicing/eligible institution fees of $59,095, on behalf
of the Fund. The Fund's expense payment fee agreement will terminate on October
31, 2000.
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:
For the years
ended October 31,
-------------------------
1998 1997
--------- --------
Capital stock sold .............................. 2,272,830 747,583
Capital stock issued in connection with
reinvestment of dividends ..................... 6,723 --
Capital stock repurchased ....................... (303,784) --
--------- -------
Net increase .................................... 1,975,769 747,583
========= =======
5. Federal Income Tax Status. At October 31, 1998, the Fund, for federal
income tax purposes, had a capital loss carryforward of $589,146 which may be
applied against any net taxable realized gain of each succeeding year until the
earlier of its utilization or expiration on October 31, 2006.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The 59 Wall Street International Equity Fund (a series of The 59 Wall Street
Fund, Inc.):
We have audited the accompanying statement of assets and liabilities of
The 59 Wall Street International Equity Fund (a series of The 59 Wall Street
Fund, Inc.) as of October 31, 1998, the related statement of operations for the
year ended, and the statement of changes in net assets and the financial
highlights for the period from June 6, 1997 (commencement of operations) to
October 31, 1997 and the year ended October 31, 1998. 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. 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
International Equity Fund at October 31, 1998, 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 11, 1998
<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,
1998.
International Equity Fund
In a year which will be remembered for financial crises, including the
Russian default and the rescue of the Long Term Capital Management hedge fund,
international equity markets weathered the storms reasonably well. As measured
by the MSCI-EAFE Index, international equity markets rose 9.7% on a dollar
adjusted basis in the financial year ending October 31, 1998. As was the case in
the preceding year, the divergence of returns between Europe and Asia was
substantial. European markets rose to all time highs by mid July, spurred on by
declining interest rates and continued economic growth. Markets in Europe sold
off sharply in August and September and concerns about hedge funds, but
recovered part of the correction in October to post a full fiscal year gain of
23%. Asian equities, on the other hand, continued to react to the sharp economic
contractions experienced throughout the region. The Japanese market declined
14.4% over the twelve month period, as low interest rates and fiscal stimulus
packages failed to reverse the consumer's propensity to save or offset the drag
from the government's failure to adequately address financial sector rescue and
reform. For most of the financial year, these concerns also weighed heavily on
the Yen/dollar rate. The Yen weakened to a low of (Y)147/$ in mid August, before
strengthening sharply as hedge funds repaid their Yen loans and as currency
traders reacted positively to Japan's announced $570 billion bank rescue plan.
The rest of Asia continued to suffer the effects of last year's currency
devaluations and the continued malaise in Japan.
The portfolio's strategy this year continued to emphasize
European markets, particularly those on the continent. Double digit profit
growth, low inflation, falling interest rates and ample liquidity continue to
create a positive environment for continental European equities. In the UK, on
the other hand, rising interest rates for much of the year as the Bank of
England engineered an economic slowdown created an environment in which a
defensive strategy was appropriate. The portfolio's exposure to Asia remained
underweight all year. Asian investments were mainly directed to Japan where, in
spite of a rather gloomy economic environment, individual issues offered
particularly attractive opportunities. The Portfolio's investments in Japan are
concentrated in large, globally competitive companies which benefit from Yen
weakness and in domestic companies whose niche products and strong managements
continue to reward shareholders.
International Equity Fund Growth of $10,000
[The following information was depicted as a line graph in the printed material]
Total Return
- --------------------------------------------------------------------------------
One Year Inception
Ended 10/31/98 to 10/31/98
(Annualized)
- --------------------------------------------------------------------------------
8.06% 6.29%
- --------------------------------------------------------------------------------
International
Equity
Portfolio MSCI-EAFE
--------- ---------
12,444 12,940
11,975 11,719
12,357 12,089
14,380 13,799
13,886 13,660
13,775 13,558
13,553 13,624
13,282 13,517
12,604 13,113
12,037 12,322
11,654 11,783
11,528 11,682
- --------------------------------------------------------------------------------
____ International Equity Portfolio* ---- MSCI-EAFE
- --------------------------------------------------------------------------------
*net of fees and expenses
Past performance is not predictive of future performance.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1998
(expressed in U.S. dollars)
Shares Value
- ---------- -----------
COMMON STOCKS AND WARRANTS (99.3%)
FINLAND (2.5%)
MULTI-INDUSTRY
18,180 Nokia AB ............................................. $ 1,654,532
-----------
TOTAL FINLAND ........................................ 1,654,532
-----------
FRANCE (11.8%)
BANKING
19,480 Banque National de Paris CI .......................... 1,233,826
-----------
CAPITAL EQUIPMENT
15,985 Alcatel Alsthom SA ................................... 1,780,938
-----------
ENERGY
10,400 Elf Aquitaine SA ..................................... 1,203,621
11,500 Total SA ............................................. 1,326,788
-----------
2,530,409
-----------
MEDIA
5,240 Canal Plus ........................................... 1,271,355
-----------
SERVICES
4,995 Accor SA ............................................. 1,049,185
-----------
TOTAL FRANCE ......................................... 7,865,713
-----------
GERMANY (4.8%)
BANKING
12,410 Deutsche Pfandbrief-und
Hypothekenbank AG................................... 996,396
-----------
CAPITAL EQUIPMENT
19,200 SAP AG ADR ........................................... 810,000
-----------
INSURANCE
4,092 Allianz AG Registered ................................ 1,404,348
-----------
TOTAL GERMANY ........................................ 3,210,744
-----------
INDIA (0.0%)
FINANCE
550 Industrial Credit & Investment Corp. ................. 524
-----------
MATERIALS
2,100 Reliance Industries, Ltd. GDR ........................ 5,436
-----------
TOTAL INDIA .......................................... 5,960
-----------
IRELAND (3.1%)
BANKING
50,000 Allied Irish Banks, Plc .............................. 722,139
-----------
CONSUMER NON-DURABLES
607,000 Waterford Wedgewood, Plc ............................. 547,211
-----------
PHARMACEUTICALS
11,100 Elan Corp., Plc. ADR* ................................ 777,694
-----------
TOTAL IRELAND ........................................ 2,047,044
-----------
ITALY (11.2%)
ENERGY
235,600 Ente Nazionale Idrocarbun
SpA (ENI) .......................................... 1,403,785
-----------
INSURANCE
62,000 Assicurazioni Generali ............................... 2,209,318
-----------
TELECOMMUNICATIONS
239,100 Telecom Italia SpA ................................... 1,727,534
368,100 Telecom Italia Mobile SpA ............................ 2,137,138
----------
3,864,672
-----------
TOTAL ITALY .......................................... 7,477,775
-----------
JAPAN (17.0%)
CHEMICALS
28,000 Shin-Etsu Chemical Co. ............................... 557,214
100 Shin-Etsu Chemical Co.
(Warrants)* ........................................ 122,500
-----------
679,714
-----------
COMPUTER SOFTWARE
11,300 Meitec Corp. ......................................... 218,091
-----------
CONSUMER DURABLES
46,000 Makita Corp. ......................................... 486,121
-----------
CONSUMER ELECTRONICS
23,000 Canon, Inc. .......................................... 435,023
5,000 Sony Corp. ........................................... 317,379
----------
752,402
-----------
CONSUMER GOODS
16,000 Honda Motor Co., Ltd. ................................ 480,357
59,000 Kirin Brewery Co., Ltd. .............................. 642,735
59,000 Suzuki Motor Corp. ................................... 678,667
----------
1,801,759
-----------
CONSUMER NON-DURABLES
15,000 Fuji Photo Film Co., Ltd. ............................ 549,408
6,000 Nintendo Co., Ltd. ................................... 507,463
----------
1,056,871
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1998 (continued)
(expressed in U.S. dollars)
Shares Value
---------- -----------
JAPAN (continued)
ELECTRIC COMPONENTS
53,000 Minebea Co., Ltd. .................................... $ 497,813
5,000 Rohm Co., Ltd. ....................................... 441,757
8,000 TDK Corp. ............................................ 527,020
----------
1,466,590
-----------
ELECTRONIC TECHNOLOGY
11,000 Tokyo Electron, Ltd. ................................. 357,608
-----------
FINANCE
90 Merrill Lynch & Co., Inc.
International (Warrants)* .......................... 74,250
4,900 Orix Corp. ........................................... 350,961
-----------
425,211
-----------
MATERIALS
23,000 Bridgestone Corp. .................................... 506,047
22,000 Kurita Water Industries, Ltd. ........................ 292,503
-----------
798,550
-----------
MULTI-INDUSTRY
178,274 Prospect Japan Fund* ................................. 588,304
-----------
PHARMACEUTICALS
23,000 Santen Pharmaceutical
Co., Ltd. .......................................... 394,382
10,000 Yamanouchi Pharmaceutical
Co., Ltd. .......................................... 286,499
38 Yamanouchi Pharmaceutical
Co., Ltd. (Warrants)* .............................. 56,050
-----------
736,931
-----------
REAL ESTATE
2,000 Oriental Land Co., Ltd. .............................. 79,941
-----------
RETAIL
11,000 Ito-Yokato Co., Ltd. ................................. 641,619
-----------
SERVICES
8,600 Benesse Corp. ........................................ 394,665
3,000 Credit Saison Co., Ltd. .............................. 70,638
110 Credit Saison Co., Ltd.
(Warrants)* ........................................ 154,000
82,000 Daikin Industries, Ltd. .............................. 647,813
-----------
1,267,116
-----------
TOTAL JAPAN .......................................... 11,356,828
-----------
NETHERLANDS (7.0%)
CONSUMER GOODS
37,837 Heineken NV .......................................... 2,014,922
-----------
FINANCE
28,000 Fortis Amev NV ....................................... 1,817,763
-----------
SERVICES
24,300 Ahold (Kon)NV ........................................ 807,637
-----------
TOTAL NETHERLANDS .................................... 4,640,322
-----------
SPAIN (8.1%)
ENERGY
25,300 Repsol SA ............................................ 1,269,849
-----------
FINANCE
110,650 Banco Bilbao Vizcaya SA .............................. 1,492,510
45,961 Banco Santander SA ................................... 841,824
-----------
2,334,334
-----------
UTILITIES
39,859 Telefonica de Espana SA .............................. 1,799,682
-----------
TOTAL SPAIN .......................................... 5,403,865
-----------
SWEDEN (5.8%)
CAPITAL EQUIPMENT
66,720 Atlas Copco .......................................... 1,555,603
62,600 Ericsson (LM) Telephone
Co. Class `B' ...................................... 1,411,427
-----------
2,967,030
-----------
CONSUMER DURABLES
60,600 Electrolux AB ........................................ 912,183
-----------
TOTAL SWEDEN ......................................... 3,879,213
-----------
SWITZERLAND (8.3%)
BANKING
6,150 Union Bank of Switzerland AG ......................... 1,685,771
-----------
CONSUMER NON-DURABLES
558 Nestle AG Registered ................................. 1,185,745
-----------
PHARMACEUTICALS
1,492 Novartis AG Bearer ................................... 2,683,905
-----------
TOTAL SWITZERLAND .................................... 5,555,421
-----------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1998 (continued)
(expressed in U.S. dollars)
Shares Value
-------- -----------
UNITED KINGDOM (19.7%)
BANKING
35,800 Barclays, Plc ........................................ $ 771,150
-----------
CONSUMER GOODS
84,000 Smithkline Beecham, Plc .............................. 1,050,213
-----------
ENERGY
99,500 Britsh Petroleum Co., Plc ............................ 1,460,495
79,000 PowerGen, Plc ........................................ 1,117,278
-----------
2,577,773
-----------
FOOD & BEVERAGES
92,500 Diageo, Plc .......................................... 998,571
-----------
PHARMACEUTICALS
34,000 Glaxo Wellcome, Plc .................................. 1,056,171
-----------
REAL ESTATE
119,000 British Land Co., Plc. (The) ......................... 956,017
75,000 Land Securities, Plc ................................. 1,057,568
-----------
2,013,585
-----------
SERVICES
96,000 BAA, Plc ............................................. 1,080,540
81,000 Granada Group, Plc ................................... 1,220,804
50,000 Railtrack Group, Plc ................................. 1,343,143
-----------
3,644,487
-----------
TELECOMMUNICATIONS
76,500 British Telecom, Plc ................................. 988,453
-----------
TOTAL UNITED KINGDOM ................................. 13,100,403
-----------
TOTAL COMMON STOCKS
AND WARRANTS
(identified cost $60,079,355) ...................... 66,197,820
-----------
TIME DEPOSIT (5.2%)
3,434,000 State Street Bank
(Cayman) 4.75%, 11/2/98
identified cost $3,434,000) ........................ 3,434,000
-----------
TOTAL INVESTMENTS (identified cost $63,513,355) (a) ...... 104.5% $69,631,820
CASH AND OTHER ASSETS LESS LIABILITIES ................... (4.5) (2,999,239)
----- -----------
NET ASSETS ............................................... 100.0% $66,632,581
===== ===========
- -------------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $64,028,898, the
aggregate gross unrealized appreciation is $8,023,429, and the aggregate
gross unrealized depreciation is $2,420,507, resulting in net unrealized
appreciation of $5,602,922.
See Notes to Financial Statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
(expressed in U.S. dollars)
ASSETS:
Investments in securities, at value (identified
cost $63,513,355) (Note 1) ............................... $69,631,820
Cash (including $5,386 in foreign currency) ................ 6,032
Receivables for:
For investments sold .................................... 92,300
For capital stock sold .................................. 86,840
Dividends and other receivables ............................ 147,857
Deferred organizational expense ............................ 1,259
-----------
Total Assets ....................................... 69,966,108
-----------
LIABILITIES:
Payables for:
Investments purchased ................................... 1,690,918
Forward foreign exchange contracts sold (Note 4) ........ 1,588,928
Investment advisory fee (Note 2) ........................ 34,593
Administrative fee (Note 2) ............................. 1,872
Expense reimbursement fee (Note 2) ...................... 3,992
Foreign withholding taxes ............................... 13,224
-----------
Total Liabilities .................................. 3,333,527
-----------
NET ASSETS .................................................... $66,632,581
===========
Net Assets Consist of:
Paid-in capital .......................................... $62,098,849
Net unrealized appreciation .............................. 4,533,732
-----------
Net Assets .................................................... $66,632,581
===========
See Notes to Financial Statements
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
(expressed in U.S. dollars)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $247,609) .. $ 850,915
Interest ................................................ 65,651
----------
Total Income ........................................ 916,566
----------
Expenses:
Investment advisory fee (Note 2) ........................ 448,851
Expense reimbursement fee (Note 2) ...................... 58,943
Administrative fee (Note 2) ............................. 23,282
Amortization of organization expenses (Note 1) .......... 887
----------
Total Expenses ...................................... 531,963
----------
Net Investment Income ............................... 384,603
----------
NET REALIZED AND UNREALIZED GAIN (Notes 1 and 3):
Net realized gain on investments and foreign exchange
transactions ............................................ 933,148
Net change in unrealized appreciation on investments
and foreign currency transactions ....................... 4,125,305
----------
Net Realized and Unrealized Gain ........................ 5,058,453
----------
Net Increase in Net Assets Resulting from Operations ....... $5,443,056
==========
See Notes to Financial Statements
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the years ended October 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................ $ 384,603 $ 287,078
Net realized gain on investments and foreign
exchange transactions ............................. 933,148 1,141,921
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations .. 4,125,305 (619,599)
------------ ------------
Net increase in net assets resulting from operations 5,443,056 809,400
------------ ------------
Capital transactions:
Proceeds from contributions .......................... 35,422,813 10,305,094
Value of withdrawals ................................. (20,271,095) (4,561,135)
------------ ------------
Net increase in net assets resulting from
capital transactions ............................ 15,151,718 5,743,959
------------ ------------
Total increase in net assets ..................... 20,594,774 6,553,959
NET ASSETS:
Beginning of year ........................................ 46,037,807 39,484,448
------------ ------------
End of year .............................................. $ 66,632,581 $ 46,037,807
============ ============
</TABLE>
See Notes to Financial Statements
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding
throughout each period
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
For the period
April 1, 1995
For the years ended October 31, (commencement of
---------------------------------- operations) to
1998 1997 1996 October 31, 1995
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)...... $66,633 $46,038 $39,484 $28,191
Expenses as a percentage of average
net assets................................ 0.76% 0.90% 0.90% 0.90%*
Ratio of net investment income to average
net assets................................ 0.56% 0.63% 0.68% 1.25%*
Portfolio turnover rate..................... 89% 85% 56% 23%
</TABLE>
- ---------------
* Annualized
See Notes to Financial Statements
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(expressed in U.S. dollars)
1. Organization and Significant Accounting Policies. International Equity
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 August 15, 1994.
The Portfolio commenced operations on April 1, 1995. 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
either a domestic or foreign 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
Portfolio's 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) all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the prevailing rates of exchange available
at the time of valuation; and (5) trading in securities on most foreign
exchanges and over-the-counter markets is normally completed before the
close of the New York Stock Exchange and may also take place on days on
which the New York Stock Exchange is closed. If events materially
affecting the value of foreign securities occur between the time when the
exchange on which they are traded closes and the time when the Portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the Portfolio's Trustees.
B. Foreign Currency Translations. The accounting records of the
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such
currency against the U.S. dollar to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Upon the purchase or sale of a
security denominated in foreign currency, the Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale, for
a fixed amount of U.S. dollars of the amount of foreign currency involved
in the underlying security transaction. The Portfolio isolates that
portion of realized gain or loss on investments resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of such investments. Reported net realized and
unrealized gains and losses arise from the sales of portfolio securities,
sales of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Portfolio's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized appreciation or
depreciation on foreign currency translations arise from changes in the
value of the assets and liabilities, excluding investments in securities,
at fiscal year end, arising from changes in the exchange rate.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
C. Forward Foreign Currency Exchange Contracts. The Portfolio may
enter into forward foreign currency exchange contracts ("contracts") in
connection with planned purchases or sales of securities, to hedge the
U.S. dollar value of portfolio securities denominated in a particular
currency, or to increase or shift its exposure to a currency other than
U.S. dollars. The Portfolio has no specific limitation on the percentage
of assets which may be committed to these types of contracts. The
Portfolio could be exposed to risks if the counterparties to the contracts
are unable to meet the terms of their contracts or if the value of the
foreign currency changes unfavorably. The U.S. dollar values of foreign
currency underlying all contractual commitments held by the Portfolio are
determined using forward currency exchange rates supplied by a quotation
service.
D. 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.
E. 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 provision
for federal income taxes is necessary.
F. 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 year ended October
31, 1998, the Portfolio incurred $448,851 for advisory services.
Administrative Fee. The Portfolio has an administrative agreement with
Brown Brothers Harriman Trust Company (Cayman) Limited (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 Signature Financial
Group (Cayman) Ltd. for which Signature Financial Group (Cayman) Ltd. receives
such compensation as is from time to time agreed upon. For the year ended
October 31, 1998, the Portfolio incurred $23,282 for administrative services.
Expense Reimbursement Fee. Brown Brothers Harriman Trust Company (Cayman)
Limited pays certain expenses of the Portfolio and receives a fee from the
Portfolio, computed and paid monthly, such that after such fee the aggregate
expenses will not exceed 0.76% of the Portfolio's average daily net assets. For
the year ended October 31, 1998, Brown Brothers Harriman Trust Company (Cayman)
Limited incurred $100,625 in expenses on behalf of the Portfolio. The expense
reimbursement agreement will terminate when the aggregate amount of fees
received by Brown Brothers Harriman Trust Co. (Cayman) Limited thereunder equals
the aggregate amount of expenses paid by Brown Brother Harriman Trust Company
(Cayman) Limited thereunder.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
(expressed in U.S. dollars)
3. Investment Transactions. For the year ended October 31, 1998, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $55,419,909 and $71,977,145, respectively. There
were no purchases or sales of U.S. government obligations during the period.
4. Financial Instruments with Off-Balance Sheet Risk. At October 31, 1998
the International Equity Portfolio had outstanding forward foreign currency
exchange contracts as a hedge to protect against possible changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Forward contracts involve elements of market
risk in excess of the amount reflected in the Statement of Assets and
Liabilities. The Funds bear the risk of an unfavorable change in the foreign
exchange rate underlying the forward contracts.
Forward foreign currency exchange contracts open at October 31, 1998:
Contracts In Exchage Deliver Unrealized
to deliver For Date Depreciation
------------- ---------- ------- -------------
JPY* 1,566,000,000 $11,939,616 12/17/98 $1,588,928
* Japanese Yen.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Trustees and Investors
International Equity Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of International Equity Portfolio as of
October 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended October 31,
1998 and 1997 and the financial highlights for each of the years in the
four-year period ended October 31, 1998 (all expressed in U.S. dollars). These
financial statements and financial highlights are the responsibility of the
Portfolio'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 auditing standards generally
accepted in the United States of America. 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, 1998 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. 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 International Equity
Portfolio at October 31, 1998, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
December 11, 1998
<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.
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.
