THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
PORTFOLIO OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
--------- ------------
<S> <C> <C>
VARIABLE FLOATING NOTES (1.6%)
Carco Auto Loan Master Trust Series 1999-2 Class A1
$ 100,000 6.690%, 05/17/2004 .......................................... $ 99,898
Chase Credit Card Master Trust Series 1998-5 Class A
100,000 6.780%, 01/15/2006 .......................................... 100,218
First USA Credit Card Master Trust Series 1996-6 Class A
100,000 6.760%, 07/10/2006 .......................................... 99,961
MBNA Master Credit Card Master Trust Series 1996-J Class A
100,000 6.770%, 02/15/2006 .......................................... 100,191
MBNA Master Credit Card Master Trust Series 1996-K Class A
100,000 6.750%, 03/15/2006 .......................................... 100,136
-----------
Total Variable Floating Notes
(identified cost $500,253) ................................ 500,404
-----------
TENNESSEE VALLEY AUTHORITY NOTES (1.0%)
327,003 3.375%, 1/15/2007 (identified cost $317,908)* ................. 309,194
-----------
U.S. TREASURY NOTES AND BONDS (84.1%)
4,812,394 3.375%, 1/15/2007* ............................................ 4,687,575
7,237,996 3.625%, 1/15/2008* ............................................ 7,122,644
4,134,289 3.625%, 4/15/2028* ............................................ 3,972,796
1,693,659 4.250%, 1/15/2010* ............................................ 1,744,997
5,747,438 3.875%, 1/15/2009* ............................................ 5,749,231
3,387,895 3.875%, 4/15/2029* ............................................ 3,401,660
-----------
Total U.S. Treasury Notes and Bonds
(identified cost $26,189,032) ............................. 26,678,903
-----------
REPURCHASE AGREEMENTS (11.6%)
3,700,000 Salomon Brothers, Inc., 6.250%, 11/01/2000
(Agreement dated 10/31/2000 collateralized by $3,766,000
Treasury Notes 5.50%, due 8/31/2001; $3,700,642
to be received upon maturity) (identified cost $3,700,000) .. 3,700,000
-----------
TOTAL INVESTMENTS (identified cost $30,707,193) (a) ............ 98.3% 31,188,501
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................. 1.7 551,480
----- -----------
NET ASSETS .................................................. 100.0% $31,739,981
===== ===========
</TABLE>
-----------
(a) The aggregate cost for federal income tax purposes is $30,772,826, the
aggregate gross unrealized appreciation is $424,560, and the aggregate
gross unrealized depreciation is $8,885, resulting in net unrealized
appreciation of $415,675.
* Inflation Protected Security.
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments in securities, at value (identified cost
$30,707,193) .............................................. $31,188,501
Cash ........................................................ 127,712
Receivables for:
Capital stock sold ........................................ 220,102
Interest .................................................. 234,013
-----------
Total Assets ......................................... 31,770,328
-----------
LIABILITIES:
Payables for:
Capital stock redeemed .................................... 65
Expense payment fee ....................................... 25,612
Administrative fee ........................................ 4,670
-----------
Total Liabilities .................................... 30,347
-----------
NET ASSETS ..................................................... $31,739,981
===========
Net Assets Consist of:
Paid-in capital ........................................... $31,835,103
Undistributed net investment income ....................... 11,730
Accumulated net realized loss ............................. (588,160)
Net unrealized appreciation ............................... 481,308
-----------
Net Assets ..................................................... $31,739,981
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($31,739,981 / 3,297,114 shares) ............................. $9.63
=====
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
STATEMENT OF OPERATIONS
October 31, 2000
NET INVESTMENT INCOME:
Income:
Interest ................................................... $1,217,606
----------
Expenses:
Expense payment fee ........................................ 97,047
Administrative fee ......................................... 17,658
----------
Total Expenses ............................................ 114,705
----------
Net Investment Income ..................................... 1,102,901
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments and foreign exchange
transactions ............................................. 160,959
Net change in unrealized appreciation on investments ....... 598,695
----------
Net Realized and Unrealized Gain ......................... 759,654
----------
Net Increase in Net Assets Resulting From Operations ....... $1,862,555
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ....................................... $ 1,102,901 $ 639,065
Net realized gain (loss) on investments and foreign
exchange transactions ..................................... 160,959 (198,319)
Net change in unrealized appreciation (depreciation) on
investments ............................................... 598,695 (143,850)
------------ -----------
Net increase in net assets resulting from operations ........ 1,862,555 296,896
------------ -----------
Dividends and distributions declared:
From net investment income ................................ (1,097,961) (638,362)
------------ -----------
Capital transactions (Note 4):
Net proceeds from sales of capital stock .................... 23,802,988 3,568,054
Net asset value of capital stock issued to shareholders
in reinvestment of dividends and distributions ............ 225,779 86,968
Net cost of capital stock redeemed .......................... (4,842,039) (4,118,741)
------------ -----------
Net increase (decrease) in net assets resulting from
capital transactions ................................... 19,186,728 (463,719)
------------ -----------
Total increase (decrease) in net assets ................... 19,951,322 (805,185)
------------ -----------
NET ASSETS:
Beginning of year ................................................ 11,788,659 12,593,844
------------ -----------
End of year (including undistributed net investment income
of $11,730 and $0, respectively) ................................ $31,739,981 $11,788,659
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding
throughout each period
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------------------------
2000 1999 1998 1997 1996
------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 9.26 $ 9.52 $ 9.51 $ 9.67 $ 9.76
Income from investment operations:
Net investment income ................... 0.60 0.48 0.45 0.48 0.55
Net realized and unrealized gain (loss) . 0.37 (0.26) 0.01 (0.16) (0.09)
Less dividends and distributions:
From net investment income .............. (0.60) (0.48) (0.45) (0.48) (0.55)
------- ------ ------- ------- -------
Net asset value, end of year ............... $ 9.63 $ 9.26 $ 9.52 $ 9.51 $ 9.67
======= ======= ======= ======= =======
TOTAL RETURN(1) ............................ 10.83% 2.43% 4.98% 3.40% 4.88%
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $31,740 $11,789 $12,594 $13,744 $16,821
Expenses as a percentage of average
net assets1 ........................... 0.65% 0.65% 0.65% 0.73% 0.85%
Ratio of net investment income to average
net assets ............................ 6.25% 5.14 4.48% 4.99% 5.73%
Portfolio turnover rate ................. 327% 899% 305% 372% 114%
</TABLE>
----------
(1) Had the expese payment agreement not been in place, the ratio of expenses
to average net assets and total return would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average
net assets 1.19% 1.19% 1.15% 1.24% 1.40%
Total return 10.29% 1.89% 4.45% 2.89% 4.33%
</TABLE>
Furthermore, the ratio of expenses to average net assets for the years
ended October 31, 2000, 1999, 1998, 1997, and 1996, 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 1.20%, 1.20%, 1.15%, 1.26%, and 1.42%, respectively.
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. The 59 Wall Street
Inflation-Indexed Securities Fund (formerly 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.
Effective March 1, 1997, the Fund changed its name to The 59 Wall Street
Inflation-Indexed Securities Fund.
The Fund'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 lnvestments. 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 investment
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. 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
accounting principles generally accepted in the United States of America,
the basis on which these financial statements are prepared. Accordingly,
the amount of net investment income and net realized gain reported on
these financial statements may differ from that reported on the Fund's tax
return due to certain book-to tax differences such as losses deferred due
to "wash sale" transactions and utilization of capital loss carryforwards.
These differences may result in temporary over-distributions for financial
statement purposes and are classified as distributions in excess of
accumulated net investment income and net realized gains. These
distributions do not constitute a return of capital. Permanent differences
are reclassified on the statement of assets and liabilities based upon
their tax classifications. 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.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (continued)
D. Forward Foreign Currency Exchange Contracts. The Fund may enter
into forward foreign currency exchange contracts ("contracts") in
connection with planned purchases or sales of securities or to hedge the
U.S. dollar value of portfolio securities denominated in a particular
currency. The Fund has to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency. The Fund has no specific
limitation on the percentage of assets which may be committed to these
types of contracts. The Fund 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 funds are determined using forward currency
exchange rates supplied by a quotation service.
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 (the "Adviser") for which the Adviser
receives a fee from calculated daily and paid monthly at an annual rate
equivalent to 0.25% of the Fund's average daily net assets.
Administrative Fee. The Corporation has an administration agreement with
Brown Brothers Harriman (the "Administrator") for which the Administrator
receives a fee from the Fund calculated daily and paid monthly at an annual rate
equivalent to 0.10% 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, 2000, the Fund incurred $17,658
for administrative services.
Custody Fee. The Corporation has a custody agreement with Brown Brothers
Harriman (the "Custodian") for which the Custodian receives a fee calculated and
paid monthly. Custody fees for the Fund were reduced by $2,613 as a result of an
expense offset arrangements with the Fund's custodian.
Shareholder Servicing/Eligible Institution Agreement. The Corporation has
a shareholder servicing agreement and an eligible institution agreement with
Brown Brothers Harriman for which Brown Brothers Harriman 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 0.65%
of the Fund's average daily net assets. Prior to March 1, 1997, under an
agreement dated February 22, 1995, 59 Wall Street Administrators, Inc. received
a fee from the Fund such that after such payment the aggregate expenses of the
Fund did not exceed an agreed annual rate of 0.85% of the average daily net
assets of the fund. For the year ended October 31, 2000, 59 Wall Street
Administrators, Inc. incurred $192,308 in expenses, including investment
advisory fees of $44,145, shareholder servicing/eligible institution fees of
$44,145 and custody fees of $7,082 paid to Brown Brothers Harriman on behalf of
the Fund. The Fund's expense payment fee agreement will terminate on October 31,
2002.
3. Investment Transactions. For the year ended October 31, 2000, the cost
of purchases and the proceeds of sales of investment securities other than
short-term investments were $71,382,526 and $55,136,540, respectively.
<PAGE>
THE 59 WALL STREET INFLATION-INDEXED SECURITIES 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,
-------------------------
2000 1999
--------- -------
Capital stock sold .......................... 2,515,024 380,212
Capital stock issued in connection with
reinvestment of dividends ................. 23,830 9,307
Capital Stock Repurchased ................... (514,844) (439,282)
--------- ---------
Net Increase (Decrease) ..................... 2,024,010 (49,763)
========= =========
5. Federal Income Tax Status. At October 31, 2000, the Fund for federal
income taxes purposes, has a capital loss carryforward of $522,000, 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, 2007.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The 59 Wall Street Inflation-Indexed Securities 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 Inflation-Indexed
Securities Fund (a series of The 59 Wall Street Fund, Inc.) as of October 31,
2000, the related statements of operations for the year then ended, the
statement of changes in net assets for the years ended October 31, 2000 and
1999, and the financial highlights for each of the years in the five-year period
ended October 31, 2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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, 2000 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The 59 Wall Street
Inflation-Indexed Securities Fund at October 31, 2000 and 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 LLP
Boston, Massachusetts
December 22, 2000
<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,
2000.
Inflation-Indexed Securities Fund
Inflation adjusted securities provide a return over 10%. The market as
measured by the Salomon Inflation-Linked Securities Index out performed almost
every other fixed income index by a large margin. The two main factors for the
good return were actual inflation rising more that what had been expected and a
general slowing of the economy during the latter part of the year. In many ways,
inflation indexed securities performed exactly as they were expected, in periods
when actual inflation exceeds anticipated inflation these securities should do
well because they offer investors inflation protection. The securities act like
an insurance policy against inflation. The second factor, the general slowing of
economic growth, also helps these securities because they offer a real rate of
return. In periods of fast economic growth real returns in the economy are high.
Since inflation indexed securities offer investors a real return, their price
should drop by an amount that equates the real return in the economy with the
real return on the securities. In 1997 and 1998 the securities under performed
because economic growth exceeded expectations. Another factor is Federal Reserve
policy. If the Federal Reserve is tightening credit or raising interest rates,
Treasury bill yields will go higher. Since Treasury bills are thought of as a
good hedge against inflation, inflation adjusted securities yields also have to
go higher to compete with the higher bill yields.
The fund out performed the index by over 60 basis points. The strong
relative return was a result of good duration and yield curve trading. The fund
also grew in size during the year as more investors saw the benefit of inflation
protected securities. Going forward there continues to be more and more interest
in these securities. One item that is worth watching is what happens to supply
as we enter a new administration. Government inflation linked securities were
the creation of a democratic treasury. Now that we have a republican
administration it should be interesting to see what happens. Most people expect
a reduction in net new supply and possibly a cancellation of 30-yr issuance.
Inflation-Indexed Securities Fund Growth of $10,000
-------------------------------------------------------
Total Return
-------------------------------------------------------
One Year Five Years Inception
Ended Ended to 10/31/00
10/31/00 10/31/00 (Annualized)
(Annualized)
-------------------------------------------------------
10.83% 5.26% 5.11%
-------------------------------------------------------
[The Following table was depicted as a line chart in the printed material]
Inflation-Indexed 3-yr Treasury SB Inflation Linked
Date Fund* Note Securities Index
---------- ----------------- ------------- -------------------
1/31/1993 $10,313 $10,347
10/31/1993 $10,839 $10,857
10/31/1994 $10,596 $10,767
10/31/1995 $11,683 $11,889
10/31/1996 $12,253 $12,575
10/31/1997 $12,670 $13,448 $12,647
10/31/1998 $13,301 $14,670 $13,249
10/31/99 $13,624 $14,833 $13,499
10/31/00 $15,099 $15,804 $14,873
* net of fees and expenses
** The Salomon Brothers Inflation Linked Securities Index started 2/28/97.
Therefore, for performance purposes the starting point used is the same
amount as the Fund.
Past performance is not predictive of future performance.
<PAGE>
The 59 Wall Street Fund, Inc.
Investment Adviser and
Administrator
Brown Brothers Harriman
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
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.
Inflation-Indexed Securities Fund
ANNUAL REPORT
October 31, 2000
