-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9N1fSJ87ogTaQXFen3FiuaeD91qUsUafpjD209kQNwxkpYF2zmwFp0VCm7oShxl NWuqgU/Qt41k1m/1f/1xHQ== 0000912057-01-530762.txt : 20010830 0000912057-01-530762.hdr.sgml : 20010830 ACCESSION NUMBER: 0000912057-01-530762 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRINSON FUNDS INC CENTRAL INDEX KEY: 0000886244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06637 FILM NUMBER: 1727324 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 N-30D 1 a2058129zn-30d.txt N-30D [GRAPHIC] GLOBAL FUND GLOBAL EQUITY FUND GLOBAL TECHNOLOGY FUND GLOBAL BIOTECH FUND GLOBAL BOND FUND U.S. BALANCED FUND U.S. EQUITY FUND U.S. LARGE CAP EQUITY FUND U.S. LARGE CAP GROWTH FUND U.S. SMALL CAP GROWTH FUND U.S. BOND FUND HIGH YIELD FUND INTERNATIONAL EQUITY FUND ANNUAL REPORT JUNE 30, 2001 THE BRINSON FUNDS TRUSTEES AND OFFICERS TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob Brian M. Storms OFFICERS Frank K. Reilly, CFA CHAIRMAN OF THE BOARD Brian M. Storms PRESIDENT Carolyn M. Burke, CPA VICE PRESIDENT Paul H. Schubert, CPA TREASURER AND PRINCIPAL ACCOUNTING OFFICER Amy R. Doberman SECRETARY Mark F. Kemper SECRETARY David E. Floyd, CPA ASSISTANT SECRETARY 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. AUGUST 15, 2001 SINCE THE FOUNDING OF OUR ORGANIZATION NEARLY TWENTY YEARS AGO, WE HAVE FOCUSED OUR COLLECTIVE ENERGY ON TWO GOALS: CREATING MEANINGFUL VALUE-ADDED INVESTMENT PERFORMANCE; AND PROVIDING OUR CLIENTS WITH INDIVIDUALIZED CLIENT RELATIONSHIPS OF THE HIGHEST QUALITY. WITH AN UNRELENTING FOCUS ON OUR GOALS, WE HAVE GROWN INTO ONE OF THE WORLD'S PREMIER INVESTMENT MANAGEMENT ORGANIZATIONS, AND A RECOGNIZED LEADER IN OUR INDUSTRY. IN NORTH AMERICA, WE MAKE OUR INVESTMENT CAPABILITIES AVAILABLE TO INSTITUTIONS AND INDIVIDUAL INVESTORS THROUGH THE BRINSON FAMILY OF FUNDS. THE BRINSON FUNDS ARE DIVERSIFIED, INSTITUTIONALLY PRICED MUTUAL FUNDS THAT PROVIDE INVESTORS CONVENIENT ACCESS TO OUR GLOBAL INVESTMENT EXPERTISE AND CAPABILITIES. WITHIN A FRAMEWORK OF INTEGRATED CAPITAL MARKETS, WE SELECT PORTFOLIO INVESTMENTS BY FOCUSING ON LONG-TERM INVESTMENT FUNDAMENTALS. INVESTMENT PERFORMANCE FOR OUR CLIENTS IS MAXIMIZED WITHIN AND ACROSS ASSET CLASSES THROUGH A COMPREHENSIVE UNDERSTANDING OF GLOBAL INVESTMENT MARKETS AND THEIR INTERRELATIONSHIPS. WE APPLY A SYSTEMATIC, DISCIPLINED APPROACH TO VALUING INVESTMENTS AND COMBINE THE SEASONED JUDGMENT OF OUR GLOBAL INVESTMENT TEAMS TO CONSTRUCT OPTIMAL PORTFOLIOS--BALANCING CONSIDERATIONS FOR BOTH RISK AND RETURN. BRINSON PARTNERS, INC. IS A MEMBER OF UBS ASSET MANAGEMENT, THE INSTITUTIONAL ASSET MANAGEMENT DIVISION OF UBS AG. 2 TABLE OF CONTENTS Global Economic and Market Highlights 4 U.S. Economic and Market Highlights 6 Portfolio Managers' Commentary and Schedule of Investments Global Fund 8 Global Equity Fund 20 Global Technology Fund 28 Global Biotech Fund 32 Global Bond Fund 36 U.S. Balanced Fund 43 U.S. Equity Fund 50 U.S. Large Cap Equity Fund 55 U.S. Large Cap Growth Fund 59 U.S. Small Cap Growth Fund 63 U.S. Bond Fund 67 High Yield Fund 73 International Equity Fund 80 Statements of Assets and Liabilities 86 Statements of Operations 88 Statement of Cash Flows 90 Statements of Changes in Net Assets 92 Financial Highlights 97 Notes to Financial Statements 110 Report of Independent Auditors 116 Federal Tax Information 117 3 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS There was a similarity in the performance of equity markets around the world during the 12-month period ended June 30, 2001. Most markets struggled, as corporate earnings declined and economic growth slowed. In the United States, the 12-month period began in an environment of relatively high interest rates, rising oil prices and concerns about a slowdown in the pace of economic growth. Against this backdrop, stock prices declined precipitously through December 31, 2000. As we moved into 2001, market sentiment was dominated by continued weak corporate earnings forecasts, as many companies made significant cuts in their operating budgets and capital spending outlays. As business activity slowed, many companies began to reduce their employee rolls, and the U.S. unemployment rate rose from 4.3% to 4.5%. In an effort to stimulate economic growth, the Federal Reserve Board reduced short-term interest rates six times for a total decrease of 2.75% between January 1, 2001 and June 30, 2001. (The Fed trimmed interest rates another 0.25% in August 2001.) The Fed's actions had little effect on the economy or stock prices. While there were brief rallies in the market, most major stock indexes ended the period in negative numbers. At the beginning of the period, it looked as if many of the European economies would withstand the downward economic pressure coming from the United States. As time went on, however, it became clear that the European economies and financial markets were not immune to the economic situation across the ocean. Throughout 2001, analysts downgraded growth expectations for Europe. While central banks in the United Kingdom and continental Europe attempted to mitigate the downward trend in economic growth by trimming interest rates, their actions did little to boost economic growth or corporate profits. As a result, many European markets lost value during the first six months of 2001. In Japan, business investment and industrial production were weak, and the decline in gross domestic product hit recession levels. While the Japanese economy was affected negatively by the troubled economies in other countries, it was also plagued by internal financial issues. In particular, Japanese banks have yet to resolve their bad loan problems. The election of a new prime minister raised hopes that new economic reforms would be implemented in the future. However, the short-term outlook for the Japanese economy and financial markets was negative. Therefore, the Japanese stock market declined. The emerging markets of Asia and Latin America also had difficulties. Weak economic growth in the United States, Europe and Japan dampened Asian exports. Reduced exports led to lower corporate profits which were negative for many of the Asian stock markets. While the Latin American economies suffered from some of the same export problems, they were also affected by energy shortages, debt problems and political concerns. In general, emerging markets generated negative returns in 2000 and for the first six months of 2001. 4 GLOBAL ENVIRONMENT
6 MONTHS 1 YEAR 3 YEARS 5 YEARS MAJOR MARKETS ENDED ENDED ENDED ENDED TOTAL RETURN IN U.S. DOLLARS 6/30/01 6/30/01 6/30/01 6/30/01 - -------------------------------------------------------------------------------------------------------- U.S. Equity -5.79% -15.34% 3.50% 13.06% Global (Ex-U.S.) Equities (currency unhedged) -13.40 -24.03 -1.16 2.24 Global (Ex-U.S.) Equities (currency hedged) -6.21 -12.38 5.78 11.18 U.S. Bonds 3.62 11.26 6.23 7.47 Global (Ex-U.S.) Bonds (currency unhedged) -6.78 -7.43 -0.20 0.48 Global (Ex-U.S.) Bonds (currency hedged) 3.13 8.68 7.16 9.24 U.S. Cash Equivalents 2.24 5.25 4.83 4.86 - --------------------------------------------------------------------------------------------------------
6 MONTHS 1 YEAR 3 YEARS 5 YEARS MAJOR CURRENCIES ENDED ENDED ENDED ENDED PERCENT CHANGE RELATIVE TO U.S. DOLLARS 6/30/01 6/30/01 6/30/01 6/30/01 - -------------------------------------------------------------------------------------------------------- Yen -8.43% 7.35% 9.47% -4.60% Pound -5.85 -1.32 -3.19 1.44 Euro -9.83 -2.06 -4.02 N/A Canadian Dollar -1.03 -1.35 -0.25 -1.47 - --------------------------------------------------------------------------------------------------------
ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. 5 U.S. ECONOMIC AND MARKET HIGHLIGHTS The rate of increase in real Gross Domestic Product spiraled downward during the second quarter of 2001, increasing just 0.7% following a 1.3% first quarter rise and 4.1% increase in 2000. This near stagnant rate of growth was exacerbated by a continued manufacturing recession, where production declined in each of the last 11 months of the fiscal year ended June 30, 2001. The National Association of Purchasing Management's index of business activity stood at 44.7 at the end of June. A mark below 50 shows a contraction in manufacturing, and the index fell short of this mark during most of the fiscal year. The country's economic difficulties seem to have spread across the globe, as Argentina endures a severe fiscal crisis and Germany has its own underperforming economy with which to deal. Surprisingly, consumer sentiment has held up well during the period, as has consumer spending, which has not declined nearly as severely as business spending. The seasonally adjusted unemployment rate, which rose from 3.9% to 4.5% during the fiscal year, may yet test consumers' confidence that the stagnant economy will not unduly affect them. The period-end rate is still low by historical standards: the 3.9% figure in October was the lowest in 17 years. Aggressive interest rate cuts by the Federal Reserve may have limited the severity of economic difficulties, as it slashed rates six times during the first six months of 2001 by a total of 2.75%. Even with the most aggressive Federal Reserve action in the past 20 years, the Fed indicated that if the economy continued to struggle, the Fed Funds rate, which now stands at 3.75%, could decline even further. Inflation, which also was a concern when the fiscal year began, was a non-issue at period-end. As energy prices have fallen with the price of oil, we expect the annual inflation rate to remain under 3.0% in 2001. Consensus forecasts of a GDP increase in the 2.6%-2.8% range for the second half of this year and around 3.0% in 2002 also point to signs the slowdown may be at or nearing its low point. Finally, the first installment of a $1.35 trillion tax cut package, around $40 billion, begins arriving in consumers' mailboxes this summer. This stimulus and continued aggressive Fed action, if necessary, should help jumpstart the economy, although worries overseas could alter these forecasts. 6 U.S. ENVIRONMENT MAJOR MARKETS ONE YEAR ENDED JUNE 30, 2001 [CHART] Total Return U.S. Cash Equivalents 5.25 U.S. Bonds 11.26 U.S. Equities -15.34
SALOMON U.S. TREASURY BENCHMARK RETURNS ONE YEAR ENDED JUNE 30, 2001 [CHART] Total Return
Maturity (Years) 1 7.89 2 8.53 5 10.35 10 8.09 30 5.97
TOP TEN INDUSTRY RETURNS RELATIVE TO S&P 500 SIX-MONTHS ENDED JUNE 30, 2001 [CHART] Office Electronics 81.7 Construction & Engineering 65.2 Auto Components 30.0 Leisure Equipment & Products 25.4 Metals & Mining 24.3 Road & Rail 24.2 Media 20.8 Specialty Retail 16.3 Tobacco 15.9 Trading Companies & Distribution 14.5
SOURCE: BARRA BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500 ONE YEAR ENDED JUNE 30, 2001 [CHART] Airlines -13.1 Wireless Communication -14.2 Beverages -15.6 Household Products -16.0 Personal Products -16.8 Internet Software & Services -16.9 Healthcare Equipment -17.3 Multi-Utilites -24.4 Electronic Equipment -31.9 Communications Equipment -47.1
SOURCE: BARRA 7 GLOBAL FUND For the fiscal year ended June 30, 2001, the Brinson Global Fund outperformed its benchmark. The Fund's Class I shares returned 5.20% and Class N Shares returned 4.95% in comparison to the Global Securities Markets Index* which fell 10.55%. EQUITY MARKETS Global equity markets were volatile throughout the fiscal year. In the United States, a sharp downturn in capital spending led to weak corporate profits, a significant decline in economic growth and wide price swings in the equity markets. While virtually all economic sectors were affected by the negative macroeconomic environment, technology stocks were among the hardest hit. The problems in the United States had a negative effect on other world markets. As a result, many overseas markets struggled during the period. In managing the equity portion of the Fund, we trimmed technology and telecommunications positions, as the business environment for technology continued to deteriorate. We overweighted the Fund's holdings in basic materials stocks, including paper, forest products and chemicals. The Fund was underweighted in consumer discretionary stocks, as consumers cut back their spending, hurting the revenues of companies in the durables and media sectors. The Fund had no exposure to the automobile industry, as we saw the industry continued to struggle with excess capacity. In addition, restructuring problems manifested themselves in some automobile companies. FIXED INCOME MARKETS Despite successive interest rate reductions, many global government bond markets ended the fiscal year with disappointing results. A short-term rebound in the equity markets in April led to the worst month for global bonds in almost two years. We took advantage of this weakness to lengthen duration in the Fund. Markets recovered slowly, but by the end of the fiscal period, yields on 10-year benchmark bonds in the United States and Europe had risen. Central bank easing helped shorter-term bonds, and yields on these were little changed. The sole market to display resilience was Japan, where the election of a new prime minister buoyed market sentiment. In Europe, bond markets recovered despite ongoing uncertainty over the European Central Bank's policy. With growth slowing, prospects brightened for the relative performance of European bonds and the Fund is overweighted in European markets. In contrast, the Fund is underexposed to the United Kingdom where long-term bond yields rose in response to impending regulatory changes. Canadian bonds tracked movements in the United States and yields offered attractive relative value. The Fund is overweighted in Canada. In the United States, the market appears to have priced in lower short-term rates and expectations for an economic recovery. At the end of the fiscal year, the long end of the Treasury market was slightly undervalued; therefore, we focused on the 10-year and 30-year sectors of the yield curve. A by-product of the aggressive Federal Reserve action has - -------------------------------------------------------------------------------- * AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 40% WILSHIRE 5000 INDEX; 22% MSCI WORLD EX USA (FREE) INDEX; 21% SALOMON SMITH BARNEY BIG BOND INDEX; 9% SALOMON NON-U.S. GOV'T BOND INDEX (UNHEDGED); 2% JP MORGAN EMBI GLOBAL; 3% MSCI EMERGING MARKETS FREE INDEX; AND 3% MERRILL LYNCH HIGH YIELD MASTER INDEX. 8 been excellent performance by some non-government bonds as the market prices in an economic recovery. At the end of the fiscal year, excess returns over comparable duration Treasurys showed a significant rebound from last year's poor performance. In emerging markets, yields rose as the poor performance of Argentina and Brazil affected the fixed income markets. Renewed concerns regarding refinancing risk caused Argentine bond prices to collapse in March. A $30 billion debt exchange in early June reduced Argentina's refinancing needs by $16 billion over the next five years. The exchange buys time for Argentina, but we believe the country needs to increase economic growth and reduce government spending if it is going to pay its sovereign obligations. As a result, the Fund is underweighted in Argentina. Brazil ended 2000 with a strong fundamental position-high growth, large fiscal surpluses and declining interest rates. However, the country's outlook deteriorated in the first six months of 2001 because of three shocks: contagion from Argentina, an electricity crisis and political uncertainties. Despite these difficulties, we believe Brazil is fundamentally attractive but is likely to be volatile in the medium term. Therefore, we reduced the Fund's overweighted position in Brazil to a market-weighted position. 9 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - ---------------------------------------------------------------------------------------------------------- BRINSON GLOBAL FUND CLASS I -0.53% 5.20% 3.12% 7.12% 8.54% BRINSON GLOBAL FUND CLASS N -0.63 4.95 2.84 N/A 4.08 GSMI Mutual Fund Index** -5.12 -10.55 3.24 8.11 10.03 MSCI World Equity (Free) Index -10.43 -20.16 1.30 8.36 10.91 Salomon Smith Barney World Gov't Bond Index -4.57 -3.07 1.36 2.44 4.63
* INCEPTION DATE OF THE BRINSON GLOBAL FUND CLASS I AND THE INDICES IS 8/31/92. INCEPTION DATE OF CLASS N IS 6/30/97. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 40% WILSHIRE 5000 INDEX; 22% MSCI WORLD EX USA (FREE) INDEX; 21% SALOMON SMITH BARNEY BIGBOND INDEX; 9% SALOMON NON-U.S. GOV'T BOND INDEX (UNHEDGED); 2% JPMORGAN EMBI GLOBAL; 3% MSCI EMERGING MARKETS FREE INDEX; AND 3% MERRILL LYNCH HIGH YIELD MASTER INDEX. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Fund Class I, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Gov't Bond Index if you had invested $1,000,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL FUND CLASS I VS. GSMI MUTUAL FUND INDEX, MSCI WORLD EQUITY FREE INDEX AND SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON GLOBAL GSMI MUTUAL MSCI WORLD EQUITY SALOMON SMITH BARNEY FUND CLASS I FUND INDEX FREE INDEX WORLD GOV'T. BOND INDEX 08/31/92 $1,000,000 $1,000,000 $1,000,000 $1,000,000 09/30/92 $1,013,000 $1,005,314 $991,424 $1,010,000 10/31/92 $1,007,000 $997,514 $964,679 $982,528 11/30/92 $1,022,000 $1,017,428 $981,884 $966,906 12/31/92 $1,032,925 $1,030,790 $990,218 $972,707 01/31/93 $1,048,115 $1,042,387 $993,555 $989,632 02/28/93 $1,068,369 $1,055,458 $1,017,111 $1,009,128 03/31/93 $1,081,142 $1,087,329 $1,075,990 $1,024,669 04/30/93 $1,086,223 $1,093,919 $1,125,787 $1,046,289 05/31/93 $1,097,400 $1,116,871 $1,151,608 $1,056,752 06/30/93 $1,107,567 $1,119,315 $1,141,995 $1,054,533 07/31/93 $1,110,624 $1,127,126 $1,165,369 $1,057,696 08/31/93 $1,134,059 $1,166,328 $1,219,770 $1,089,322 09/30/93 $1,134,084 $1,165,277 $1,197,451 $1,102,285 10/31/93 $1,143,329 $1,182,154 $1,230,666 $1,100,411 11/30/93 $1,131,002 $1,153,045 $1,160,611 $1,092,488 12/31/93 $1,148,054 $1,179,800 $1,216,970 $1,101,774 01/31/94 $1,173,590 $1,218,761 $1,297,251 $1,110,698 02/28/94 $1,152,310 $1,200,384 $1,280,212 $1,103,479 03/31/94 $1,118,262 $1,159,902 $1,225,058 $1,101,934 04/30/94 $1,122,518 $1,172,611 $1,263,624 $1,103,256 05/31/94 $1,124,646 $1,176,334 $1,267,366 $1,093,547 06/30/94 $1,116,140 $1,164,817 $1,263,653 $1,109,295 07/31/94 $1,132,192 $1,189,039 $1,287,844 $1,118,169 08/31/94 $1,156,805 $1,220,385 $1,326,764 $1,114,255 09/30/94 $1,139,683 $1,201,153 $1,291,735 $1,122,278 10/31/94 $1,137,543 $1,219,945 $1,328,898 $1,140,234 11/30/94 $1,122,561 $1,185,231 $1,271,623 $1,124,613 12/31/94 $1,126,372 $1,196,581 $1,283,696 $1,127,762 01/31/95 $1,139,482 $1,208,707 $1,264,851 $1,151,445 02/28/95 $1,167,887 $1,241,252 $1,283,628 $1,180,922 03/31/95 $1,183,182 $1,281,224 $1,345,555 $1,251,069 04/30/95 $1,206,125 $1,311,158 $1,392,625 $1,274,214 05/31/95 $1,244,362 $1,344,050 $1,405,192 $1,310,019 06/30/95 $1,256,423 $1,364,548 $1,404,729 $1,317,748 07/31/95 $1,284,098 $1,407,264 $1,475,059 $1,320,911 08/31/95 $1,300,703 $1,397,070 $1,442,137 $1,275,471 09/30/95 $1,322,842 $1,431,834 $1,484,735 $1,303,914 10/31/95 $1,332,805 $1,420,901 $1,461,670 $1,313,694 11/30/95 $1,371,549 $1,460,456 $1,512,615 $1,328,539 12/31/95 $1,398,239 $1,492,180 $1,557,004 $1,342,488 01/31/96 $1,424,264 $1,516,541 $1,586,115 $1,325,841 02/29/96 $1,418,349 $1,520,871 $1,595,762 $1,319,080 03/31/96 $1,428,996 $1,533,859 $1,622,255 $1,317,233 04/30/96 $1,447,923 $1,560,277 $1,660,368 $1,311,964 05/31/96 $1,452,655 $1,571,859 $1,661,696 $1,312,226 06/30/96 $1,462,269 $1,575,059 $1,670,552 $1,322,593 07/31/96 $1,440,730 $1,533,666 $1,611,513 $1,347,987 08/31/96 $1,463,465 $1,558,424 $1,630,570 $1,353,244 09/30/96 $1,511,330 $1,609,728 $1,694,507 $1,358,792 10/31/96 $1,536,459 $1,625,807 $1,706,172 $1,384,202 11/30/96 $1,596,290 $1,694,182 $1,802,355 $1,402,473 12/31/96 $1,595,424 $1,679,087 $1,773,711 $1,391,113 01/31/97 $1,615,268 $1,703,669 $1,795,453 $1,353,970 02/28/97 $1,629,820 $1,711,688 $1,815,917 $1,343,815 03/31/97 $1,604,685 $1,674,053 $1,779,574 $1,333,602 04/30/97 $1,621,882 $1,707,941 $1,837,951 $1,321,867 05/31/97 $1,689,351 $1,794,288 $1,951,681 $1,357,822 06/30/97 $1,736,975 $1,858,527 $2,048,772 $1,373,980 07/31/97 $1,792,537 $1,932,478 $2,143,333 $1,363,263 08/31/97 $1,746,236 $1,861,633 $1,998,274 $1,362,445 09/30/97 $1,800,475 $1,942,292 $2,106,916 $1,391,465 10/31/97 $1,747,558 $1,879,655 $1,996,320 $1,420,407 11/30/97 $1,751,527 $1,896,429 $2,031,234 $1,398,675 12/31/97 $1,770,868 $1,919,220 $2,056,055 $1,394,479 01/31/98 $1,791,307 $1,945,072 $2,113,738 $1,408,005 02/28/98 $1,857,002 $2,039,216 $2,256,707 $1,419,410 03/31/98 $1,899,340 $2,097,013 $2,351,687 $1,405,358 04/30/98 $1,902,260 $2,117,641 $2,374,682 $1,427,844 05/31/98 $1,892,040 $2,087,766 $2,345,868 $1,431,128 06/30/98 $1,880,791 $2,114,278 $2,400,735 $1,433,275 07/31/98 $1,876,373 $2,103,244 $2,397,112 $1,435,138 08/31/98 $1,726,145 $1,890,448 $2,077,594 $1,474,174 09/30/98 $1,780,639 $1,955,786 $2,114,567 $1,552,600 10/31/98 $1,845,443 $2,072,492 $2,306,035 $1,598,556 11/30/98 $1,896,992 $2,157,209 $2,443,377 $1,576,017 12/31/98 $1,918,264 $2,234,978 $2,562,157 $1,607,695 01/31/99 $1,921,515 $2,266,011 $2,618,456 $1,592,904 02/28/99 $1,874,371 $2,205,921 $2,548,875 $1,541,772 03/31/99 $1,905,259 $2,275,610 $2,654,608 $1,545,626 04/30/99 $1,983,290 $2,354,761 $2,759,698 $1,545,008 05/31/99 $1,947,525 $2,295,188 $2,658,034 $1,519,052 06/30/99 $1,970,339 $2,365,315 $2,781,678 $1,492,468 07/31/99 $1,965,421 $2,352,689 $2,773,413 $1,529,034 08/31/99 $1,934,276 $2,346,165 $2,768,271 $1,536,067 09/30/99 $1,906,409 $2,336,243 $2,742,247 $1,560,030 10/31/99 $1,903,131 $2,419,672 $2,884,671 $1,559,250 11/30/99 $1,911,327 $2,476,305 $2,965,698 $1,542,878 12/31/99 $1,946,875 $2,611,563 $3,205,899 $1,539,175 01/31/00 $1,889,358 $2,523,710 $3,022,471 $1,506,391 02/29/00 $1,861,471 $2,568,867 $3,030,353 $1,495,545 03/31/00 $1,925,960 $2,669,142 $3,240,084 $1,541,906 04/30/00 $1,925,960 $2,562,211 $3,102,944 $1,491,486 05/31/00 $1,931,189 $2,509,281 $3,024,390 $1,503,120 06/30/00 $1,960,819 $2,600,875 $3,126,209 $1,539,646 07/31/00 $1,952,104 $2,554,470 $3,038,069 $1,513,626 08/31/00 $1,976,505 $2,642,975 $3,137,025 $1,502,273 09/30/00 $1,943,389 $2,558,611 $2,970,373 $1,499,269 10/31/00 $1,939,903 $2,511,287 $2,920,673 $1,480,228 11/30/00 $1,959,076 $2,392,917 $2,743,143 $1,509,685 12/31/00 $2,073,907 $2,452,039 $2,786,559 $1,563,731 01/31/01 $2,131,105 $2,514,973 $2,840,640 $1,561,698 02/28/01 $2,092,358 $2,373,946 $2,600,882 $1,561,074 03/31/01 $2,016,708 $2,260,108 $2,429,900 $1,516,115 04/30/01 $2,073,907 $2,369,321 $2,609,734 $1,510,657 05/31/01 $2,077,597 $2,367,229 $2,576,726 $1,506,125 06/30/01 $2,062,836 $2,326,496 $2,495,850 $1,492,269
8/31/92 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 10 ASSET ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - ------------------------------------------------------- U.S. Equities 40.0% 33.5% International Equities 22.0 19.5 Emerging Markets Equities 3.0 4.5 Dollar Bonds 21.0 25.0 High Yield Bonds 3.0 6.5 International Bonds 9.0 7.5 Emerging Markets Debt 2.0 3.5 - ------------------------------------------------------- 100.0% 100.0%
CURRENCY ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - ------------------------------------------------------- U.S. 66.0% 52.9% Asia (Ex-Japan) 0.6 0.2 Australia/New Zealand 0.7 6.6 Canada 1.4 5.4 Emerging Markets 3.0 4.5 Euro 12.0 25.2 Japan 8.7 2.7 Other Europe 2.5 2.5 U.K. 5.1 0.0 - ------------------------------------------------------- 100.0% 100.0%
TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Allergan, Inc. 1.24% 2. Burlington Northern Santa Fe Corp. 1.08 3. Wells Fargo and Co. 1.06 4. Microsoft Corp. 1.02 5. Baxter International, Inc. 0.95 6. Freddie Mac 0.89 7. GPU, Inc. 0.89 8. Advanced Micro Devices, Inc. 0.83 9. Masco Corp. 0.80 10. Johnson & Johnson Co. 0.76
TOP TEN FIXED INCOME HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. U.S. Treasury Note 6.500%, due 02/15/10 2.35% 2. Federal National Mortgage Association 7.000%, due 09/01/23 1.47 3. U.S. Treasury Note 7.000%, due 07/15/06 1.36 4. U.S. Treasury Note 4.625%, due 02/28/03 0.96 5. U.S. Treasury Note 5.750%, due 08/15/03 0.87 6. Federal National Mortgage Association (REMIC), 7.500%, due 02/25/29 0.79 7. Government National Mortgage Association, 6.000%, due 05/20/29 0.78 8. Fannie Mae 7.125%, due 01/15/30 0.72 9. U.S. Treasury Bond 6.625%, due 02/15/27 0.64 10. Federal National Mortgage Association 7.000%, due 03/01/29 0.61
11 INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 U.S. EQUITIES - ------------------------------------------------------------------------ Basic Industries Chemicals 1.18% Housing/Paper 0.90 Metals 0.80 ------ 2.88 Capital Investment Capital Goods 1.45 Electronic Components 2.28 ------ 3.73 Computers Software 1.41 Systems 0.90 ------ 2.31 Consumer Autos/Durables 1.02 Food/House Products 1.28 Health: Drugs 4.17 Health: Non-Drugs 2.71 Leisure/Tourism 0.43 Retail/Apparel 2.11 ------ 11.72 Financial Banks 2.80 Non-Banks 3.39 ------ 6.19 Telecommunications Equipment 0.20 Services 1.78 ------ 1.98 Energy 0.91 Services/Miscellaneous 3.43 Transportation 1.63 U.S. Small Capitalization Equity 2.64 Utilities 1.86 ------ Total U.S. Equities 39.28 INTERNATIONAL EQUITIES Aerospace and Military 0.12 Appliances & Household 0.21 Autos/Durables 0.16 Banking 2.16 Beverages & Tobacco 0.68 Broadcasting & Publishing 0.72 Building Materials 0.24 Business & Public Service 0.29 Chemicals 0.59 Construction 0.12 Data Processing 0.21 Electric Components 0.68 Electronics 0.17 Energy 1.41 Financial Services 1.42 Food & House Products 1.03 Forest Products 0.14 Health & Personal Care 1.97 Housing/Paper 0.26% Industrial Components 0.13 Insurance 1.00 Leisure & Tourism 0.16 Machinery & Engineering 0.27 Metals: Non Ferrous 0.22 Metals: Steel 0.07 Multi-Industry 0.31 Non-Durables 0.03 Real Estate 0.15 Retail/Apparel 0.10 Services/Miscellaneous 0.04 Telecommunications 1.67 Transportation 0.66 Utilities 0.68 Wholesale & International Trade 0.04 ------ Total International Equities 18.11 EMERGING MARKETS EQUITIES 4.52 ------ TOTAL EQUITIES 61.91* U.S. BONDS U.S. Corporate Bonds Airlines 0.16 Appliances & Household Durables 0.05 Banks 0.06 Construction 0.06 Consumer 0.04 Electronics 0.01 Energy 0.22 Financial 0.82 Publishing 0.04 Recreation 0.11 Services/Miscellaneous 0.05 Telecommunications 0.31 Television Broadcasting 0.02 Utilities 0.11 ------ Total U.S. Corporate Bonds 2.06 Asset-Backed Securities 0.58 Corporate Mortgage-Backed Securities 2.02 International Dollar Bonds 0.31 U.S. Government Mortgage-Backed Securities 6.19 U.S. Government Obligations 6.33 ------ Total U.S. Bonds 17.49* HIGH YIELD BONDS 4.61 INTERNATIONAL BONDS Foreign Financial Bonds 0.58 Foreign Government Bonds 6.98 ------ Total International Bonds 7.56 EMERGING MARKETS BONDS 3.60 SHORT-TERM INVESTMENTS 5.95* ------ TOTAL INVESTMENTS 101.12 SECURITIES LENDING CASH COLLATERAL RECEIVED 20.82 LIABILITIES, LESS CASH AND OTHER ASSETS (21.94) ------ NET ASSETS 100.00% ======
- -------------------------------------------------------------------------------- * THE FUND HELD A LONG POSITION IN U.S. TREASURY FUTURES ON JUNE 30, 2001 WHICH INCREASED U.S. BOND EXPOSURE FROM 17.49% TO 25.17%. THE FUND HELD A SHORT POSITION IN STOCK INDEX FUTURES ON JUNE 30, 2001 WHICH REDUCED TOTAL EQUITY EXPOSURE FROM 61.91% TO 53.47%. THESE ADJUSTMENTS RESULT IN A NET INCREASE IN THE FUND'S EXPOSURE TO SHORT-TERM INVESTMENTS FROM 5.95% TO 6.71%. 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ EQUITIES -- 61.91% U.S. EQUITIES -- 39.28% Abbott Laboratories 14,300 $ 686,543 Advanced Micro Devices, Inc. (b)(c) 46,800 1,351,584 Allergan, Inc. (c) 23,600 2,017,800 American General Corp. 16,100 747,845 American Home Products Corp. 16,300 952,572 American Standard Companies, Inc. (b)(c) 12,600 757,260 Analog Devices, Inc. (b)(c) 15,800 683,350 Baxter International, Inc. (c) 31,600 1,548,400 Brinson U.S. Small Capitalization Equity Fund (b) 174,628 4,320,042 Burlington Northern Santa Fe Corp. (c) 58,600 1,767,962 Cardinal Health, Inc. (c) 13,950 962,550 Carnival Corp., Class A 23,000 706,100 Cephalon, Inc. (b)(c) 6,700 472,350 CIGNA Corp. (c) 10,300 986,946 Cisco Systems, Inc. (b) 20,900 380,380 Citigroup, Inc. (c) 13,907 734,846 Clear Channel Communications (b)(c) 7,800 489,060 CMS Energy Corp. (c) 14,400 401,040 CommScope, Inc. (b)(c) 14,200 333,700 Compaq Computer Corp. 45,300 701,697 Computer Sciences Corp. (b) 26,000 899,600 Compuware Corp. (b) 46,000 643,540 COR Therapeutics, Inc. (b)(c) 12,100 369,050 Dow Chemical Co. (c) 18,400 611,800 Eastman Chemical Co. 4,600 219,098 Electronic Data Systems Corp. 7,500 468,750 Eli Lilly and Co. 16,000 1,184,000 Emerson Electric Co. 15,000 907,500 Entergy Corp. 11,800 453,002 Exelon Corp. 11,400 730,968 Exxon Mobil Corp. (c) 9,000 786,150 Federated Department Stores, Inc. (b)(c) 9,100 386,750 FedEx Corp. (b) 16,200 651,240 First Data Corp. 15,830 1,017,077 FleetBoston Financial Corp. (c) 23,015 907,942 Freddie Mac 20,800 1,456,000 GATX Corp. 6,200 248,620 General Mills, Inc. (c) 25,400 1,112,012 Genzyme Corp. (b)(c) 9,400 573,400 GPU, Inc. 41,200 1,448,180 GreenPoint Financial Corp. 30,000 1,152,000 Household International, Inc. 13,700 913,790 Illinois Tool Works, Inc. 19,000 1,202,700 IMC Global, Inc. 30,900 315,180 Johnson & Johnson Co. (c) 24,758 1,237,900 Johnson Controls, Inc. (c) 5,300 384,091 JP Morgan Chase & Co. (c) 17,300 771,580 Kimberly-Clark Corp. 5,500 307,450 KPMG Consulting, Inc. (b) 12,200 187,270 Kroger Co. (b)(c) 44,500 1,112,500 Lear Corp. (b) 16,000 558,400 Lincoln National Corp. 6,400 331,200 Lyondell Chemical Co. (c) 19,500 299,910 Martin Marietta Materials, Inc. (c) 12,984 642,578 Masco Corp. (c) 52,300 1,305,408 Mattel, Inc. 44,000 832,480 Mead Corp. 14,700 $ 398,958 Microsoft Corp. (b)(c) 22,800 1,664,400 Motorola, Inc. (c) 29,130 482,393 Newell Rubbermaid, Inc. (c) 29,500 740,450 Nextel Communications, Inc. (b)(c) 62,600 1,095,500 Omnicom Group (c) 9,500 817,000 Pentair, Inc. (c) 15,396 520,385 PNC Financial Services Group . 11,800 776,322 Praxair, Inc. 10,300 484,100 Sapient Corp. (b)(c) 20,500 199,875 Sara Lee Corp. 51,454 974,539 SBC Communications, Inc. 23,900 957,434 SCI Systems, Inc. (b) 20,000 510,000 SICOR, Inc. 23,700 547,470 Target Corp. 10,700 370,220 Tellabs, Inc. (b) 18,900 366,282 Ultramar Diamond Shamrock Corp. 14,902 704,119 United Health Group, Inc. 11,400 703,950 Viacom, Inc. (b)(c) 11,300 584,775 Viad Corp. 15,300 403,920 W.W. Grainger, Inc. 17,700 728,532 Wells Fargo and Co. 37,300 1,731,839 XL Capital Ltd. (c) 6,100 500,810 York International Corp. 7,600 266,152 ------------ Total U.S. Equities 64,160,568 INTERNATIONAL EQUITIES -- 18.11% AUSTRALIA -- 0.83% Amcor Ltd. 16,520 55,567 Cable & Wireless Optus Ltd. 78,300 147,599 National Australia Bank Ltd. 2,300 40,963 National Australia Bank Ltd., Preferred 7,700 239,085 News Corp., Ltd., Preferred 18,636 149,325 QBE Insurance Group Ltd. 16,600 99,611 Rio Tinto Ltd. 9,645 167,307 Westpac Banking Corp., Ltd. 62,828 461,540 ------------ 1,360,997 ------------ BELGIUM -- 0.27% Electrabel S.A. 930 183,607 Fortis B 10,847 261,716 ------------ 445,323 ------------ CANADA -- 0.60% Alcan Aluminum Ltd. 4,420 185,817 BCE, Inc. 8,600 230,641 Canadian Pacific Ltd. 2,073 80,101 Magna International, Inc., Class A 1,800 110,579 Nortel Networks Corp. 10,500 96,863 Royal Bank of Canada 5,200 166,423 Shaw Communications, Inc., Class B 4,460 105,387 ------------ 975,811 ------------ DENMARK -- 0.29% Danske Bank A/S 8,800 158,108 Novo-Nordisk A/S 5,000 221,173 Tele Danmark A/S 2,600 93,723 ------------ 473,004 ------------
13
SHARES VALUE -------- ------------ FINLAND -- 0.63% Nokia Oyj 18,990 $ 430,378 Sampo Leonia Insurance, Class A 21,000 178,674 Stora Enso Oyj 17,900 193,972 UPM-Kymmene Corp. 8,020 226,708 ------------ 1,029,732 ------------ FRANCE -- 1.89% Air Liquide 1,330 191,078 Alcatel S.A. ADR 6,350 132,784 Aventis S.A., Class A (c) 6,784 541,594 Axa 6,904 196,681 Banque Nationale de Paris (c) 3,019 262,744 Cie de Saint Gobain (c) 1,687 229,228 Groupe Danone (c) 2,950 404,838 Societe Generale 4,400 260,566 Suez S.A. 3,050 98,121 Total Fina S.A., Class B 5,032 704,616 Usinor Sacilor 5,520 57,901 ------------ 3,080,151 ------------ GERMANY -- 0.66% Allianz AG (c) 1,230 361,024 Bayer AG 4,280 166,678 Bayerische Motoren Werke AG 4,800 158,077 Continental AG 5,700 80,346 E.on AG (c) 5,889 306,116 ------------ 1,072,241 ------------ HONG KONG -- 0.19% Esprit Holdings Ltd. 8,000 8,769 Hong Kong Electric Holdings 77,000 296,158 ------------ 304,927 ------------ IRELAND -- 0.17% Bank of Ireland 19,600 194,141 Eircom PLC 74,700 81,896 ------------ 276,037 ------------ ITALY -- 0.38% Assicurazioni Generali (c) 6,000 180,325 ENI Spa (c) 26,500 323,062 San Paolo-imi Spa 9,000 115,357 ------------ 618,744 ------------ JAPAN -- 3.70% Benesse Corp. 3,200 100,321 Canon, Inc. 4,000 161,642 Dai Nippon Printing Co., Ltd. 11,000 134,237 Daikin Industries Ltd. 3,000 55,564 East Japan Railway Co. 40 230,917 Fanuc Ltd. 2,200 109,541 Fuji Photo Film Co., Ltd. 6,000 258,820 Fujitsu 18,000 189,064 Hirose Electric Co., Ltd. 800 60,936 Hitachi Ltd. 18,000 176,796 Hoya Corp. 1,600 101,347 Kamigumi Co., Ltd. 16,000 78,255 Kao Corp. 7,000 173,990 Kuraray Co., Ltd. 12,000 89,288 Matsushita Electric Industrial Co. 10,000 $ 156,511 Minebea Co., Ltd. (c) 32,000 210,648 Mitsubishi Corp. (c) 8,000 64,464 Mitsubishi Estate Co., Ltd. 20,000 183,932 Mizuho Holding, Inc. 33 153,464 Murata Manufacturing Co., Inc. 3,600 239,288 Nikko Securities Co., Ltd. 16,000 128,159 Nippon Steel Co. 34,000 51,523 Nippon Telegraph & Telephone Corp. 68 354,394 Nomura Securities Co., Ltd. 10,000 191,629 Omron Corp. 3,000 54,242 Ono Pharmaceutical Co., Ltd. 7,000 222,258 Orix Corp. 3,000 291,774 Rohm Co. 1,800 279,699 Sekisui House Ltd. 8,000 67,928 Seven-Eleven Japan Co., Ltd. 4,000 156,190 Shin-Etsu Chemical Co., Ltd. 3,000 110,167 Sony Corp. 2,800 184,092 Sumitomo Bank 15,000 123,877 Sumitomo Chemical Co. 29,000 130,909 Takeda Chemical Industries 7,000 325,529 Takefuji Corp. 900 81,759 Tokio Marine & Fire Insurance Co. 9,000 84,068 West Japan Railway Co. 14 75,882 Yamanouchi Pharmaceutical Co., Ltd. 8,000 224,503 ------------ 6,067,607 ------------ NETHERLANDS -- 1.22% ABN-AMRO Holdings NV 12,243 229,997 Aegon NV 10,803 304,097 Akzo Nobel NV 6,400 270,911 Elsevier NV 26,270 326,929 ING Groep NV 1,100 71,893 Philips Electronics NV 7,122 188,782 TNT Post Group NV 11,700 244,163 Wolters Kluwer NV 13,067 351,234 ------------ 1,988,006 ------------ NEW ZEALAND -- 0.09% Lion Nathan Ltd. 64,020 141,256 ------------ NORWAY -- 0.06% Telenor ASA 24,200 99,798 ------------ PORTUGAL -- 0.22% Brisa-Auto Estradas de Portugal S.A. 16,700 141,382 Electricidade de Portugal S.A. 87,100 207,943 Portugal Telecom 2,100 14,649 ------------ 363,974 ------------ SINGAPORE -- 0.19% DBS Group Holdings Ltd. 26,000 191,219 Neptune Orient Lines 146,000 112,184 ------------ 303,403 ------------ SPAIN -- 0.41% Altadis S.A. 760 10,835 Banco Popular Espanol S.A. 6,747 235,848 Banco Santander Central Hispano S.A. 24,496 221,899 Telefonica S.A. (b) 16,875 208,009 ------------ 676,591 ------------
14
SHARES VALUE -------- ------------ SWEDEN -- 0.43% Sandvik AB 6,500 $ 130,771 Svenska Cellulosa AB 1,660 35,151 Svenska Handelsbanken AB 15,340 219,135 Swedish Match AB 68,340 320,185 ------------ 705,242 ------------ SWITZERLAND -- 1.00% Givaudan S.A. (Reg.) (b) 493 136,723 Nestle S.A. (Reg.) 2,010 427,160 Novartis AG (Reg.) 9,408 340,468 Roche Holding AG (Gen.) 6,500 468,289 Swiss Reinsurance Co. (Reg.) 47 93,922 Zurich Financial Services AG (Reg.) 472 160,966 ------------ 1,627,528 ------------ UNITED KINGDOM -- 4.88% BAE Systems PLC 41,000 196,339 Barclays PLC 8,000 245,275 BP Amoco PLC 58,000 476,781 British Land Company PLC 8,000 54,568 British Telecommunications PLC 64,000 402,340 Carlton Communications PLC 13,000 61,431 Charter PLC 33,676 106,800 Compass Group PLC 16,000 128,038 Diageo PLC 24,209 265,569 Dixons Group PLC 13,000 42,600 Emap PLC 8,000 78,758 Gallaher Group PLC 41,000 257,749 GlaxoSmithKline PLC (b) 21,901 616,027 Hanson PLC 22,000 161,974 HSBC Holdings PLC 26,000 308,070 Invensys PLC 86,000 163,282 Kelda Group PLC 36,080 197,896 Lattice Group PLC (b) 117,000 261,220 Lloyds TSB Group PLC 31,969 319,897 Marconi PLC 32,360 115,142 Nycomed Amersham PLC 22,844 165,457 Powergen PLC 4,000 40,448 Prudential Corp. PLC 21,040 254,774 Reckitt & Benckiser PLC 19,000 273,895 Rentokil Initial PLC 48,000 162,691 RMC Group PLC 14,000 134,873 Rolls-Royce PLC 3,000 9,894 Royal & Sun Alliance Insurance Group PLC 1,884 14,176 Royal Bank of Scotland Group PLC 17,000 374,648 Scottish & Newcastle PLC 15,000 117,609 Scottish & Southern Energy PLC 29,380 276,842 Scottish Power PLC 21,000 154,464 Shell Transport & Trading PLC 53,000 440,524 Smurfit (Jefferson) Group PLC 111,000 202,942 Tesco PLC 78,190 282,062 Trinity Mirror PLC 17,815 99,718 United Business Media PLC 7,902 64,235 Vodafone Group PLC 197,356 437,156 ------------ 7,966,164 ------------ Total International Equities 29,576,536 ------------ EMERGING MARKETS EQUITIES -- 4.52% Brinson Emerging Markets Equity Fund (b) 910,794 $ 7,386,994 ------------ Total Equities (Cost $97,452,845) 101,124,098 ------------ FACE AMOUNT ---------- BONDS -- 33.26% U.S. BONDS -- 17.49% U.S. CORPORATE BONDS -- 2.06% AOL Time Warner, Inc. 6.750%, due 04/15/11 $ 35,000 34,444 AT&T Wireless Services, Inc., 144A 7.875%, due 03/01/11 55,000 55,105 Avon Products, Inc. 7.150%, due 11/15/09 50,000 50,928 Bank of America Corp. 7.400%, due 01/15/11 50,000 51,953 Bank One Corp. 7.875%, due 08/01/10 50,000 53,511 Black & Decker Corp., 144A 7.125%, due 06/01/11 75,000 74,347 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 30,000 29,721 Capital One Bank 8.250%, due 06/15/05 50,000 51,710 Caterpillar, Inc. 6.550%, due 05/01/11 25,000 25,090 Cendant Corp. 7.750%, due 12/01/03 130,000 132,342 Centex Corp. 9.750%, due 06/15/05 85,000 92,376 CIT Group, Inc. 5.625%, due 05/17/04 105,000 104,631 Citigroup, Inc. 7.250%, due 10/01/10 160,000 166,435 Citizens Communications Co. 9.250%, due 05/15/11 105,000 109,156 Comcast Cable Communications 6.750%, due 01/30/11 30,000 29,321 Conoco, Inc. 6.950%, due 04/15/29 45,000 43,265 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 200,000 197,158 Delhaize America, Inc., 144A 8.125%, due 04/15/11 95,000 99,093 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 100,000 104,576 Duke Energy Field Services 6.875%, due 02/01/11 15,000 14,667 Equistar Chemicals LP 8.750%, due 02/15/09 70,000 64,235 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 40,000 40,895 First Union National Bank 7.800%, due 08/18/10 50,000 53,547 Ford Motor Credit Co. 6.875%, due 02/01/06 60,000 60,786 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 50,000 49,720
15
FACE AMOUNT VALUE ---------- ------------ Harrah's Operating Co., Inc., 144A 7.125%, due 06/01/07 $ 40,000 $ 39,635 Household Finance Corp. 6.750%, due 05/15/11 160,000 157,848 ING Capital Funding Trust III 8.439%, due 12/29/49 20,000 21,218 Liberty Financial Co. 7.625%, due 11/15/28 30,000 29,610 Mirant Americas Generation, Inc., 144A 7.625%, due 05/01/06 15,000 15,141 Morgan Stanley Dean Witter 6.750%, due 04/15/11 125,000 124,133 News America Holdings, Inc. 7.125%, due 04/08/28 75,000 65,337 Nisource Finance Corp. 7.875%, due 11/15/10 65,000 68,865 Northrop Grumman Corp., 144A 7.125%, due 02/15/11 50,000 49,410 Pacific Gas & Electric Co. 7.050%, due 03/01/24 100,000 81,000 Phillips Petroleum Co. 8.750%, due 05/25/10 50,000 56,903 Pure Resources, Inc., 144A 7.125%, due 06/15/11 25,000 24,602 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 80,000 82,648 Sprint Capital Corp. 7.625%, due 01/30/11 120,000 119,066 Telus Corp. 8.000%, due 06/01/11 110,000 112,444 Transocean Sedco Forex, Inc., 144A 6.625%, due 04/15/11 30,000 29,447 TRW, Inc. 7.625%, due 03/15/06 20,000 20,590 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 70,000 71,231 Verizon Global Funding Corp., 144A 7.750%, due 12/01/30 50,000 51,426 Viacom, Inc. 8.625%, due 08/01/12 110,000 121,150 Wells Fargo Bank NA 6.450%, due 02/01/11 120,000 118,005 WorldCom, Inc. 7.500%, due 05/15/11 110,000 107,101 ------------ 3,355,822 ------------ ASSET-BACKED SECURITIES-- 0.58% Capital One Master Trust 7.200%, due 08/15/08 460,000 485,023 Sears Credit Account Master Trust, 99-3, Class A, 6.450%, due 11/15/05 230,000 237,178 Vanderbilt Mortgage Finance 8.255%, due 05/07/17 215,000 230,332 ------------ 952,533 ------------ CORPORATE MORTGAGE-BACKED SECURITIES -- 2.02% Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2, 7.320%, due 10/15/32 440,000 458,485 CS First Boston Mortgage Securities Corp. 6.238%, due 2/15/34, 144A $ 340,000 $ 336,542 7.545%, due 04/15/10 140,000 147,958 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B, 7.300%, due 06/10/32 145,000 151,130 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B, 7.180%, due 08/10/10 125,000 128,955 LB Commercial Conduit Mortgage Trust, 99-C, Class A2, 7.325%, due 10/15/32 70,000 73,065 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1, 6.410%, due 08/15/07 232,830 236,195 Morgan Stanley Dean Witter 6.660%, due 02/15/33 75,000 74,963 7.570%, due 12/15/09 95,000 100,362 Norwest Asset Securities Corp., 99-3, Class A3, 6.000%, due 02/25/29 606,318 585,557 Norwest Asset Securities Corp., 96-2, Class A9, 7.000%, due 09/25/11 435,000 442,430 Residential Asset Securitization Trust, 96-A3, Class A11, 6.592%, due 10/18/10 80,000 79,690 7.500%, due 07/25/11 474,654 485,315 ------------ 3,300,647 ------------ INTERNATIONAL DOLLAR BONDS -- 0.31% Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97 85,000 65,827 Gulf Canada Resources Ltd. 7.125%, due 01/15/11 10,000 10,261 HSBC Capital Funding LP, 144A 9.547%, due 12/29/49 30,000 33,901 Petroleum Geo-Services A/S 6.625%, due 03/30/08 30,000 28,078 7.500%, due 03/31/07 20,000 19,823 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14 40,000 39,350 Stora Enso Oyj 7.375%, due 05/15/11 20,000 20,257 Tyco International Group S.A. 6.750%, due 02/15/11 115,000 113,923 7.000%, due 06/15/28 30,000 28,344 United Mexican States 8.375%, due 01/14/11 85,000 85,553 Vodafone Group PLC 7.750%, due 02/15/10 50,000 52,532 ------------ 497,849 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 6.19% Fannie Mae 7.125%, due 01/15/30 1,105,000 1,181,203 Fannie Mae Grantor Trust 7.500%, due 06/19/30 420,100 435,400 Fannie Mae Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 12,878 13,623 Federal Home Loan Mortgage Corp., Gold 6.500%, due 04/01/29 773,582 762,832 Federal National Mortgage Association 6.500%, due 03/01/19 242,738 241,236 7.000%, due 09/01/23 2,377,220 2,400,993
16
FACE AMOUNT VALUE ---------- ------------ Federal National Mortgage Association--(Continued) 7.000%, due 03/01/29 $ 993,742 $ 998,307 7.500%, due 02/25/29 (REMIC) (c) 1,244,118 1,287,313 7.500%, due 05/01/31 151,840 155,044 Government National Mortgage Association 6.000%, due 11/20/28 297,647 287,319 6.000%, due 12/20/28 191,577 184,930 6.000%, due 02/20/29 254,666 245,830 6.000%, due 05/20/29 1,326,783 1,280,746 6.500%, due 01/15/29 227,283 225,079 7.500%, due 02/15/27 395,738 406,192 9.000%, due 11/15/04 6,340 6,728 ------------ 10,112,775 ------------ U.S. GOVERNMENT OBLIGATIONS -- 6.33% U.S. Treasury Note (c) 4.625%, due 02/28/03 1,550,000 1,560,266 5.750%, due 08/15/03 1,390,000 1,428,807 6.500%, due 02/15/10 3,575,000 3,840,608 7.000%, due 07/15/06 2,040,000 2,213,270 7.500%, due 02/15/05 230,000 250,302 U.S. Treasury Bond (c) 6.625%, due 02/15/27 955,000 1,046,147 ------------ 10,339,400 ------------ Total U.S. Bonds 28,559,026 ------------ SHARES -------- HIGH YIELD BONDS -- 4.61% Brinson High Yield Fund 555,787 7,530,852 ------------ FACE AMOUNT -------- INTERNATIONAL BONDS -- 7.56% AUSTRIA -- 0.46% Government of Austria 3.900%, due 10/20/05 EUR 360,000 295,228 5.500%, due 01/15/10 (c) 540,000 462,452 ------------ 757,680 ------------ BELGIUM -- 0.36% Government of Belgium 5.750%, due 03/28/08 600,000 526,619 7.000%, due 05/15/06 60,000 55,434 ------------ 582,053 ------------ CANADA -- 1.50% Government of Canada 4.250%, due 12/01/21 CAD 650,000 557,486 4.250%, due 12/01/26 415,000 341,084 5.750%, due 06/01/02 415,000 276,220 5.750%, due 06/01/29 230,000 146,099 6.000%, due 09/01/05 830,000 554,737 6.000%, due 06/01/11 320,000 212,074 8.000%, due 06/01/23 330,000 266,383 Government of Canada, Real Return Bond 4.250%, due 12/01/21 100,000 85,767 ------------ 2,439,850 ------------ FRANCE -- 1.13% Government of France 3.500%, due 07/12/04 EUR 200,000 $ 164,938 4.000%, due 10/25/09 (OAT) 720,000 564,180 4.750%, due 03/12/02 (BTAN) 490,000 415,634 8.500%, due 12/26/12 650,000 704,155 ------------ 1,848,907 ------------ GERMANY -- 1.24% Bundesrepublik Deutschland 4.500%, due 07/04/09 160,000 131,376 DePfa Deutsche Pfandbriefbank AG (c) 4.750%, due 03/20/03 300,000 255,115 Depfa Pfandbrief Bank 5.750%, due 03/04/09 685,000 592,892 Government of Germany 6.000%, due 01/05/06 435,000 387,568 6.500%, due 07/04/27 230,000 212,604 Treuhandanstalt 6.750%, due 05/13/04 500,000 447,763 ------------ 2,027,318 ------------ ITALY -- 1.16% Buoni Poliennali Del Tes 3.250%, due 04/15/04 (c) 460,000 376,799 5.250%, due 11/01/29 (c) 310,000 234,688 6.750%, due 07/01/07 735,000 674,115 8.750%, due 07/01/06 420,000 413,122 12.000%, due 09/01/02 210,000 192,614 ------------ 1,891,338 ------------ SPAIN -- 0.69% Government of Spain 3.250%, due 01/31/05 450,000 363,671 6.150%, due 01/31/13 (c) 240,001 213,328 7.350%, due 03/31/07 480,000 453,413 8.200%, due 02/28/09 100,000 100,398 ------------ 1,130,810 ------------ SWEDEN -- 0.57% Government of Sweden 5.000%, due 01/28/09 SEK 2,200,000 197,644 5.000%, due 01/15/04 3,800,000 350,035 5.500%, due 04/12/02 295,000 27,266 6.750%, due 05/05/14 1,890,000 191,074 8.000%, due 08/15/07 1,600,000 168,235 ------------ 934,254 ------------ UNITED KINGDOM -- 0.45% European Investment Bank 6.125%, due 12/07/05 GBP 70,000 98,775 U.K. Treasury 6.250%, due 11/25/10 150,000 225,156 8.000%, due 12/07/15 140,000 250,634 8.500%, due 12/07/05 100,000 156,869 ------------ 731,434 ------------
17
SHARES VALUE -------- ------------ Total International Bonds $ 12,343,644 ------------ EMERGING MARKETS BONDS -- 3.60% Brinson Emerging Markets Debt Fund (b) 202,113 5,884,177 ------------ Total Bonds (Cost $56,084,405) 54,317,699 ------------ SHORT-TERM INVESTMENTS -- 5.95% INVESTMENT COMPANIES -- 4.12% Brinson Supplementary Trust U.S. Cash Management Prime Fund 6,737,178 6,737,178 ------------ FACE AMOUNT -------- U.S. GOVERNMENT OBLIGATIONS -- 1.83% U.S. Treasury Bill, due 08/09/01 $3,000,000 2,988,619 ------------ Total Short Term Investments (Cost $9,721,643) 9,725,797 ------------ Total Investments (Cost $163,258,893) -- 101.12% (a) 165,167,594 ------------ Total Cash Collateral Received for Securities Loaned (Cost $34,552,487) -- 20.82% (a) 34,000,528 ------------ Liabilities, less cash and other assets -- (21.94%) (35,830,895) ------------ Net Assets -- 100% $163,337,227 ============ CASH COLLATERAL RECEIVED FOR SECURITIES LOANED -- 20.82% COMMERCIAL PAPER -- 15.50% AT&T Corp. Restricted 3.980%, due 07/19/01 $1,650,000 $ 1,649,472 Cinergy Corp. 5.000%, due 07/11/01 1,500,000 1,498,575 Conectiv Inc. 4.500%, due 07/02/01 1,500,000 1,499,813 Eastman Chemical Co. 5.000%, due 08/06/01 1,000,000 996,340 Exelon Corp. 4.550%, due 07/02/01 2,000,000 1,999,747 Goodyear Tire & Rubber 5.000%, due 07/13/01 1,500,000 1,497,500 Harrah's Operating 4.650%, due 07/13/01 2,000,000 1,997,680 Hilton Hotels Corp. 4.500%, due 07/30/01 1,500,000 1,494,563 Houston Industries Financeco LP 4.350%, due 07/12/01 2,000,000 1,997,861 Kroger Co., 5.000%, due 07/02/01 2,000,000 1,999,722 MCN Energy Enterprises 5.300%, due 07/06/01 2,000,000 1,998,528 Nisource Finance Corp. 5.000%, due 07/02/01 1,187,000 1,187,000 Sprint Corp. 4.180%, due 07/10/01 2,000,000 1,998,280 Texas Utilities Co. 4.080%, due 07/25/01 1,500,000 1,496,355 FACE AMOUNT VALUE -------- ------------ Tyco International Group S.A. 4.400%, due 07/24/01 $1,000,000 $ 997,380 4.450%, due 07/27/01 1,000,000 997,189 ------------ 25,306,005 ------------ CORPORATE DEBT OBLIGATIONS -- 5.32% Arrow Electronics, Inc. 5.846%, due 10/05/01 2,500,000 2,500,362 Centex Corp. 4.890%, due 10/29/01 1,500,000 1,499,786 Pacific Gas & Electric, FRN 7.680%, due 10/31/01 2,000,000 1,460,000 Petro Geo-Services, FRN 4.437%, due 03/20/02 2,000,000 1,981,124 Qwest Capital Funding 6.875%, due 08/15/01 1,250,000 1,253,251 ------------ 8,694,523 ------------ $ 34,000,528 ============
See accompanying notes to schedule of investments. 18 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $203,050,402 and net unrealized depreciation consisted of: Gross unrealized appreciation $ 9,357,475 Gross unrealized depreciation (13,239,755) ------------ Net unrealized depreciation $ (3,882,280) ============
(b) Non-income producing security. (c) Security, or portion thereof, was on loan at June 30, 2001. E.E.T.C.: Enhanced Equipment Trust Certificate FRN: Floating rate note -- The rate disclosed is that in effect at June 30, 2001. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2001, the value of these securities amounted to $918,615 or 0.56% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS The Global Fund had the following open forward foreign currency contracts as of June 30, 2001:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ------------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 08/08/01 24,400,000 $12,383,827 $ (770,793) British Pound (GBP) 08/08/01 1,150,000 1,615,237 (19,338) Canadian Dollar (CAD) 08/08/01 11,800,000 7,770,366 (100,105) Euro (EUR) 08/08/01 36,250,000 30,709,566 (2,920,353) Japanese Yen (JPY) 08/08/01 850,000,000 6,842,072 (184,579) New Zealand Dollar (NZD) 08/08/01 9,200,000 3,699,704 (360,716) Swiss Franc (CHF) 08/08/01 2,200,000 1,224,677 (126,674) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) 08/08/01 6,200,000 3,146,710 (98,675) British Pound (GBP) 08/08/01 7,250,000 10,183,016 344,824 Canadian Dollar (CAD) 08/08/01 3,600,000 2,370,620 (71,408) Euro (EUR) 08/08/01 9,100,000 7,709,160 401,827 Japanese Yen (JPY) 08/08/01 1,080,000,000 8,693,456 742,902 New Zealand Dollar (NZD) 08/08/01 9,200,000 3,699,704 228,696 ------------ Total $ (2,934,392) ============
FUTURES CONTRACTS The Global Fund had the following open futures contracts as of June 30, 2001:
SETTLEMENT COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN/LOSS ---------- ------------- ----------- ------------ U.S. INTEREST RATE FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 92 contracts September 2001 $ 9,463,707 $ 9,507,625 $ 43,918 10 year U.S. Treasury Notes,12 contracts September 2001 1,225,303 1,236,188 10,885 30 year U.S. Treasury Bonds, 18 contracts September 2001 1,788,642 1,805,625 16,983 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 40 contracts September 2001 12,537,025 12,317,000 220,025 JPY Topix Index September 2001 1,467,520 1,454,779 (12,741) ------------ Total $ 279,070 ============
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2001 was $2,988,619. See accompanying notes to financial statements. 19 GLOBAL EQUITY FUND The Brinson Global Equity Fund Class I shares produced an annualized return of 8.42% since inception on January 31, 1994 compared to the 9.22% return for its benchmark, the MSCI World Equity (Free) Index. For the fiscal year ended June 30, 2001, the Fund's Class I shares declined 4.07% and Class N shares declined 4.45%, comparing favorably to the benchmark's 20.16% fall. During the fiscal year, most global equity markets were marked by turbulence, as investors grew increasingly concerned about weak corporate profits and a slowdown in economic growth. In most markets, a sharp decline in capital spending in the technology, media and telecommunications sectors pushed growth stocks lower. While growth stocks struggled, value stocks--those that do not reflect the full value of a company's worth--performed relatively well. During the height of the bull market, value stocks had been overlooked by investors who mostly preferred rapidly growing "new economy" companies. As growth stocks declined, however, investors turned to "old economy" companies. As a result, select financial, basic materials, food, beverage and utility stocks made gains. While there were pockets of strength in many equity markets, most world markets struggled during the fiscal year. In the United States a downward trend in economic growth dominated market sentiment. Despite six Federal Reserve Board interest-rate cuts totaling 2.75%, a tax rebate and long-term tax rate reductions, the economy remained stubbornly in the doldrums. Corporate profits continued to decline, and analysts' expectations for U.S. profits were for an approximate 15% decline. This figure hides a wide dispersion among sectors. Some companies, such as those in the energy, healthcare and utility sectors may do better, whereas U.S. technology sector profits could fall by 60%. While the U.S. stock market had a number of short-term rallies, in general, broad market indices declined. Investors appeared uncertain as to when corporate profits and the economy would pick up. The problems in the United States spilled over to other world economies. The emerging markets of Latin America and Asia faced a number of obstacles. Many of these countries, particularly in Asia, are highly dependent on the United States, Europe and Japan as markets for their goods and services. As economic growth declined in these large industrial regions, many emerging market countries saw their exports shrink. Fewer exports led to lower earnings, and ultimately, to lower stock prices. Debt problems and political concerns were also factors in the performance of emerging markets. Late in the fiscal year, Argentina announced a debt swap program. Under the program, Argentina swapped a significant amount of short-term debt for longer-term debt. The $30 billion debt exchange in early June reduced Argentina's refinancing needs by $16 billion over the next five years. The exchange buys time for Argentina, but we believe the country needs to increase economic growth and reduce government spending if it is going to be successful in paying its creditors. Brazil began 2001 with a strong fundamental position--high growth, large fiscal surpluses and declining interest rates. However, the country's outlook deteriorated in the first six 20 months of the year because of three shocks: contagion from Argentina, an electricity crisis and political uncertainties. In Japan, gross domestic product declined to recession levels. Japan's difficult economic situation might give impetus to the new prime minister's plans for structural reform. Japan's banks continued to be mired in bad debt, and solving the loan problem could result in a rise in corporate bankruptcies and unemployment. With the globalization of most industries, Europe was not immune to the slowdown in the United States. In Europe, the TMT sector--technology, media and telecommunications--was particularly hard hit. As a result, stocks on many European exchanges declined. In managing the Fund, we trimmed technology and telecommunications positions, as the business environment for technology continued to deteriorate. We overweighted the Fund in basic materials stocks, including paper, forest products and chemicals. The Fund was underweighted in consumer discretionary stocks, as consumers cut back their spending, hurting the revenues of companies in the durables and media sectors. The Fund had no exposure to the automobile industry, because the industry continued to struggle with excess capacity. In addition, restructuring problems manifested themselves in some automobile companies. 21 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - --------------------------------------------------------------------------------------------------------- BRINSON GLOBAL EQUITY FUND CLASS I -6.47% -4.07% 2.76% 7.47% 8.42% BRINSON GLOBAL EQUITY FUND CLASS N -6.71 -4.45 2.44 N/A 3.95 MSCI World Equity (Free) Index -10.43 -20.16 1.30 8.36 9.22
* PERFORMANCE INCEPTION DATE OF THE BRINSON GLOBAL EQUITY CLASS I AND MSCI WORLD EQUITY (FREE) INDEX IS 1/31/94. INCEPTION DATE OF CLASS N IS 6/30/97. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund Class I and the MSCI World Equity (Free) Index if you had invested $1,000,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL EQUITY FUND CLASS I VS. MSCI WORLD EQUITY FREE INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON GLOBAL EQUITY FUND CLASS I MSCI WORLD EQUITY FREE INDEX 1/31/1994 $1,000,000 $1,000,000 2/28/1994 $978,000 $986,865 3/31/1994 $935,000 $944,349 4/30/1994 $957,000 $974,078 5/31/1994 $964,000 $976,963 6/30/1994 $953,025 $974,101 7/31/1994 $967,085 $992,749 8/31/1994 $1,008,259 $1,022,751 9/30/1994 $981,144 $995,748 10/31/1994 $983,153 $1,024,396 11/30/1994 $957,042 $980,244 12/31/1994 $956,520 $989,551 1/31/1995 $942,320 $975,024 2/28/1995 $957,535 $989,498 3/31/1995 $965,650 $1,037,236 4/30/1995 $991,008 $1,073,520 5/31/1995 $1,004,194 $1,083,208 6/30/1995 $1,010,802 $1,082,850 7/31/1995 $1,057,638 $1,137,065 8/31/1995 $1,075,010 $1,111,687 9/30/1995 $1,094,426 $1,144,524 10/31/1995 $1,092,382 $1,126,744 11/30/1995 $1,131,213 $1,166,016 12/31/1995 $1,166,324 $1,200,233 1/31/1996 $1,201,270 $1,222,674 2/29/1996 $1,206,730 $1,230,110 3/31/1996 $1,227,479 $1,250,533 4/30/1996 $1,261,333 $1,279,913 5/31/1996 $1,264,610 $1,280,937 6/30/1996 $1,270,202 $1,287,763 7/31/1996 $1,229,582 $1,242,252 8/31/1996 $1,251,539 $1,256,943 9/30/1996 $1,293,257 $1,306,229 10/31/1996 $1,297,648 $1,315,221 11/30/1996 $1,363,519 $1,389,365 12/31/1996 $1,367,688 $1,367,284 1/31/1997 $1,379,696 $1,384,044 2/28/1997 $1,398,908 $1,399,820 3/31/1997 $1,392,904 $1,371,804 4/30/1997 $1,401,310 $1,416,804 5/31/1997 $1,484,164 $1,504,475 6/30/1997 $1,540,253 $1,579,318 7/31/1997 $1,590,951 $1,652,211 8/31/1997 $1,517,318 $1,540,391 9/30/1997 $1,582,501 $1,624,139 10/31/1997 $1,496,797 $1,538,885 11/30/1997 $1,495,590 $1,565,798 12/31/1997 $1,514,304 $1,584,932 1/31/1998 $1,539,631 $1,629,398 2/28/1998 $1,634,275 $1,739,607 3/31/1998 $1,700,926 $1,812,823 4/30/1998 $1,698,260 $1,830,549 5/31/1998 $1,692,928 $1,808,337 6/30/1998 $1,678,772 $1,850,633 7/31/1998 $1,670,739 $1,847,840 8/31/1998 $1,487,333 $1,601,536 9/30/1998 $1,511,430 $1,630,037 10/31/1998 $1,611,835 $1,777,632 11/30/1998 $1,673,417 $1,883,504 12/31/1998 $1,726,828 $1,975,067 1/31/1999 $1,726,828 $2,018,465 2/28/1999 $1,676,039 $1,964,828 3/31/1999 $1,728,200 $2,046,333 4/30/1999 $1,847,623 $2,127,343 5/31/1999 $1,780,362 $2,048,974 6/30/1999 $1,849,022 $2,144,286 7/31/1999 $1,842,133 $2,137,916 8/31/1999 $1,813,199 $2,133,952 9/30/1999 $1,762,220 $2,113,891 10/31/1999 $1,787,020 $2,223,680 11/30/1999 $1,831,110 $2,286,141 12/31/1999 $1,949,056 $2,471,302 1/31/2000 $1,816,581 $2,329,904 2/29/2000 $1,780,037 $2,335,980 3/31/2000 $1,842,467 $2,497,654 4/30/2000 $1,822,672 $2,391,938 5/31/2000 $1,837,899 $2,331,384 6/30/2000 $1,898,807 $2,409,872 7/31/2000 $1,856,172 $2,341,928 8/31/2000 $1,889,671 $2,418,209 9/30/2000 $1,833,331 $2,289,744 10/31/2000 $1,854,649 $2,251,432 11/30/2000 $1,839,422 $2,114,581 12/31/2000 $1,947,478 $2,148,049 1/31/2001 $1,990,037 $2,189,738 2/28/2001 $1,874,277 $2,004,918 3/31/2001 $1,765,328 $1,873,114 4/30/2001 $1,870,873 $2,011,742 5/31/2001 $1,855,552 $1,986,297 6/30/2001 $1,821,530 $1,923,953
1/31/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 22 MARKET ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - ---------------------------------------------------- U.S. 52.5% 48.9% Australia 1.4 4.7 Austria 0.1 0.0 Belgium 0.4 0.9 Canada 2.2 1.7 Denmark 0.4 0.5 Finland 1.0 2.0 France 5.0 4.3 Germany 3.8 0.6 Greece 0.3 0.0 Hong Kong 1.0 1.2 Ireland 0.3 0.4 Italy 2.0 1.1 Japan 11.2 9.3 Netherlands 2.5 3.5 New Zealand 0.1 0.0 Norway 0.2 0.3 Portugal 0.2 0.5 Singapore 0.4 0.8 Spain 1.4 1.1 Sweden 1.0 2.0 Switzerland 3.0 3.2 United Kingdom 9.8 13.1 - ---------------------------------------------------- 100.0% 100.0%
CURRENCY ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - ---------------------------------------------------- U.S. 52.5% 39.5% Australia 1.4 9.4 Canada 2.2 6.2 Denmark 0.4 0.4 Euro 17.0 31.0 Hong Kong 1.0 0.0 Japan 11.2 5.2 New Zealand 0.1 0.1 Norway 0.2 0.2 Singapore 0.4 0.4 Sweden 1.0 1.0 Switzerland 3.0 3.0 United Kingdom 9.8 3.8 - ---------------------------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ---------------------------------------------------------- 1. American Home Products Corp. 1.63% 2. Johnson & Johnson Co. 1.55 3. Wells Fargo and Co. 1.49 4. Citigroup, Inc. 1.48 5. Eli Lilly and Co. 1.41 6. GPU, Inc. 1.32 7. Exxon Mobil Corp. 1.29 8. Microsoft Corp. 1.19 9. Burlington Northern Santa Fe Corp. 1.13 10. First Data Corp. 1.13 - ----------------------------------------------------------
TOP TEN INTERNATIONAL EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ---------------------------------------------------------- 1. Westpac Banking Corp. 1.79% 2. Total Fina S.A., Class B 1.09 3. National Australia Bank Ltd., Preferred 0.91 4. Orix Corp. 0.89 5. Aventis S.A. 0.88 6. Hong Kong Electric Holdings Ltd. 0.84 7. Lattice Group PLC 0.77 8. Nokia OYJ 0.76 9. HSBC Holdings PLC 0.75 10. Banque Nationale de Paris 0.74 - ----------------------------------------------------------
23 INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Basic Industries Chemicals 2.13% Housing/Paper 0.90 Metals 1.85 ------ 4.88 Capital Investment Electronic Components 1.84 Technology 0.51 ------ 2.35 Computers Services 0.25 Software 2.22 Systems 1.67 ------ 4.14 Consumer Autos/Durables 0.54 Food & House Products 2.01 Health: Drugs 7.80 Health: Non-Drugs 2.66 Retail/Apparel 0.93 ------ 13.94 Financial Banks 2.94 Non-Banks 3.29 ------ 6.23 Energy 2.17 Services/Miscellaneous 4.34 Telecommunications 2.99 Transportation 1.56 Utilities 1.77 ------ Total U.S. Equities 44.37 INTERNATIONAL EQUITIES Appliances & Household Durables 0.18% Banking 6.90 Beverages and Tobacco 1.86 Broadcasting & Publishing 1.88 Building Materials 0.71 Business & Public Service 0.37 Chemicals 1.17 Construction 0.36 Data Processing 0.23 Electric Components 2.71 Electronics 0.35 Energy 2.84 Financial Services 3.63 Food & House Products 2.28 Forest Products 0.73 Health: Drugs 3.37 Health: Non-Drugs 1.47 Housing/Paper 0.43 Industrial Components 0.36 Insurance 2.36 Machinery & Engineering 0.74 Merchandising 1.26 Non-Ferrous Metals 0.26 Multi-Industry 0.79 Real Estate 0.61 Recreation 0.43 Retail/Apparel 0.11 Services/Miscellaneous 0.32 Technology 0.23 Telecommunications 3.83 Textiles & Apparel 0.45 Transportation 0.57 Utilities 2.27 ------ Total International Equities 46.06 CONVERTIBLE PREFERRED 0.30 SHORT-TERM INVESTMENTS 8.60 ------ TOTAL INVESTMENTS 99.33 CASH AND OTHER ASSETS, LESS LIABILITIES 0.67 ------ NET ASSETS 100.00% ======
24 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ EQUITIES -- 90.73% U.S. EQUITIES -- 44.37% Abbott Laboratories 15,200 $ 729,752 Advanced Micro Devices, Inc. (b) 19,700 568,936 Allergan, Inc. 8,500 726,750 American Electric Power Co., Inc. 8,880 409,990 American General Corp. 10,100 469,145 American Home Products Corp. 19,400 1,133,736 Baxter International, Inc. 15,800 774,200 BellSouth Corp. 8,100 326,187 Bristol-Myers Squibb Co. 7,900 413,170 Burlington Northern Santa Fe Corp. 26,100 787,437 Cephalon, Inc. (b) 2,100 148,050 CIGNA Corp. 2,300 220,386 Cisco Systems, Inc. (b) 20,200 367,640 Citigroup, Inc. 19,500 1,030,380 Compaq Computer Corp. 5,100 78,999 Computer Sciences Corp. (b) 7,400 256,040 Compuware Corp. (b) 19,500 272,805 Conoco, Inc. 6,800 196,520 COR Therapeutics, Inc. (b) 12,700 387,350 Dell Computer Corp. (b) 5,100 133,365 Dominion Resources, Inc. 5,200 312,676 E.I. du Pont de Nemours and Co. 11,500 554,760 Eli Lilly and Co. 13,300 984,200 Emerson Electric Co. 10,700 647,350 Exxon Mobil Corp. 10,300 899,705 FedEx Corp. (b) 7,400 297,480 First Data Corp. 12,204 784,107 FleetBoston Financial Corp. 5,300 209,085 Freddie Mac 4,000 280,000 General Mills, Inc. 9,347 409,212 GPU, Inc. 26,100 917,415 GreenPoint Financial Corp. 11,900 456,960 Household International, Inc. 7,000 466,900 Illinois Tool Works, Inc. 8,800 557,040 Informix Corp. 2,968 17,333 International Business Machines Corp. 3,100 350,300 Interpublic Group of Companies, Inc. 6,300 184,905 Johnson & Johnson Co. 21,502 1,075,100 JP Morgan Chase & Co. 7,700 343,420 Kimberly-Clark Corp. 6,900 385,710 Kroger Co. (b) 14,800 370,000 Masco Corp. 29,100 726,336 McGraw-Hill Companies, Inc. 9,100 601,965 Micron Technology, Inc. (b) 7,100 291,810 Microsoft Corp. (b) 11,300 824,900 Newell Rubbermaid, Inc. 7,200 180,720 Nextel Communications, Inc. (b) 23,100 404,250 Omnicom Group 1,900 163,400 Oracle Corp. (b) 28,100 533,900 Pfizer, Inc. 17,901 716,935 Praxair, Inc. 7,600 357,200 Proctor & Gamble Co. 3,400 216,920 Sapient Corp. (b) 17,500 170,625 Sara Lee Corp. 21,081 399,274 SBC Communications, Inc. 16,600 664,996 Schlumberger Ltd. 5,400 284,310 SCI Systems, Inc. (b) 14,200 362,100 SICOR, Inc. 8,200 $ 189,420 Siebel Systems, Inc. 3,900 182,910 Smurfit-Stone Container Corp. (b) 14,745 238,869 Tellabs, Inc. (b) 10,400 201,552 Texas Instruments, Inc. 8,600 270,900 Verizon Communications, Inc. 9,200 492,200 Viacom, Inc. 5,360 284,294 W.W. Grainger, Inc. 9,100 374,556 Wal-Mart Stores, Inc. 9,500 463,600 Wells Fargo and Co. 22,300 1,035,389 XL Capital Ltd. 3,600 295,560 ------------ Total U.S. Equities 30,863,387 ------------ INTERNATIONAL EQUITIES -- 46.06% AUSTRALIA -- 4.30% Australian Gas Light Company Ltd. 51,100 220,173 Cable & Wireless Optus Ltd. 129,100 243,360 National Australia Bank Ltd., Preferred 20,400 633,420 News Corp., Ltd. 35,000 280,445 QBE Insurance Group Ltd. 31,700 190,221 Rio Tinto Ltd. 10,263 178,027 Westpac Banking Corp., Ltd. 169,545 1,245,494 ------------ 2,991,140 ------------ BELGIUM -- 0.75% Electrabel S.A. 1,480 292,191 Fortis B 9,362 225,886 ------------ 518,077 ------------ CANADA -- 1.59% BCE, Inc. 7,500 201,140 Inco Ltd., 144A 59,000 32,598 Nortel Networks Corp. 17,300 159,594 NOVA Chemicals Corp. 19,900 426,166 Shaw Communications, Inc., Class B 12,200 288,279 ------------ 1,107,777 ------------ DENMARK -- 0.45% Novo Nordisk A/S 5,500 243,291 Tele Danmark A/S 1,900 68,490 ------------ 311,781 ------------ FINLAND -- 1.84% Nokia Oyj 23,400 530,323 Stora Enso Oyj 22,500 243,820 UPM-Kymmene Corp. 17,900 505,995 ------------ 1,280,138 ------------ FRANCE -- 3.98% Alcatel S.A. 4,930 103,091 Aventis S.A. 7,670 612,327 Aventis S.A., Class A 900 70,479 Banque Nationale de Paris 5,932 516,263 Cie de Saint Gobain 1,756 238,603 Groupe Danone 3,400 466,593 Total Fina S.A., Class B 5,439 761,608 ------------ 2,768,964 ------------ GERMANY -- 0.56% Bayer AG 10,040 390,992 ------------
25
SHARES VALUE -------- ------------ HONG KONG -- 1.03% Esprit Holdings Ltd. 125,000 $ 137,021 Hong Kong Electric Holdings Ltd. 151,443 582,481 ------------ 719,502 ------------ IRELAND -- 0.41% Bank of Ireland 28,500 282,298 ------------ ITALY -- 1.19% Assicurazioni Generali Spa 6,000 180,325 ENI-Ente Nazionale Idrocarburi Spa 39,500 481,545 San Paolo-imi Spa 13,000 166,627 ------------ 828,497 ------------ JAPAN -- 8.20% Benesse Corp. 3,100 97,186 Fanuc Ltd. 3,000 149,375 Fuji Photo Film Co., Ltd. 7,000 301,956 Fujitsu 15,000 157,553 Hirose Electric Co., Ltd. 1,900 144,724 Hitachi Ltd. 17,000 166,974 Hoya Corp. 2,000 126,684 Kao Corp. 6,000 149,134 Minebea Co., Ltd. 43,000 283,058 Mitsubishi Estate Co., Ltd. 30,000 275,898 Mizuho Holding, Inc. 56 260,423 Murata Manufacturing Co., Inc. 5,900 392,167 Nikko Securities Co., Ltd. 30,000 240,298 Nippon Telegraph & Telephone Corp. 73 380,452 Nomura Securities Co., Ltd. 16,000 306,607 Ono Pharmaceutical Co., Ltd. 9,000 285,760 Orix Corp. 6,400 622,450 Rohm Co. 2,700 419,548 Sekisui House Ltd. 14,000 118,874 Seven-Eleven Japan Co., Ltd. 2,000 78,095 Sony Corp. 1,900 124,920 Takeda Chemical Industries 6,000 279,025 Yamanouchi Pharmaceutical Co., Ltd. 12,000 336,754 ------------ 5,697,915 ------------ NETHERLANDS -- 3.22% ABN AMRO Holdings NV 16,960 318,610 Aegon NV 14,992 422,015 Akzo Nobel NV 9,200 389,434 Elsevier NV 16,600 206,587 Philips Electronics NV 13,867 367,572 TNT Post Group NV 12,342 257,560 Wolters Kluwer NV 10,452 280,944 ------------ 2,242,722 ------------ NORWAY -- 0.28% Telenor ASA 47,200 194,647 ------------ PORTUGAL -- 0.43% Electricidade de Portugal S.A. 115,000 274,551 Portugal Telecom S.A. 3,700 25,811 ------------ 300,362 ------------ SINGAPORE -- 0.67% DBS Group Holdings Ltd. 45,000 $ 330,955 Singapore Press Holdings Ltd. 12,046 132,228 ------------ 463,183 ------------ SPAIN -- 1.12% Altadis S.A. 979 13,957 Banco Popular Espanol S.A. 7,099 248,153 Banco Santander Central Hispano S.A. 32,993 298,771 Telefonica S.A. (b) 17,636 217,389 ------------ 778,270 ------------ SWEDEN -- 1.50% Sandvik AB 12,400 249,472 Svenska Cellulosa AB 2,460 52,091 Svenska Handelsbanken AB 23,790 339,844 Swedish Match AB 85,460 400,395 ------------ 1,041,802 ------------ SWITZERLAND -- 2.66% Nestle S.A. (Reg.) 2,250 478,164 Novartis AG (Reg.) 8,840 319,912 Roche Holding AG (Gen.) 5,811 418,651 Swiss Reinsurance Co. (Reg.) 195 389,674 Zurich Financial Services AG (Reg) 718 244,859 ------------ 1,851,260 ------------ UNITED KINGDOM -- 11.88% BAE Systems PLC 75,000 359,157 Barclays PLC 14,000 429,230 British Land Company PLC 22,000 150,062 British Telecommunications PLC 67,800 426,229 Compass Group PLC 23,000 184,054 Diageo PLC 46,630 511,524 Dixons Group PLC 23,000 75,368 Gallaher Group PLC 58,000 364,621 Hanson PLC 35,000 257,686 HSBC Holdings PLC 44,000 521,349 Invensys PLC 82,000 155,687 Lattice Group PLC (b) 241,000 538,068 Lloyds TSB Group PLC 28,220 282,383 Marconi PLC 29,000 103,187 Northern Foods PLC 59,000 136,082 Nycomed Amersham PLC 57,000 412,846 Powergen PLC 25,000 252,799 Prudential Corp. PLC 19,000 230,071 Reckitt Benckiser PLC 12,000 172,986 Rentokil Initial PLC 62,800 212,854 RMC Group PLC 14,000 134,873 Rolls-Royce PLC 4,000 13,192 Scottish & Southern Energy PLC 46,650 439,574 Scottish Power PLC 32,000 235,374 Shell Transport & Trading PLC 48,000 398,965 Tesco PLC 120,250 433,789 The Great Universal Stores PLC 36,000 308,084 Trinity Mirror PLC 21,175 118,526 United Business Media PLC 15,818 128,584 Vodafone Group PLC 123,188 272,869 ------------ 8,260,073 ------------
26
SHARES VALUE -------- ------------ Total International Equities $ 32,029,400 ------------ CONVERTIBLE PREFERRED -- 0.30% LUXEMBOURG -- 0.30% Hellenic Exchangeable Finance SCA 250,000 211,650 ------------ Total Equities (Cost $60,904,394) 63,104,437 ------------ SHORT-TERM INVESTMENTS -- 8.60% INVESTMENT COMPANIES -- 8.60% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $5,984,286) 5,984,286 5,984,286 ------------ Total Investments (Cost $66,888,680) 99.33% (a) 69,088,723 Cash and other assets, less liabilities -- 0.67% 467,385 ------------ Net Assets -- 100% $ 69,556,108 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $67,875,917; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 7,009,420 Gross unrealized depreciation (5,796,614) ------------ Net unrealized appreciation $ 1,212,806 ============
(b) Non-income producing security. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2001, the value of this security amounted to $32,598 or 0.05% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS The Global Equity Fund had the following open forward foreign currency contracts as of June 30, 2001:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ------------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 11/30/01 7,700,000 $ 3,894,909 $ (78,880) Canadian Dollar (CAD) 11/30/01 4,600,000 3,023,531 58,945 Euro (EUR) 11/30/01 14,850,000 12,558,989 (174,236) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) 11/30/01 2,090,000 1,057,190 17,643 British Pound (GBP) 11/30/01 4,400,000 6,152,125 36,695 Euro (EUR) 11/30/01 2,600,000 2,198,880 19,484 Hong Kong Dollar (HKD) 11/30/01 4,200,000 538,579 138 Japanese Yen (JPY) 11/30/01 322,000,000 2,623,913 92,427 Singapore Dollar (SGD) 11/30/01 550,000 303,696 4,082 Swedish Krona (SEK) 11/30/01 3,300,000 302,462 10,661 ------------ Total $ (13,041) ============
See accompanying notes to financial statements. 27 GLOBAL TECHNOLOGY FUND After years of producing superior gains, technology stocks over the past year were highly volatile and generated negative returns. For the period since its performance inception (May 31, 2000) through June 30, 2001, the Brinson Global Technology Fund Class I shares declined 41.96% and Class N shares fell 42.06%. The Fund's benchmark, the Morgan Stanley High Tech Index, fell 33.92% for the same period. Historically, technology stocks have been volatile and the decline in this sector during the fiscal year was exemplary--from June 30, 2000 through June 30, 2001, the Nasdaq Composite Index, which is concentrated in technology stocks, lost 45.51%. During the fiscal year, a decline in capital spending in technology products led to weak corporate profits and a slowdown in economic growth in the United States. The sharp slowdown in the U.S. technology sector had a ripple effect throughout the world, and investors sold their technology shares in large numbers. The widespread technology sell off sent share prices tumbling, and valuations declined to relatively attractive levels. Although many investors hoped for a recovery early in the period, tight credit, a lengthy election dispute and a decline in the broad stock market weakened consumer confidence during the holiday shopping period. Soft personal computer sales along with the lack of financing for telecommunications equipment depressed semiconductor component orders, leading to severe declines in semiconductor stocks. As the fiscal year progressed, technology companies continued to signal declining and uncertain business prospects. Communications and networking equipment providers were among the worst performers, as their customers postponed capital spending decisions in the uncertain economy. Software and Internet service companies also suffered, as businesses in all sectors reviewed information technology and advertising budgets in light of the economic slowdown. In April, there was a burst of enthusiasm in the technology sector, after a surprise interest rate cut by the Federal Reserve Board. The technology rally was short-lived, however, because few companies could see evidence of a business recovery. As a result, most companies adjusted their growth expectations downward. Many companies announced prudent, sometimes severe, measures to conserve cash through a business downturn of uncertain duration. Despite these efforts, telecommunications services and networking industries continued to be weak performers, and several companies had disappointing results. As the fiscal year drew to a close, there were some mildly positive gains for individual companies and for the Fund. Because there was some relatively good performance from individual technology companies, we believe investors may be anticipating improved business results. Stock price gains will continue only if those improvements materialize in the near term. As we look ahead, we expect a new generation of high-speed wireless communication devices ("3G") to drive a new cycle of demand and growth, especially as current debates over the technical standards are resolved. The Internet continues to grow. We continue to see real growth in global Internet penetration, individual usage levels, on-line commerce and the creation of economic value. We believe there is still a thriving market for Internet bandwidth, web servers, data storage, productivity software, wireless connectivity and Internet access devices. Providers of high technology products and services remain ready and able to deliver the productivity-boosting technology innovations that fueled the long global economic expansion, as soon as consumers and businesses step up demand for technology products. While technology stocks may continue to struggle in the short term, we are optimistic about their long-term prospects. We believe that the current valuations of many technology stocks represent excellent buying opportunities for those with long time horizons. 28 TOTAL RETURN
6 MONTHS 1 YEAR INCEPTION* ENDED ENDED TO 6/30/01 6/30/01 6/30/01 - ----------------------------------------------------------------------------------------------------------- BRINSON GLOBAL TECHNOLOGY FUND CLASS I -13.17% -48.58% -41.96% BRINSON GLOBAL TECHNOLOGY FUND CLASS N -13.19 -48.67 -42.06 Morgan Stanley High Tech Index -13.29 -33.89 -33.92
* PERFOMANCE INCEPTION DATE OF THE BRINSON TECHNOLOGY FUND CLASS I, CLASS N, AND THE MORGAN STANLEY HIGH TECH INDEX IS 5/31/00. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Technology Fund Class I and the Morgan Stanley High Tech Index if you had invested $1,000,000 on May 31, 2000, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL TECHNOLOGY FUND CLASS I VS. MORGAN STANLEY HIGH TECH INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON GLOBAL TECHNOLOGY MORGAN STANLEY FUND CLASS I HIGH TECH INDEX 5/01/00 $1,047,000 $1,000,000 6/30/00 $1,130,000 $1,119,878 7/31/00 $1,076,000 $1,085,761 8/31/00 $1,210,000 $1,231,069 9/30/00 $1,011,000 $1,048,546 10/31/00 $951,000 $1,023,082 11/30/00 $707,000 $781,364 12/31/00 $669,226 $736,598 1/31/01 $791,450 $867,830 2/28/01 $581,064 $654,551 3/31/01 $516,947 $577,928 4/30/01 $600,099 $669,697 5/31/01 $568,040 $627,632 6/30/01 $554,980 $638,699
5/31/00 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 29 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. PeopleSoft, Inc. 4.96% 2. Electronic Arts, Inc. 4.74 3. Computer Associates International, Inc. 4.65 4. AOL Time Warner, Inc. 4.50 5. Micron Technology, Inc. 4.27 6. Dell Computer Corp. 3.62 7. International Business Machines Corp. 3.56 8. QUALCOMM, Inc. 3.31 9. Microsoft Corp. 3.22 10. Parametric Technology Corp. 3.08 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Computers Software 24.85% Systems 23.60 ------ 48.45 Electronic Components 22.34 Internet Services 3.22 Nasdaq 100-Index Tracking Stock 1.45 Services/Miscellaneous 9.03 Telecommunications 12.06 ------ Total U.S. Equities 96.55 INTERNATIONAL EQUITIES Computer Systems 0.61% Electronic Components 0.86 Telecommunications 1.14 ------ Total International Equities 2.61 SHORT-TERM INVESTMENTS 0.84 ------ TOTAL INVESTMENTS 100.00 CASH AND OTHER ASSETS, LESS LIABILITIES -- ------ NET ASSETS 100.00% ======
30 GLOBAL TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ EQUITIES -- 99.16% U.S. EQUITIES -- 96.55% ADC Telecom, Inc. (b) 450 $ 2,970 Advanced Micro Devices, Inc. (b) 800 23,104 Advent Software, Inc. 200 12,700 Agilent Technologies, Inc. (b) 319 10,368 Amazon.com, Inc. (b) 2,500 35,375 Amkor Technologies, Inc. (b) 750 16,575 AOL Time Warner, Inc. 1,350 71,550 Applied Material, Inc. (b) 550 27,005 Atmel Corp. (b) 650 8,769 Automatic Data Processing, Inc. 150 7,455 Avici Systems, Inc. (b) 550 4,714 BEA Systems, Inc. (b) 100 3,071 Borland Software Corp. 2,000 31,200 Broadcom Corp. (b) 350 14,966 CIENA Corp. (b) 150 5,700 Cisco Systems, Inc. (b) 1,150 20,930 Compaq Computer Corp. 2,800 43,372 Computer Associates International, Inc. 2,050 73,800 Dell Computer Corp. (b) 2,200 57,530 DuPont Photomasks, Inc. (b) 100 4,825 Electronic Arts, Inc. (b) 1,300 75,270 Electronic Data Systems Corp. 150 9,375 EMC Corp. (b) 900 26,145 Emcore Corp. (b) 700 21,525 eMerge Interactive, Inc. (b) 2,150 2,494 Flextronics International Ltd. (b) 750 19,582 Hewlett-Packard Co. 1,300 37,180 Intel Corp. 200 5,850 International Business Machines Corp. 500 56,500 Intuit, Inc. (b) 1,150 45,988 Jabil Circuit, Inc. (b) 550 16,973 Juniper Networks, Inc. (b) 250 7,775 KLA-Tencor Corp. (b) 550 32,158 Leap Wireless International, Inc. (b) 400 12,120 Lucent Technologies, Inc. 2,450 15,190 McData Corp. 129 2,264 Micron Technology, Inc. (b) 1,650 67,815 Microsoft Corp. (b) 700 51,100 Motorola, Inc. 2,800 46,368 Nasdaq 100-Index Tracking Stock 500 22,970 Network Plus Corp. (b) 3,400 9,214 New Focus, Inc. 400 3,300 Novellus Systems, Inc. (b) 550 31,234 Oracle Corp. (b) 1,950 37,050 Palm, Inc. (b) 1,500 $ 9,105 Parametric Technology Corp. 3,500 48,965 PeopleSoft, Inc. (b) 1,600 78,768 QUALCOMM, Inc. (b) 900 52,632 Safeguard Scientifics, Inc. (b) 950 4,883 Solectron Corp. (b) 450 8,235 Sun Microsystems, Inc. (b) 1,050 16,506 Sunbeam Corp. 600 10,272 Sycamore Networks, Inc. (b) 650 6,058 Tellabs, Inc. (b) 1,050 20,349 Texas Instruments, Inc. 800 25,200 Titan Corp. (b) 950 21,755 Transmeta Corp. (b) 900 5,022 Uniroyal Technology Corp. (b) 700 5,950 Veritas Software Corp. (b) 200 13,306 Xilinx, Inc. (b) 1,000 41,240 Yahoo!, Inc. (b) 1,700 33,983 ------------ Total U.S. Equities 1,533,648 ------------ INTERNATIONAL EQUITIES -- 2.61% CANADA -- 0.80% Nortel Networks Corp. 1,400 12,726 ------------ FINLAND -- 0.35% Nokia OYJ 250 5,510 ------------ FRANCE -- 0.85% STMicroelectronics N.V. 400 13,600 ------------ SWITZERLAND -- 0.61% Logitech International S.A. (b) 300 9,660 ------------ Total International Equities 41,496 ------------ Total Equities (Cost $1,859,932) 1,575,144 ------------ SHORT-TERM INVESTMENTS -- 0.84% INVESTMENT COMPANIES -- 0.84% Vista U.S. Government Money Market Fund (Cost $13,348) 13,348 13,348 ------------ Total Investments (Cost $1,873,280) -- 100% (a) 1,588,492 Cash and other assets, less liabilities -- 0.00% 29 ------------ Net Assets -- 100% $ 1,588,521 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $2,249,693; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 59,590 Gross unrealized depreciation (720,791) --------- Net unrealized depreciation $(661,201) =========
(b) Non-income producing security. See accompanying notes to financial statements. 31 GLOBAL BIOTECH FUND Brinson Global Biotech Fund invests in established, profitable biotechnology companies with solid product pipelines, revenue growth and potential blockbuster therapeutics. Smaller investments are made in early stage, more speculative stocks. Additional investments are made as companies succeed. The Fund's investment strategy emphasizes 40 to 70 biotechnology and biotechnology-related companies that are diversified by market capitalization, therapeutic area, stage of development and geographic location. Since its performance inception on June 30, 2000 through June 30, 2001, the Brinson Global Biotech Fund Class I shares have fell 23.25%, while Class N shares fell 23.44%. In comparison, the Fund's benchmark, the Nasdaq Biotech Index, declined 16.68%. The Fund is experiencing a challenging investment environment, as concerns about a slowdown in U.S. economic growth dominated market sentiment. Early in the fiscal year, biotechnology stocks performed relatively well, as a number of companies announced new drug therapies for a variety of diseases. The biggest boost in the biotechnology industry came from enthusiasm over Celera's mapping of the human genome. As the year progressed, however, excess supply and some missed revenue expectations overshadowed some of the good news in the biotechnology industry, which came in the form of promising data presented by leading companies at medical meetings. As a result, the biotech sector became more volatile and produced mixed returns. While some biotechnology companies, such as Waters Corporation, declined on poor revenue and earnings forecasts, others were buoyed by announcements of breakthrough data on new medicines. For example, Novartis announced that its new drug, Gleevec, was successful in treating blood cancer, and Imclone reported favorably on a new colon cancer drug. There was positive news about new therapeutics for the treatment of psoriasis and diabetes. Of particular note, was the progress being made on new antibody drugs being developed by Genentech, Biogen, MedImmune and Abgenix. In another encouraging development, Guilford Pharmaceuticals received a priority review from the Food and Drug Administration (FDA) for a new type of treatment for brain cancer. Looking ahead, we believe that the fundamentals of the biotech sector are relatively strong; however, mixed signals from the U.S. economy could result in continued significant volatility. Additional weakness may come from a political transition at the FDA, which has slowed the expected rate of drug approvals this year. Nevertheless, we are optimistic about the long-term prospects for the biotechnology industry, as more therapeutic breakthroughs occur, technical progress continues and an increasing number of companies become profitable. There are several hundred products in clinical trials, and we expect many research successes in the next few years, particularly in the treatment of cancer, genomics, and diagnostics. In the interim, we expect continued consolidation in the industry, as pharmaceutical companies and large biotechnology companies are likely to continue to buy smaller companies. We believe that momentum players will come and go in the biotechnology sector and contribute to short-term volatility, but they will have little impact on the promising long-term outlook for this area of the market. 32 TOTAL RETURN
6 MONTHS INCEPTION* ENDED TO 6/30/01 6/30/01 - ---------------------------------------------------------------------------------------------------------- BRINSON GLOBAL BIOTECH FUND CLASS I -18.00% -23.25% BRINSON GLOBAL BIOTECH FUND CLASS N -18.12 -23.44 Nasdaq Biotech Index -6.52 -16.68
* PERFORMANCE INCEPTION DATE OF THE BRINSON BIOTECH FUND CLASS I, CLASS N, AND NASDAQ BIOTECH INDEX IS 6/30/00. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Biotech Fund Class I and the Nasdaq Biotech Index if you had invested $1,000,000 on June 30, 2000, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL BIOTECH FUND CLASS I VS. NASDAQ BIOTECH INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON GLOBAL BIOTECH FUND CLASS I NASDAQ BIOTECH INDEX 6/30/00 $1,000,000 $1,000,000 7/31/00 $920,530 $923,369 8/31/00 $1,115,066 $1,120,182 9/30/00 $1,127,484 $1,080,904 10/31/00 $1,043,874 $992,963 11/30/00 $874,172 $862,021 12/31/00 $936,035 $891,337 1/31/01 $823,980 $856,917 2/28/01 $779,327 $790,919 3/31/01 $625,147 $630,031 4/30/01 $711,083 $749,516 5/31/01 $743,941 $811,757 6/30/01 $767,532 $832,880
6/30/00 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 33 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Amgen, Inc. 5.11% 2. Medimmune, Inc. 4.46 3. Gilead Sciences, Inc. 4.20 4. Chiron Corp. 4.03 5. Serono S.A. 3.99 6. Genzyme Corp. 3.88 7. Idec Pharmaceuticals Corp. 3.72 8. Immunex Corp. 3.66 9. Millennium Pharmaceuticals, Inc. 3.00 10. Cephalon, Inc. 2.91 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------ U.S. EQUITIES Biomedical 13.15% Gene 9.46 Health: Drugs 16.53 Health: Non-Drugs 1.80 Medical Products 4.47 Merrill Lynch - Biotech HOLDRs Trust 2.28 Research and Development 14.69 Technology 0.43 Therapeutics 21.35 ------ Total U.S. Equities 84.16 INTERNATIONAL EQUITIES Gene 0.73% Health: Drugs 3.20 Health: Non-Drugs 1.26 Technology 4.84 Therapeutics 1.63 ------ Total International Equities 11.66 SHORT-TERM INVESTMENTS 3.33 ------ TOTAL INVESTMENTS 99.15 CASH AND OTHER ASSETS, LESS LIABILITIES 0.85 ------ NET ASSETS 100.00% ======
34 GLOBAL BIOTECH FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ EQUITIES -- 95.82% U.S. EQUITIES -- 84.16% Abgenix, Inc. (b) 550 $ 24,750 Affymetrix, Inc. (b) 1,300 28,665 Alexion Pharmaceuticals, Inc. (b) 600 14,400 Alkermes, Inc. (b) 1,400 49,140 Amgen, Inc. (b) 2,450 148,666 Applera Corp.-Applied Biosystems Group 800 21,400 Applera Corp.-Celera Genomics Group (b) 1,250 49,575 Arena Pharmaceuticals, Inc. (b) 550 16,769 Aviron (b) 450 25,650 Biogen, Inc. (b) 1,250 67,950 Cell Genesys, Inc. 100 2,050 Cell Therapeutics, Inc. (b) 2,000 55,280 Cephalon, Inc. (b) 1,200 84,600 Chiron Corp. (b) 2,300 117,300 COR Therapeutics, Inc. (b) 1,800 54,900 Cubist Pharmaceuticals, Inc. (b) 400 15,200 CV Therapeutics, Inc. (b) 350 19,950 Emisphere Technologies, Inc. (b) 700 21,735 Enzon, Inc. (b) 600 37,500 Gene Logic, Inc. (b) 650 14,170 Genentech, Inc. (b) 1,450 79,895 GenVec, Inc. (b) 100 291 Genzyme Corp. (b) 1,850 112,850 Geron Corp. (b) 500 7,000 Gilead Sciences, Inc. (b) 2,100 122,199 Guilford Pharmaceuticals, Inc. (b) 1,200 40,800 Human Genome Sciences, Inc. (b) 1,150 69,287 Icos Corp. (b) 750 48,000 Idec Pharmaceuticals Corp. (b) 1,600 108,304 ImClone Systems, Inc. (b) 1,150 60,720 Immunex Corp. (b) 6,000 106,500 Immunogen, Inc. (b) 1,800 36,000 Incyte Genomics, Inc. (b) 650 15,938 Inhale Therapeutic Systems, Inc. (b) 850 19,550 Laboratory Corp. of America Holdings (b) 200 15,380 Large Scale Biology Corp. (b) 300 2,130 Luminex Corp. (b) 300 5,997 Medarex, Inc. (b) 1,500 35,250 Medicines Co. (b) 400 8,196 Medimmune, Inc. (b) 2,750 129,800 Merrill Lynch & Co. 500 66,250 Millennium Pharmaceuticals, Inc. (b) 2,450 87,171 Monsanto Co. 750 27,750 Myriad Genetics, Inc. (b) 400 25,328 NPS Pharmaceuticals, Inc. 450 18,090 Pharmacopeia, Inc. (b) 350 8,400 Praecis Pharmaceuticals, Inc. (b) 2,100 34,524 Protein Design Labs, Inc. (b) 850 73,746 Quest Diagnostics, Inc. (b) 200 $ 14,970 Regeneron Pharmaceuticals, Inc. (b) 450 15,593 Scios, Inc. (b) 1,450 36,264 SuperGen, Inc. (b) 550 8,102 Transkaryotic Therapies, Inc. (b) 1,200 35,340 Tularik, Inc. (b) 600 15,498 Vertex Pharmaceuticals, Inc. (b) 1,500 74,250 Waters Corp. (b) 450 12,425 ------------ Total U.S. Equities 2,447,438 ------------ INTERNATIONAL EQUITIES -- 11.66% CANADA -- 1.18% QLT, Inc. 1,750 34,265 ------------ DENMARK -- 0.84% Novo Nordisk A/S 550 24,329 ------------ GERMANY -- 0.18% Lion Bioscience AG (b) 200 5,360 ------------ ISRAEL -- 2.25% Teva Pharmaceutical Industries Ltd. 1,050 65,415 ------------ NETHERLANDS -- 0.11% Qiagen N.V. (b) 150 3,308 ------------ SPAIN -- 0.67% Zeltia S.A. (b) 1,900 19,335 ------------ SWITZERLAND -- 4.10% Actelion Ltd. 100 3,249 Serono S.A. 4,650 116,017 ------------ 119,266 ------------ UNITED KINGDOM -- 2.33% Cambridge Antibody Technology Group PLC 400 11,656 Celltech Group PLC (b) 400 13,200 Nycomed Amersham PLC 1,000 36,500 Oxford Glycosciences PLC 400 6,396 ------------ 67,752 ------------ Total International Equities 339,030 ------------ Total Equities (Cost $2,816,721) 2,786,468 ------------ SHORT-TERM INVESTMENTS -- 3.33% INVESTMENT COMPANIES -- 3.33% Vista U.S. Government Money Market Fund (Cost $96,877) 96,877 96,877 ------------ Total Investments (Cost $2,913,598) -- 99.15% (a) 2,883,345 Cash and other assets, less liabilities -- 0.85% 24,651 ------------ Net Assets -- 100% $ 2,907,996 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $3,126,799; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 201,002 Gross unrealized depreciation (444,456) ----------- Net unrealized depreciation $ (243,454) ===========
(b) Non-income producing security. See accompanying notes to financial statements. 35 GLOBAL BOND FUND The Brinson Global Bond Fund Class I shares produced an annualized return of 3.80% since inception on July 31, 1993 compared to the 4.44% return of its benchmark, the Salomon Smith Barney World Government Bond Index. For the fiscal year ended June 30, 2001, the Fund's Class I shares fell 4.02%, and Class N shares fell 4.27%. For the same period, the Fund's benchmark declined 3.07%. Despite successive interest rate reductions, many global government bond markets ended the fiscal year with disappointing results. A short-term rebound in the equity markets in April led to the worst month for global bonds in almost two years. We took advantage of this weakness to lengthen duration in the Fund. Markets recovered slowly, but by the end of the fiscal period, yields on 10-year benchmark bonds in the United States and Europe had risen. Central bank easing helped shorter-term bonds and yields on these were little changed. The lone market to display resilience was Japan where the election of a new prime minister buoyed market sentiment. In Europe, bond markets recovered, despite ongoing uncertainty over the European Central Bank's policy. With growth slowing, prospects brightened for the relative performance of European bonds, and the Fund is overweighted in European markets. In contrast, the Fund is underexposed to the United Kingdom, where long-term bond yields rose in response to impending regulatory changes. Canadian bonds tracked movements in the United States, and yields offered attractive relative value. The Fund is overweighted in Canada. In the United States, the market has priced in lower short-term rates and expectations for an economic recovery. At the end of the fiscal year, the long end of the Treasury market appeared slightly undervalued; therefore, we focused on the 10-year and 30-year sectors of the yield curve. A by-product of the aggressive Federal Reserve action has been excellent performance by some non-government bonds as the market prices in an economic recovery. At the end of the fiscal year, excess returns over comparable duration Treasurys showed a significant rebound from last year's poor performance. In emerging markets, yields rose as the poor performance of Argentina and Brazil affected the fixed-income markets. Renewed concerns regarding refinancing risk caused Argentine bond prices to collapse in March. A $30 billion debt exchange in early June reduced Argentina's refinancing needs by $16 billion over the next five years. The exchange buys time for Argentina, but we believe the country needs to increase economic growth and reduce government spending if it is going to pay its sovereign obligations. The Fund is underweighted in Argentina. Brazil ended 2000 with a strong fundamental position--high growth, large fiscal surpluses and declining interest rates. However, the country's outlook deteriorated in the first six months of 2001 because of three shocks: contagion from Argentina, an electricity crisis and political uncertainties. Despite these difficulties, we believe Brazil is fundamentally attractive but is likely to be volatile in the medium term. Therefore, we reduced the Fund's overweighted position in Brazil to a market-weighted position. 36 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - ---------------------------------------------------------------------------------------------------------- BRINSON GLOBAL BOND FUND CLASS I -5.72% -4.02% -0.45% 1.76% 3.80% BRINSON GLOBAL BOND FUND CLASS N -5.78 -4.27 -0.72 N/A 0.04 Salomon Smith Barney World Gov't Bond Index -4.57 -3.07 1.36 2.44 4.44
* PERFORMANCE INCEPTION DATE OF THE BRINSON GLOBAL BOND FUND CLASS I AND THE SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX IS 7/31/93. INCEPTION DATE OF CLASS N IS 6/30/97. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund Class I and the Salomon Smith Barney World Gov't Bond Index if you had invested $1,000,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL BOND FUND CLASS I VS. SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON GLOBAL BOND SALOMON SMITH BARNEY FUND CLASS I WORLD GOV'T BOND INDEX 7/01/93 $1,000,000 $1,000,000 8/01/93 $1,019,000 $1,029,900 9/01/93 $1,022,010 $1,042,156 10/01/93 $1,032,059 $1,040,384 11/01/93 $1,023,015 $1,032,893 12/01/93 $1,038,591 $1,041,673 1/01/94 $1,045,818 $1,050,111 2/01/94 $1,021,040 $1,043,285 3/01/94 $1,007,619 $1,041,824 4/01/94 $1,002,457 $1,043,074 5/01/94 $994,198 $1,033,895 6/01/94 $992,146 $1,048,783 7/01/94 $999,419 $1,057,174 8/01/94 $1,000,457 $1,053,474 9/01/94 $1,001,496 $1,061,059 10/01/94 $1,005,652 $1,078,036 11/01/94 $1,003,574 $1,063,266 12/01/94 $1,002,396 $1,066,244 1/01/95 $1,012,827 $1,088,635 2/01/95 $1,030,559 $1,116,504 3/01/95 $1,044,119 $1,182,824 4/01/95 $1,069,153 $1,204,706 5/01/95 $1,106,704 $1,238,559 6/01/95 $1,104,638 $1,245,866 7/01/95 $1,122,712 $1,248,856 8/01/95 $1,134,406 $1,205,896 9/01/95 $1,148,228 $1,232,787 10/01/95 $1,167,365 $1,242,033 11/01/95 $1,190,755 $1,256,068 12/01/95 $1,206,119 $1,269,257 1/01/96 $1,212,149 $1,253,518 2/01/96 $1,200,088 $1,247,125 3/01/96 $1,204,913 $1,245,379 4/01/96 $1,216,974 $1,240,397 5/01/96 $1,220,592 $1,240,645 6/01/96 $1,231,653 $1,250,447 7/01/96 $1,243,921 $1,274,455 8/01/96 $1,253,735 $1,279,425 9/01/96 $1,274,590 $1,284,671 10/01/96 $1,301,578 $1,308,694 11/01/96 $1,326,113 $1,325,969 12/01/96 $1,318,299 $1,315,229 1/01/97 $1,297,658 $1,280,112 2/01/97 $1,299,034 $1,270,511 3/01/97 $1,279,768 $1,260,856 4/01/97 $1,272,888 $1,249,760 5/01/97 $1,310,043 $1,283,753 6/01/97 $1,326,556 $1,299,030 7/01/97 $1,321,051 $1,288,898 8/01/97 $1,316,923 $1,288,124 9/01/97 $1,343,069 $1,315,561 10/01/97 $1,360,958 $1,342,925 11/01/97 $1,343,069 $1,322,378 12/01/97 $1,339,835 $1,318,411 1/01/98 $1,351,311 $1,331,200 2/01/98 $1,359,918 $1,341,983 3/01/98 $1,345,573 $1,328,697 4/01/98 $1,362,787 $1,349,956 5/01/98 $1,362,787 $1,353,061 6/01/98 $1,362,306 $1,355,091 7/01/98 $1,362,306 $1,356,852 8/01/98 $1,378,231 $1,393,759 9/01/98 $1,444,826 $1,467,906 10/01/98 $1,476,676 $1,511,357 11/01/98 $1,466,542 $1,490,046 12/01/98 $1,500,412 $1,519,996 1/01/99 $1,500,412 $1,506,012 2/01/99 $1,451,914 $1,457,669 3/01/99 $1,450,398 $1,461,314 4/01/99 $1,453,429 $1,460,729 5/01/99 $1,427,665 $1,436,189 6/01/99 $1,404,902 $1,411,055 7/01/99 $1,430,918 $1,445,626 8/01/99 $1,424,797 $1,452,276 9/01/99 $1,438,570 $1,474,932 10/01/99 $1,430,918 $1,474,194 11/01/99 $1,409,493 $1,458,715 12/01/99 $1,406,271 $1,455,214 1/01/00 $1,370,532 $1,424,218 2/01/00 $1,362,762 $1,413,964 3/01/00 $1,392,286 $1,457,797 4/01/00 $1,342,562 $1,410,127 5/01/00 $1,350,331 $1,421,126 6/01/00 $1,400,056 $1,455,659 7/01/00 $1,370,532 $1,431,058 8/01/00 $1,354,993 $1,420,326 9/01/00 $1,347,224 $1,417,485 10/01/00 $1,317,700 $1,399,483 11/01/00 $1,353,439 $1,427,333 12/01/00 $1,425,362 $1,478,431 1/01/01 $1,425,362 $1,476,509 2/01/01 $1,419,089 $1,475,918 3/01/01 $1,372,048 $1,433,412 4/01/01 $1,370,480 $1,428,252 5/01/01 $1,353,231 $1,423,967 6/01/01 $1,343,823 $1,410,867
7/31/93 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 37 MARKET ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - --------------------------------------------------- U.S. 25.8% 25.3% Australia 0.5 2.0 Austria 1.1 3.7 Belgium 2.6 2.7 Canada 2.8 7.8 Denmark 1.1 0.0 Euro 0.0 4.0 Finland 0.5 0.0 France 7.5 8.9 Germany 7.9 5.7 Greece 1.0 0.0 Ireland 0.3 0.0 Italy 7.8 9.1 Japan 28.8 17.3 Netherlands 2.1 0.0 Portugal 0.5 0.0 Spain 3.3 5.5 Sweden 0.8 4.5 Switzerland 0.5 0.0 U.K. 5.2 3.7 - --------------------------------------------------- 100.0% 100.0%
CURRENCY ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - --------------------------------------------------- U.S. 25.8% 13.8% Australia 0.5 8.5 Canada 2.8 4.8 Denmark 1.1 1.1 Euro 34.7 47.8 Japan 28.8 22.8 Sweden 0.8 0.8 Switzerland 0.5 0.5 U.K. 5.2 0.0 - --------------------------------------------------- 100.0% 100.0%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. BONDS Corporate Bonds Airlines 0.09% Construction 0.22 Consumer 0.24 Energy 0.37 Financial Services 5.06 Recreation 0.18 Services/Miscellaneous 0.59 Telecommunications 0.57 Utilities 0.50 ------ Total U.S. Corporate Bonds 7.82 Asset-Backed Securities 1.19 Corporate Mortgage-Backed Securities 5.56 International Dollar Bonds 0.49 U.S. Government Mortgage-Backed Securities 7.14 U.S. Government Obligations 5.13 ------ Total U.S. Bonds 27.33 INTERNATIONAL BONDS Foreign Government Bonds 65.45% Foreign Financial Bonds 1.85 ------ Total International Bonds 67.30 SHORT-TERM INVESTMENTS 2.81 ------ TOTAL INVESTMENTS 97.44 CASH AND OTHER ASSETS, LESS LIABILITIES 2.56 ------ NET ASSETS 100.00% ======
38 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
FACE AMOUNT VALUE ---------- ------------ BONDS -- 94.63% U.S. BONDS -- 27.33% U.S. CORPORATE BONDS -- 7.82% AOL Time Warner, Inc. 6.750%, due 04/15/11 $ 25,000 $ 24,603 AT&T Wireless Services, Inc., 144A 7.875%, due 03/01/11 25,000 25,048 Avon Products, Inc. 7.150%, due 11/15/09 20,000 20,371 Bank of America Corp. 7.400%, due 01/15/11 45,000 46,758 Bank One Corp. 7.875%, due 08/01/10 20,000 21,404 Black & Decker Corp., 144A 7.125%, due 06/01/11 20,000 19,826 Boeing Capital Corp. 7.100%, due 09/27/05 100,000 104,980 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 10,000 9,907 Capital One Bank, BKNT 8.250%, due 06/15/05 30,000 31,026 Caterpillar, Inc. 6.550%, due 05/01/11 10,000 10,036 Cendant Corp. 7.750%, due 12/01/03 55,000 55,991 Centex Corp. 9.750%, due 06/15/05 45,000 48,905 CIT Group, Inc. 5.625%, due 05/17/04 45,000 44,842 Citigroup, Inc. 7.250%, due 10/01/10 60,000 62,413 Citizens Communications Co. 9.250%, due 05/15/11 45,000 46,781 Comcast Cable Communications 6.750%, due 01/30/11 20,000 19,547 Conoco, Inc. 6.950%, due 04/15/29 15,000 14,422 Consolidated Edison 7.500%, due 09/01/10 60,000 61,017 Delhaize America, Inc., 144A 8.125%, due 04/15/11 50,000 52,154 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 50,000 52,288 Duke Energy Field Services 6.875%, due 02/01/11 10,000 9,778 Equistar Chemicals LP 8.750%, due 02/15/09 30,000 27,529 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 30,000 30,672 First Union National Bank 7.800%, due 08/18/10 20,000 21,419 Ford Motor Credit Co. 6.875%, due 02/01/06 50,000 50,655 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 40,000 39,776 Harrah's Operating Co., Inc., 144A 7.125%, due 06/01/07 15,000 14,863 Household Finance Corp. 6.750%, due 05/15/11 65,000 64,126 HSBC Capital Funding, 144A 9.547%, due 12/31/49 $ 20,000 $ 22,601 ING Capital Funding Trust III 8.439%, due 12/31/49 15,000 15,913 KFW International Finance 1.000%, due 12/20/04 JPY 150,000,000 1,236,636 Liberty Financial Co. 7.625%, due 11/15/28 $ 20,000 19,740 Mirant Americas Generation, Inc., 144A 7.625%, due 05/01/06 10,000 10,094 Morgan Stanley Dean Witter & Co. 6.750%, due 04/15/11 45,000 44,688 News America Holdings, Inc. 7.125%, due 04/08/28 20,000 17,423 Nisource Finance Corp. 7.875%, due 11/15/10 55,000 58,270 Northrop Grumman Corp., 144A 7.125%, due 02/15/11 25,000 24,705 Phillips Petroleum Co. 8.750%, due 05/25/10 25,000 28,451 Pure Resources, Inc., 144A 7.125%, due 06/15/11 10,000 9,841 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 25,000 25,828 Sempra Energy 7.950%, due 03/01/10 60,000 59,540 Southern California Edison 8.950%, due 11/03/03 100,000 73,000 Sprint Capital Corp. 7.625%, due 01/30/11 45,000 44,650 Telus Corp. 8.000%, due 06/01/11 45,000 46,000 Transocean Sedco Forex, Inc., 144A 6.625%, due 04/15/11 25,000 24,539 TRW, Inc. 7.625%, due 03/15/06 15,000 15,443 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 35,000 35,615 Verizon Global Funding Corp., 144A 7.750%, due 12/01/30 40,000 41,141 Viacom, Inc. 8.625%, due 08/01/12 60,000 66,082 Wells Fargo Bank N.A. 6.450%, due 02/01/11 45,000 44,252 WorldCom, Inc. 7.500%, due 05/15/11 45,000 43,814 ------------ 3,039,403 ------------ ASSET-BACKED SECURITIES -- 1.19% Comed Transitional Funding Trust, 98-1, Class A7, 5.740%, due 12/25/10 195,000 189,751 DVI Receivables Corp. 6.808%, due 07/12/04 35,000 35,773 Vanderbilt Mortgage Finance, 98-B, Class A2, 6.120%, due 05/07/09 236,505 238,114 ------------ 463,638 ------------
39
FACE AMOUNT VALUE ---------- ------------ CORPORATE MORTGAGE-BACKED SECURITIES -- 5.56% Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2 7.320%, due 08/15/10 $ 75,000 $ 78,151 CS First Boston Mortgage Securities Corp., 6.238%, due 2/15/34, 144A 25,000 24,746 7.545%, due 04/15/10 90,000 95,116 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B, 7.340%, due 09/10/09 25,000 26,106 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B, 7.180%, due 08/10/10 140,000 144,430 GE Capital Mortgage Services, Inc., 93-7F, Class FA3, 6.500%, due 09/25/08 4,979 4,961 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1 6.500%, due 05/15/31 357,789 363,242 LB Commercial Conduit Mortgage Trust, 99-C, Class A2, 7.325%, due 10/15/32 50,000 52,189 Merrill Lynch Mortgage Investors, Inc., 99-C1, Class A2, 7.560%, due 11/15/31 25,000 26,322 Morgan Stanley Dean Witter & Co. 6.660%, due 02/15/33 40,000 39,980 6.960%, due 07/15/08 38,614 39,704 Norwest Asset Securities Corp., 99-3, Class A3, 6.000%, due 02/25/29 50,809 49,069 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24 190,000 195,453 Prudential Home Mortgage Securities, 93-43, Class A9, 6.750%, due 10/25/23 175,492 177,178 Prudential Home Mortgage Securities, 96-7, Class A4, 6.750%, due 06/25/11 150,000 151,821 Prudential Mortgage Capital Funding LLC, 00-ROCK, Class A2, 6.605%, due 05/10/34 15,000 14,906 Residential Accredit Loans, Inc., 98-QS4, Class AI5, 7.000%, due 03/25/28 400,000 402,750 Residential Asset Securitization Trust, 98-A1, Class A1, 7.000%, due 03/25/28 20,902 20,852 Salomon Brothers Mortgage Securities VII 6.592%, due 10/18/10 60,000 59,767 Structured Asset Securities Corp., 98-RF2, 144A, 8.538%, due 07/15/27 185,092 193,932 ------------ 2,160,675 ------------ INTERNATIONAL DOLLAR BONDS -- 0.49% Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97 30,000 23,233 Gulf Canada Resource Ltd. 7.125%, due 01/15/11 5,000 5,130 Petroleum Geo-Services 7.500%, due 03/31/07 20,000 19,823 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14 20,000 19,675 Stora Enso Oyj 7.375%, due 05/15/11 10,000 10,128 Tyco International Group S.A. 6.750%, due 02/15/11 35,000 34,672 7.000%, due 06/15/28 10,000 9,448 United Mexican States 9.875%, due 02/01/10 $ 45,000 $ 49,230 Vodafone Group PLC 7.750%, due 02/15/10 20,000 21,014 ------------ 192,353 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 7.14% Fannie Mae 7.125%, due 01/15/30 330,000 352,757 Fannie Mae Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 6,100 6,453 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13 68,215 69,811 Federal Home Loan Mortgage Corp. Gold 8.000%, due 01/01/30 525,246 542,530 9.000%, due 07/01/30 103,992 109,001 Federal National Mortgage Association 6.500%, due 03/01/19 104,628 103,980 6.500%, due 06/01/29 112,844 111,110 7.000%, due 03/01/29 539,870 542,350 Government National Mortgage Association 6.000%, due 11/20/28 83,844 80,935 6.000%, due 12/20/28 133,271 128,647 6.000%, due 05/20/29 154,791 149,420 7.000%, due 08/15/24 283,509 286,303 7.000%, due 07/15/25 39,935 40,329 7.500%, due 08/15/23 46,968 48,209 7.500%, due 12/15/23 72,647 74,566 7.500%, due 01/15/24 50,081 51,404 7.500%, due 07/15/25 74,986 76,967 ------------ 2,774,772 ------------ U.S. GOVERNMENT OBLIGATIONS -- 5.13% U.S. Treasury Inflation Indexed Note* 3.875%, due 01/15/09 530,000 590,289 U.S. Treasury Note 6.500%, due 02/15/10 240,000 257,831 7.000%, due 07/15/06 190,000 206,138 7.500%, due 02/15/05 200,000 217,654 U.S. Treasury Bond 6.625%, due 2/15/27 660,000 722,992 ------------ 1,994,904 ------------ Total U.S. Bonds 10,625,745 ------------ INTERNATIONAL BONDS -- 67.30% AUSTRIA -- 3.71% Republic of Austria 4.125%, due 01/15/14 EUR 550,000 404,898 4.300%, due 07/15/03 920,000 777,317 5.500%, due 01/15/10 305,000 261,200 ------------ 1,443,415 ------------ BELGIUM -- 2.63% Kingdom of Belgium 5.000%, due 09/28/11 1,250,000 1,023,853 ------------
40
FACE AMOUNT VALUE ---------- ------------ CANADA -- 7.47% Government of Canada 5.500%, due 06/01/09 CAD 570,000 $ 366,868 5.750%, due 06/01/02 700,000 465,913 5.750%, due 06/01/29 600,000 381,128 6.000%, due 06/01/08 490,000 325,862 7.250%, due 06/01/07 550,000 388,932 8.000%, due 06/01/23 160,000 129,156 Province of Ontario 6.100%, due 11/19/10 700,000 455,544 7.500%, due 01/19/06 550,000 386,877 ------------ 2,900,280 ------------ FRANCE -- 8.83% Government of France (BTAN) 4.750%, due 03/12/02 EUR 410,000 347,776 Government of France (OAT) 5.500%, due 10/25/10 980,000 846,092 5.500%, due 04/25/29 290,000 235,987 6.500%, due 10/25/06 645,000 590,932 7.500%, due 04/25/05 1,270,000 1,186,595 8.500%, due 10/25/19 200,000 224,669 ------------ 3,432,051 ------------ GERMANY -- 9.52% Bundesrepublik Deutschland 4.500%, due 07/04/09 350,000 287,385 6.500%, due 07/04/27 80,000 73,949 6.000%, due 07/04/07 1,210,000 1,087,398 6.000%, due 06/20/16 270,000 241,944 Depfa Pfandbrief Bank 4.750%, due 01/28/02 150,000 127,218 5.750%, due 03/04/09 1,380,000 1,194,440 Bundesobligation 4.500%, due 02/22/02 475,000 402,185 4.750%, due 11/20/01 80,000 67,771 International Bank for Reconstruction and Development, 7.125%, due 04/12/05 470,000 218,978 ------------ 3,701,268 ------------ ITALY -- 9.12% Buoni Poliennali Del Tes 3.250%, due 04/15/04 1,590,000 1,302,415 3.500%, due 11/01/01 120,000 101,294 4.250%, due 11/01/09 325,000 254,957 5.500%, due 11/01/10 330,000 281,262 6.500%, due 11/01/27 465,000 419,034 7.750%, due 11/01/06 1,245,000 1,184,057 ------------ 3,543,019 ------------ JAPAN -- 12.88% International Bank for Reconstruction and Development 2.000%, due 02/18/08 JPY 42,000,000 $ 369,031 Government of Japan 0.100%, due 06/20/03 444,300,000 3,564,161 1.310%, due 06/20/11 132,400,000 1,072,774 ------------ 5,005,966 ------------ SPAIN -- 5.43% Government of Spain 3.250%, due 01/31/05 EUR 845,000 682,893 5.200%, due 07/30/09 150,000 125,911 6.000%, due 01/31/08 1,320,000 1,166,438 6.000%, due 01/31/29 120,000 102,300 7.900%, due 02/28/02 40,000 34,601 ------------ 2,112,143 ------------ SWEDEN -- 4.17% Government of Sweden 5.000%, due 01/28/09 SEK 3,600,000 323,417 5.500%, due 04/12/02 2,730,000 252,325 6.750%, due 05/05/14 3,935,000 397,818 8.000%, due 08/15/07 2,050,000 215,552 10.250%, due 05/05/03 4,280,000 430,396 ------------ 1,619,508 ------------ UNITED KINGDOM -- 3.54% European Investment Bank 6.300%, due 04/15/14 GBP 220,000 322,578 U.K. Treasury 5.750%, due 12/07/09 172,000 247,995 6.000%, due 12/07/28 100,000 160,820 8.500%, due 12/07/05 410,000 643,162 ------------ 1,374,555 ------------ Total International Bonds 26,156,058 ------------ Total Bonds (Cost $39,416,618) 36,781,803 ------------ SHARES --------- SHORT-TERM INVESTMENTS -- 2.81% INVESTMENT COMPANIES -- 2.81% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,092,304) 1,092,304 1,092,304 ------------ Total Investments (Cost $40,508,922) -- 97.44% (a) 37,874,107 Cash and other assets, less liabilities -- 2.56% 994,867 ------------ Net Assets -- 100% $ 38,868,974 ============
See accompanying notes to schedule of investments. 41 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $40,617,006; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 80,737 Gross unrealized depreciation (2,823,636) ----------- Net unrealized depreciation $(2,742,899) ===========
* Principal amount for accrual purposes is periodically adjusted based on changes to the Consumer Price Index. E.E.T.C.: Enhanced equipment trust certificate. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2001, the value of these securities amounted to $523,744 or 1.35% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 2001:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ------------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 09/06/01 6,800,000 $3,448,137 $(109,632) Danish Krone (DKK) 09/06/01 13,100,000 1,486,637 (93,869) Euro (EUR) 09/06/01 4,770,000 4,042,852 (288,092) Japanese Yen (JPY) 09/06/01 362,000,000 2,923,140 (196,427) Swiss Franc (CHF) 09/06/01 350,000 194,936 (15,141) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) 09/06/01 500,000 253,539 4,511 British Pounds (GBP) 09/06/01 950,000 1,332,801 27,455 Canadian Dollar (CAD) 09/06/01 1,800,000 1,184,711 (24,884) Danish Krone (DKK) 09/06/01 9,500,000 1,078,096 86,391 Euro (EUR) 09/06/01 1,630,000 1,381,518 60,326 Japanese Yen (JPY) 09/06/01 90,000,000 726,748 6,570 Swedish Krona (SEK) 09/06/01 15,300,000 1,404,246 169,266 --------- Total $(373,526) =========
See accompanying notes to financial statements. 42 U.S. BALANCED FUND The Brinson U.S. Balanced Fund Class I shares produced an annualized return of 10.40% since its performance inception on December 31, 1994. Its benchmark, the U.S. Balanced Mutual Fund Index*, produced an annual return of 14.16% over the same time period. For the fiscal year ended June 30, 2001, the Fund's Class I shares returned 14.18%, while Class N returned 13.89%, significantly outperforming the benchmark's decline of 6.34%. Contributors to solid performance on the equity side included financial stocks benefiting from lower interest rates and consumer companies having the advantage of continued consumer demand. Other sector overweights included pharmaceuticals, industrial parts, construction and railroads. Exposure to technology was reduced by year-end. On the fixed income side, the Fund benefited from continued Federal Reserve Board easing of interest rates with a resulting market rally in the long end of the yield curve, continued low inflation, and attractive real yields for much of the year. Market allocation was positive for the year, powered by an overweighted fixed income position and equity underweight. Where normal policy for this Fund produces a portfolio of 65% in U.S. equities, 30% in U.S. Bonds and 5% in high yield bonds, by year-end the Fund contained 49% in U.S. equities, 41% in U.S. bonds and 10% in high yield bonds. In a volatile environment, this strategy produced positive performance. - -------------------------------------------------------------------------------- * AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 65% WILSHIRE 5000 INDEX AND 35% SALOMON SMITH BARNEY BIG BOND INDEX. 43 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - ---------------------------------------------------------------------------------------------------------------------------------- BRINSON U.S. BALANCED FUND CLASS I 4.55% 14.18% 4.32% 8.02% 10.40% BRINSON U.S. BALANCED FUND CLASS N 4.33 13.89 3.92 N/A N/A U.S. Balanced Mutual Fund Index** -2.32 -6.34 4.95 11.78 14.16 Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 3.62 11.26 6.23 7.47 8.30 Wilshire 5000 Index -5.79 -15.34 3.50 13.06 17.03
* PERFORMANCE INCEPTION DATE OF THE BRINSON U.S. BALANCED FUND CLASS I AND OF EACH OF THE INDICES IS 12/31/94. INCEPTION DATE OF CLASS N IS 6/30/97. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 65% WILSHIRE 5000 INDEX AND 35% SALOMON SMITH BARNEY BIG BOND INDEX. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Balanced Fund Class I, the U.S. Balanced Mutual Fund Index, the Salomon Smith Barney BIG Bond Index and the Wilshire 5000 Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. BALANCED FUND CLASS I VS. U.S. BALANCED MUTUAL FUND INDEX, SALOMON SMITH BARNEY BIG BOND INDEX AND WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S. BALANCED U.S. BALANCED MUTUAL SALOMON SMITH BARNEY FUND CLASS I FUND INDEX BIG BOND INDEX WILSHIRE 5000 INDEX 12/01/94 $1,000,000 $1,000,000 $1,000,000 $1,000,000 1/01/95 $1,019,000 $1,020,459 $1,020,700 $1,021,610 2/01/95 $1,050,000 $1,054,245 $1,044,584 $1,062,301 3/01/95 $1,064,000 $1,074,390 $1,050,643 $1,090,303 4/01/95 $1,080,000 $1,096,416 $1,065,037 $1,117,397 5/01/95 $1,120,000 $1,133,880 $1,107,319 $1,155,243 6/01/95 $1,139,086 $1,160,041 $1,115,070 $1,192,095 7/01/95 $1,154,301 $1,190,258 $1,112,840 $1,241,150 8/01/95 $1,170,530 $1,202,593 $1,125,637 $1,253,251 9/01/95 $1,192,845 $1,236,363 $1,136,218 $1,301,050 10/01/95 $1,199,945 $1,234,093 $1,151,444 $1,287,988 11/01/95 $1,236,461 $1,274,819 $1,169,406 $1,342,560 12/01/95 $1,254,813 $1,294,524 $1,185,544 $1,364,511 1/01/96 $1,278,797 $1,320,148 $1,193,606 $1,401,066 2/01/96 $1,273,346 $1,327,347 $1,173,434 $1,425,571 3/01/96 $1,276,616 $1,333,440 $1,164,985 $1,441,166 4/01/96 $1,279,887 $1,351,405 $1,156,364 $1,476,778 5/01/96 $1,284,248 $1,375,184 $1,155,786 $1,517,153 6/01/96 $1,293,124 $1,374,037 $1,170,696 $1,504,667 7/01/96 $1,273,247 $1,327,151 $1,173,857 $1,423,490 8/01/96 $1,287,603 $1,354,051 $1,172,096 $1,469,027 9/01/96 $1,324,045 $1,409,155 $1,192,490 $1,547,238 10/01/96 $1,354,965 $1,433,057 $1,219,321 $1,568,869 11/01/96 $1,405,762 $1,503,045 $1,239,440 $1,672,806 12/01/96 $1,396,859 $1,487,404 $1,228,533 $1,653,954 1/01/97 $1,414,616 $1,541,137 $1,233,201 $1,742,490 2/01/97 $1,419,351 $1,541,269 $1,234,558 $1,741,688 3/01/97 $1,394,492 $1,491,511 $1,222,089 $1,664,653 4/01/97 $1,418,167 $1,541,254 $1,239,565 $1,737,249 5/01/97 $1,459,599 $1,617,304 $1,251,217 $1,860,333 6/01/97 $1,493,510 $1,672,335 $1,266,106 $1,945,797 7/01/97 $1,555,541 $1,771,767 $1,300,418 $2,095,390 8/01/97 $1,530,490 $1,723,142 $1,289,234 $2,016,624 9/01/97 $1,563,891 $1,798,103 $1,308,186 $2,135,625 10/01/97 $1,548,383 $1,768,170 $1,326,893 $2,064,487 11/01/97 $1,559,120 $1,808,707 $1,333,129 $2,132,079 12/01/97 $1,581,464 $1,836,890 $1,346,727 $2,171,479 1/01/98 $1,597,411 $1,851,668 $1,364,100 $2,183,270 2/01/98 $1,638,609 $1,938,835 $1,363,145 $2,342,213 3/01/98 $1,670,504 $2,004,556 $1,368,461 $2,459,440 4/01/98 $1,666,517 $2,023,669 $1,375,577 $2,488,634 5/01/98 $1,670,504 $1,995,465 $1,388,783 $2,422,411 6/01/98 $1,675,623 $2,046,667 $1,400,171 $2,507,341 7/01/98 $1,661,933 $2,019,025 $1,403,111 $2,452,405 8/01/98 $1,614,019 $1,825,461 $1,424,579 $2,070,492 9/01/98 $1,672,885 $1,918,044 $1,458,199 $2,205,737 10/01/98 $1,705,740 $2,007,780 $1,451,637 $2,369,844 11/01/98 $1,726,275 $2,093,825 $1,459,621 $2,519,073 12/01/98 $1,738,302 $2,183,188 $1,464,146 $2,680,268 1/01/99 $1,734,600 $2,241,007 $1,474,981 $2,778,795 2/01/99 $1,693,873 $2,174,476 $1,449,168 $2,678,063 3/01/99 $1,712,385 $2,233,359 $1,457,429 $2,781,410 4/01/99 $1,762,368 $2,305,519 $1,462,238 $2,914,723 5/01/99 $1,753,112 $2,265,290 $1,448,786 $2,850,920 6/01/99 $1,755,023 $2,338,823 $1,443,860 $2,998,512 7/01/99 $1,728,828 $2,286,810 $1,438,084 $2,902,379 8/01/99 $1,702,634 $2,272,397 $1,437,078 $2,875,329 9/01/99 $1,665,214 $2,243,346 $1,454,323 $2,800,197 10/01/99 $1,646,503 $2,338,435 $1,458,686 $2,978,275 11/01/99 $1,646,503 $2,389,259 $1,458,540 $3,078,018 12/01/99 $1,617,539 $2,503,334 $1,451,830 $3,311,735 1/01/00 $1,582,878 $2,433,318 $1,447,728 $3,174,275 2/01/00 $1,532,811 $2,478,682 $1,464,624 $3,245,369 3/01/00 $1,602,134 $2,585,630 $1,483,622 $3,438,131 4/01/00 $1,656,052 $2,495,379 $1,479,217 $3,259,001 5/01/00 $1,675,309 $2,437,960 $1,477,911 $3,145,180 6/01/00 $1,666,038 $2,525,663 $1,508,793 $3,283,857 7/01/00 $1,685,433 $2,500,270 $1,522,577 $3,216,909 8/01/00 $1,724,223 $2,630,757 $1,544,332 $3,450,447 9/01/00 $1,720,344 $2,557,206 $1,554,799 $3,289,443 10/01/00 $1,761,074 $2,527,581 $1,564,693 $3,219,545 11/01/00 $1,772,711 $2,378,481 $1,590,061 $2,899,258 12/01/00 $1,819,583 $2,421,789 $1,620,131 $2,950,952 1/01/01 $1,871,975 $2,496,033 $1,646,791 $3,063,985 2/01/01 $1,863,914 $2,349,923 $1,661,443 $2,773,373 3/01/01 $1,837,719 $2,251,405 $1,670,146 $2,586,672 4/01/01 $1,882,050 $2,368,140 $1,662,308 $2,799,545 5/01/01 $1,916,305 $2,388,895 $1,673,194 $2,827,420 6/01/01 $1,902,361 $2,365,636 $1,678,722 $2,780,038
12/31/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 44 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------------- 1. Allergan, Inc. 1.65% 2. Burlington Northern Santa Fe Corp. 1.43 3. Wells Fargo and Co. 1.39 4. Microsoft Corp. 1.35 5. Baxter International, Inc. 1.27 6. Freddie Mac 1.19 7. GPU, Inc. 1.17 8. Advanced Micro Devices, Inc. 1.09 9. Johnson & Johnson Co. 1.07 10. Masco Corp. 1.05 - -------------------------------------------------------------------
ASSET ALLOCATION AS OF JUNE 30, 2001
CURRENT BENCHMARK STRATEGY - ------------------------------------------------------------------ U.S. Equities 65% 49% U.S. Bonds 35 51 - ------------------------------------------------------------------ 100% 100%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Basic Industries Chemicals 1.57% Housing/Paper 1.19 Metals 1.05 ------ 3.81 Capital Investment Capital Goods 2.15 Electronic Components 2.78 Technology 0.92 ------ 5.85 Computers Software 1.35 Systems 1.02 ------ 2.37 Consumer Autos/Durables 1.34 Food/House Products 1.69 Health: Drugs 5.52 Health: Non-Drugs 3.67 Leisure/Tourism 0.57 Retail/Apparel 2.76 ------ 15.55 Financial Banks 3.68 Non-Banks 4.61 ------ 8.29 Telecommunications Equipment 0.27 Services 1.95 ------ 2.22 Energy 1.22 Services/Miscellaneous 4.52 Transportation 2.25 Utilities 2.45 ------ Total U.S. Equities 48.53* U.S. BONDS Corporate Bonds Airlines 0.11% Appliances & Household Durables 0.11 Banks 0.40 Chemicals 0.08 Consumer 0.26 Electric Components 0.13 Energy 0.23 Financial Services 1.50 Forest Products 0.04 Leisure & Tourism 0.05 Retail/Apparel 0.15 Services/Miscellaneous 0.18 Technology 0.06 Telecommunications 0.75 Television Broadcasting 0.16 Transportation 0.02 Utilities 0.22 ------ Total U.S. Corporate Bonds 4.45 International Dollar Bonds 0.71 Asset-Backed Securities 1.33 Corporate Mortgage-Backed Securities 3.04 U.S. Government Mortgage-Backed Securities 17.43 U.S. Government Obligations 17.22 ------ Total U.S. Bonds 44.18* SHORT-TERM INVESTMENTS 6.52* ------ TOTAL INVESTMENTS 99.23 CASH AND OTHER ASSETS, LESS LIABILITIES 0.77 ------ NET ASSETS 100.00% ======
- -------------------------------------------------------------------------------- * THE FUND HELD A LONG POSITION IN U.S. TREASURY FUTURES ON JUNE 30, 2001 WHICH INCREASED U.S. BOND EXPOSURE FROM 44.18% TO 48.36%. THE FUND ALSO HELD A SHORT POSITION IN STOCK INDEX FUTURES WHICH REDUCED U.S. EQUITY EXPOSURE FROM 48.53% TO 47.39%. THESE TWO ADJUSTMENTS RESULT IN A NET DECREASE IN THE FUND'S EXPOSURE TO SHORT-TERM INVESTMENTS FROM 6.52% TO 3.48%. 45 U.S. BALANCED FUND--SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ U.S. EQUITIES -- 48.53% Abbott Laboratories 3,100 $ 148,831 Advanced Micro Devices, Inc. (b) 10,200 294,576 Allergan, Inc. 5,200 444,600 American General Corp. 3,500 162,575 American Home Products Corp. 3,600 210,384 American Standard Companies, Inc. (b) 2,800 168,280 Analog Devices, Inc. (b) 3,400 147,050 Baxter International, Inc. 7,000 343,000 Burlington Northern Santa Fe Corp. 12,800 386,176 Cardinal Health, Inc. 3,000 207,000 Carnival Corp., Class A 5,000 153,500 Cephalon, Inc. (b) 1,400 98,700 CIGNA Corp. 2,200 210,804 Cisco Systems, Inc. (b) 4,600 83,720 Citigroup, Inc. 3,086 163,064 Clear Channel Communications (b) 1,700 106,590 CMS Energy Corp. 3,100 86,335 CommScope, Inc. (b) 3,100 72,850 Compaq Computer Corp. 9,900 153,351 Computer Sciences Corp. (b) 5,700 197,220 Compuware Corp. (b) 10,100 141,299 COR Therapeutics, Inc. (b) 2,600 79,300 Dow Chemical Co. 4,000 133,000 Eastman Chemical Co. 1,000 47,630 Electronic Data Systems Corp. 1,600 100,000 Eli Lilly and Co. 3,500 259,000 Emerson Electric Co. 3,300 199,650 Entergy Corp. 2,600 99,814 Exelon Corp. 2,500 160,300 Exxon Mobil Corp. 2,000 174,700 Federated Department Stores, Inc. (b) 1,900 80,750 FedEx Corp. (b) 4,200 168,840 First Data Corp. 3,458 222,176 FleetBoston Financial Corp. 5,005 197,447 Freddie Mac 4,600 322,000 GATX Corp. 1,300 52,130 General Mills, Inc. 5,600 245,168 Genzyme Corp. (b) 2,100 128,100 GPU, Inc. 9,000 316,350 GreenPoint Financial Corp. 6,500 249,600 Household International, Inc. 3,000 200,100 Illinois Tool Works, Inc. 4,200 265,860 IMC Global, Inc. 6,800 69,360 Johnson & Johnson Co. 5,764 288,200 Johnson Controls, Inc. 1,100 79,717 JP Morgan Chase & Co. 3,800 169,480 Kimberly-Clark Corp. 1,200 67,080 KPMG Consulting, Inc. (b) 2,500 38,375 Kroger Co. (b) 9,700 242,500 Lear Corp. (b) 3,500 122,150 Lincoln National Corp. 1,400 72,450 Lyondell Chemical Co. 4,300 66,134 Martin Marietta Materials, Inc. 2,836 140,354 Masco Corp. 11,400 284,544 Mattel, Inc. 9,600 181,632 Mead Corp. 3,200 86,848 Microsoft Corp. (b) 5,000 365,000 Motorola, Inc. 6,415 106,232 Newell Rubbermaid, Inc. 6,400 $ 160,640 Nextel Communications, Inc. (b) 13,700 239,750 Omnicom Group 2,100 180,600 Pentair, Inc. 3,400 114,920 PNC Financial Services Group 2,600 171,054 Praxair, Inc. 2,300 108,100 Sapient Corp. (b) 4,000 39,000 Sara Lee Corp. 11,224 212,583 SBC Communications, Inc. 5,200 208,312 SCI Systems, Inc. (b) 4,300 109,650 SICOR, Inc. 5,200 120,120 Target Corp. 2,300 79,580 Tellabs, Inc. (b) 4,100 79,458 Ultramar Diamond Shamrock Corp. 3,290 155,453 United Health Group, Inc. 2,500 154,375 Viacom, Inc. (b) 2,500 129,375 Viad Corp. 3,300 87,120 W.W. Grainger, Inc. 3,900 160,524 Wells Fargo and Co. 8,100 376,083 XL Capital Ltd. 1,300 106,730 York International Corp. 1,700 59,534 ------------ Total U.S. Equities (Cost $12,385,595) 13,114,837 ------------ FACE AMOUNT ---------- BONDS -- 44.18% ASSET-BACKED SECURITIES -- 1.33% Peco Energy Transition Trust, 99-A3, Class A7, 6.130%, due 03/01/09 $ 110,000 109,281 Sears Credit Account Master Trust, 99-3, Class A, 6.450%, due 11/15/05 170,000 175,305 Vanderbilt Mortgage Finance 8.255%, due 05/07/17 70,000 74,992 ------------ 359,578 ------------ CORPORATE MORTGAGE-BACKED SECURITIES -- 3.04% Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2 7.320%, due 10/15/32 150,000 156,302 CS First Boston Mortgage Securities Corp., 144A, 6.238%, due 02/15/34 30,000 29,695 CS First Boston Mortgage Securities Corp. 7.545%, due 04/15/10 90,000 95,116 DLJ Commercial Mortgage Corp. 7.300%, due 06/10/09 24,999 26,056 7.340%, due 09/10/09 45,000 46,990 GE Capital Mortgage Services, Inc. 7.750%, due 02/25/30 67,736 68,925 LB Commercial Conduit Mortgage Trust, 99-C, Class A2, 7.325%, due 10/15/32 40,000 41,752 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1, 6.410%, due 08/15/07 96,406 97,799 Merrill Lynch Mortgage Investors, Inc., 7.560%, due 11/15/31 15,000 15,793 Morgan Stanley Dean Witter & Co. 6.660%, due 02/15/33 15,000 14,992 6.960%, due 07/15/08 28,960 29,778 7.570%, due 12/15/09 25,000 26,411
46
FACE AMOUNT VALUE ---------- ------------ Norwest Asset Securities Corp., 99-3 6.000%, due 02/25/29 $ 50,809 $ 49,069 Prudential Mortgage Capital Funding, LLC, 00-ROCK, Class A2, 6.605%, due 05/11/11 15,000 14,906 Salomon Brothers Mortgage Securities VII 6.592%, due 10/18/10 45,000 44,825 Structured Asset Securities Corp., 98-ALS1, Class A1, 6.900%, due 01/25/29 64,098 64,523 ------------ 822,932 ------------ INTERNATIONAL DOLLAR BONDS -- 0.71% Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97 30,000 23,233 Gulf Canada Resources Ltd. 7.125%, due 01/15/11 5,000 5,130 Petroleum Geo-Services 6.625%, due 03/30/08 10,000 9,359 7.500%, due 03/31/07 10,000 9,911 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14 15,000 14,756 Stora Enso Oyj 7.375%, due 05/15/11 10,000 10,129 Tyco International Group S.A. 6.750%, due 02/15/11 45,000 44,579 7.000%, due 06/15/28 15,000 14,172 United Mexican States 9.875%, due 02/01/10 35,000 38,290 Vodafone Group PLC 7.750%, due 02/15/10 20,000 21,013 ------------ 190,572 ------------ U.S. CORPORATE BONDS -- 4.45% AOL Time Warner, Inc. 6.750%, due 04/15/11 20,000 19,682 AT&T Wireless Services, Inc., 144A 7.875%, due 03/01/11 25,000 25,048 Avon Products, Inc. 7.150%, due 11/15/09 20,000 20,371 Bank of America Corp. 7.400%, due 01/15/11 20,000 20,781 Bank One Corp. 7.875%, due 08/01/10 20,000 21,404 Black & Decker Corp., 144A 7.125%, due 06/01/11 30,000 29,739 Boeing Capital Corp. 6.100%, due 03/01/11 25,000 24,365 Bombardier Capital Inc., 144A 6.125%, due 06/29/06 15,000 14,861 Capital One Bank, BKNT 8.250%, due 06/15/05 25,000 25,855 Caterpillar, Inc. 6.550%, due 05/01/11 10,000 10,036 Cendant Corp. 7.750%, due 12/01/03 50,000 50,901 CIT Group, Inc. 5.625%, due 05/17/04 45,000 44,842 Citigroup, Inc. 7.250%, due 10/01/10 60,000 62,413 Citizens Communications Co. 9.250%, due 05/15/11 40,000 41,583 Comcast Cable Communications 6.750%, due 01/30/11 $ 10,000 $ 9,774 Conoco, Inc. 6.950%, due 04/15/29 15,000 14,422 Consolidated Edison 7.500%, due 09/01/10 30,000 30,508 Delhaize America, Inc., 144A 8.125%, due 04/15/11 40,000 41,723 Duke Energy Field Services 6.875%, due 02/01/11 5,000 4,889 Equistar Chemicals LP 8.750%, due 02/15/09 25,000 22,941 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 10,000 10,224 First Union National Bank 7.800%, due 08/18/10 20,000 21,419 Ford Motor Credit Co. 6.875%, due 02/01/06 20,000 20,262 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 20,000 19,888 Harrah's Operating Co., Inc., 144A 7.125%, due 06/01/07 15,000 14,863 Household Finance Corp. 6.750%, due 05/15/11 60,000 59,193 ING Capital Funding Trust III 8.439%, due 12/31/49 10,000 10,609 Liberty Financial Co. 7.625%, due 11/15/28 10,000 9,870 Mirant Americas Generation, Inc., 144A 7.625%, due 05/01/06 5,000 5,047 Morgan Stanley Dean Witter & Co. 6.750%, due 04/15/11 45,000 44,688 News America Holdings, Inc. 7.125%, due 04/08/28 20,000 17,423 Northrop Grumman Corp., 144A 7.125%, due 02/15/11 20,000 19,764 Pacific Gas & Electric Co. 7.050%, due 03/01/24 30,000 24,300 Phillips Petroleum Co. 8.750%, due 05/25/10 20,000 22,761 Pure Resources, Inc., 144A 7.125%, due 06/15/11 10,000 9,841 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 30,000 30,993 Southern California Edison 8.950%, due 11/03/03 50,000 36,500 Sprint Capital Corp. 7.625%, due 01/30/11 45,000 44,650 Telus Corp. 8.000%, due 06/01/11 45,000 46,000 Transocean Sedco Forex, Inc., 144A 6.625%, due 04/15/11 10,000 9,816 TRW, Inc. 7.625%, due 03/15/06 5,000 5,148 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 30,000 30,527 Verizon Global Funding Corp., 144A 7.750%, due 12/01/30 20,000 20,571
47
FACE AMOUNT VALUE ---------- ------------ Viacom, Inc. 8.625%, due 08/01/12 $ 40,000 $ 44,055 Wells Fargo Bank NA 6.450%, due 02/01/11 45,000 44,252 WorldCom, Inc. 7.500%, due 05/15/11 45,000 43,814 ------------ 1,202,616 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 17.43% Fannie Mae 7.125%, due 01/15/30 445,000 475,688 Fannie Mae Grantor Trust 7.500%, due 06/19/30 172,982 179,282 Federal Home Loan Mortgage Corp. Gold 6.500%, due 04/01/29 697,492 687,800 Federal Home Loan Mortgage Corp., Guaranteed Mortgage Certificates 9.000%, due 07/01/30 207,984 218,002 Federal National Mortgage Assoc., 97-72, Class EG, 5.670%, due 09/25/22 (P.O.) 50,768 49,949 Federal National Mortgage Association 7.000%, due 09/01/23 1,362,495 1,376,120 7.500%, due 05/01/31 84,931 86,723 Government National Mortgage Association 6.000%, due 11/20/28 54,499 52,608 6.000%, due 02/20/29 114,600 110,624 6.000%, due 05/20/29 207,863 200,650 7.000%, due 12/15/23 104,399 105,428 7.000%, due 04/15/26 124,914 126,145 7.500%, due 07/15/25 16,068 16,492 7.500%, due 02/15/27 610,870 627,007 7.500%, due 04/15/27 388,236 398,492 ------------ 4,711,010 ------------ U.S. GOVERNMENT OBLIGATIONS -- 17.22% U.S Treasury Note 6.500%, due 02/15/10 $1,700,000 $ 1,826,303 6.625%, due 05/31/02 170,000 174,176 7.000%, due 07/15/06 1,955,000 2,121,050 U.S. Treasury Bond 6.625%, due 02/15/27 485,000 531,289 ------------ 4,652,818 ------------ Total U.S. Bonds (Cost $11,992,551) 11,939,526 ------------ SHARES --------- SHORT-TERM INVESTMENTS -- 6.52% INVESTMENT COMPANIES -- 5.60% Brinson Supplementary Trust U.S. Cash Management Prime Fund 1,514,779 1,514,779 FACE AMOUNT --------- U.S. GOVERNMENT OBLIGATIONS -- 0.92% U.S. Treasury Bill, due 08/09/01 $ 250,000 249,052 ------------ Total Short-Term Investments (Cost $1,763,484) 1,763,831 ------------ Total Investments (Cost $26,141,630) -- 99.23% (a) 26,818,194 Cash and other assets, less liabilities -- 0.77% 206,750 ------------ Net Assets -- 100% $ 27,024,944 ============
See accompanying notes to schedule of investments. 48 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $26,276,605; and net unrealized appreciation consisted of: Gross unrealized appreciation $1,108,235 Gross unrealized depreciation (566,646) ---------- Net unrealized appreciation $ 541,589 ==========
(b) Non-income producing security. E.E.T.C.: Enhanced Equipment Trust Certificate P.O.: Principal-only 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2001, the value of these securities amounted to $245,948 or 0.91% of net assets. FUTURES CONTRACTS The U.S. Balanced Fund had the following open futures contracts as of June 30, 2001:
EXPIRATION COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN -------------- ------------- ----------- ------------- U.S. INTEREST RATE FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 8 contracts September 2001 $822,931 $826,750 $ 3,819 10 year U.S. Treasury Notes, 1 contract September 2001 102,109 103,016 907 30 year U.S. Treasury Bonds, 2 contracts September 2001 197,373 200,624 3,251 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 1 contract September 2001 313,426 307,925 5,501 ------- Total $13,478 =======
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2001 was $249,052. See accompanying notes to financial statements. 49 U.S. EQUITY FUND The Brinson U.S. Equity Fund posted strong returns in the fiscal year ended June 30, 2001, with Class I shares gaining 10.88% and Class N shares gaining 10.63%. In contrast, the Fund's benchmark, the Wilshire 5000 Equity Index fell 15.34%. The gain occurred against the backdrop of a declining U.S. equity market. A sharp decline in large-cap stocks, falling technology valuations, and a synchronized global slowdown contributed to the market's downward trajectory. Other investor concerns included a deceleration in capital equipment spending and rising inventories. Despite these concerns, consumers displayed resilience, due in part to the Federal Reserve's aggressive attempts at reviving the economic engine. The Federal Reserve lowered the Fed Funds rate six times during the fiscal year, for a total 2.75% decrease. Fund gains came from market exposure, industry factors and stock selection. The most significant positive factor in the Fund's performance was underexposure to size--the Fund was underweighted in the largest stocks that dominate major market benchmarks. The disparity between large- and small-cap stocks, which began developing in 1999 and early 2000, began to dissipate as many of the largest-cap stocks significantly underperformed. The most positive industry position was the underweighted Internet sector, which underperformed as investors retreated from stocks with very high prices and little or no earnings support. The Fund's overweight in the medical products industry was also profitable. Stock selection also helped the Fund beat its benchmark, with holdings in such large-cap companies as UnitedHealth Group, Emerson Electric, Carnival Cruise, CIGNA and Kimberly-Clark posting strong returns. Poor performers were mainly technology stocks, including Compuware, Gateway, Lexmark, Compaq, and FedEx. In the intermediate-capitalization arena, top stocks included Fort James, Alza, Exelon, Southdown, St. Jude and Greenpoint Financial. Unisys, Motorola, Pentair, Circuit City and Owens-Illinois were among the worst performers. The Fund continues to carry an overweight to earnings yield and an underweight to size. Though we are not pursuing these strategies to the degree we did a year ago, they still represent a major performance factor. 50 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - --------------------------------------------------------------------------------------------------------------------------------- BRINSON U.S. EQUITY FUND CLASS I 2.62% 10.88% 1.97% 11.17% 13.98% BRINSON U.S. EQUITY FUND CLASS N 2.46 10.63 1.66 N/A 6.20 Wilshire 5000 Equity Index -5.79 -15.34 3.50 13.06 14.82
* PERFORMANCE INCEPTION DATES OF THE BRINSON U.S. EQUITY FUND CLASS I AND THE WILSHIRE 5000 EQUITY INDEX IS 2/28/94. INCEPTION DATE OF CLASS N IS 6/30/97. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR REPRESENT AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Equity Fund Class I and the Wilshire 5000 Equity Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. EQUITY FUND CLASS I VS. WILSHIRE 5000 EQUITY INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S. EQUITY FUND CLASS I WILSHIRE 5000 EQUITY INDEX 2/28/1994 $1,000,000 $1,000,000 3/31/1994 $942,000 $954,700 4/30/1994 $964,000 $963,865 5/31/1994 $984,000 $973,311 6/30/1994 $969,033 $947,324 7/31/1994 $991,125 $975,459 8/31/1994 $1,054,389 $1,018,574 9/30/1994 $1,018,238 $998,814 10/31/1994 $1,013,217 $1,015,095 11/30/1994 $978,071 $977,942 12/31/1994 $982,692 $991,144 1/31/1995 $1,003,017 $1,012,553 2/28/1995 $1,048,747 $1,052,853 3/31/1995 $1,075,169 $1,080,648 4/30/1995 $1,098,542 $1,107,448 5/31/1995 $1,139,191 $1,144,991 6/30/1995 $1,176,845 $1,181,516 7/31/1995 $1,218,693 $1,230,076 8/31/1995 $1,241,148 $1,242,008 9/30/1995 $1,288,099 $1,289,328 10/31/1995 $1,284,017 $1,276,435 11/30/1995 $1,357,506 $1,330,556 12/31/1995 $1,381,494 $1,352,244 1/31/1996 $1,438,138 $1,388,484 2/29/1996 $1,461,216 $1,412,783 3/31/1996 $1,488,489 $1,428,182 4/30/1996 $1,516,811 $1,463,458 5/31/1996 $1,540,937 $1,503,411 6/30/1996 $1,536,662 $1,491,083 7/31/1996 $1,462,936 $1,410,564 8/31/1996 $1,518,757 $1,455,702 9/30/1996 $1,587,217 $1,533,146 10/31/1996 $1,620,921 $1,554,610 11/30/1996 $1,733,616 $1,657,680 12/31/1996 $1,735,857 $1,638,948 1/31/1997 $1,798,916 $1,726,632 2/28/1997 $1,809,235 $1,725,769 3/31/1997 $1,749,615 $1,649,490 4/30/1997 $1,803,502 $1,721,408 5/31/1997 $1,935,354 $1,843,455 6/30/1997 $2,026,459 $1,928,070 7/31/1997 $2,181,545 $2,076,339 8/31/1997 $2,096,535 $1,998,268 9/30/1997 $2,190,735 $2,116,166 10/31/1997 $2,074,708 $2,045,698 11/30/1997 $2,116,064 $2,112,592 12/31/1997 $2,165,710 $2,151,675 1/31/1998 $2,180,493 $2,163,294 2/28/1998 $2,370,209 $2,320,782 3/31/1998 $2,506,951 $2,437,053 4/30/1998 $2,482,313 $2,466,054 5/31/1998 $2,446,588 $2,400,457 6/30/1998 $2,461,722 $2,484,713 7/31/1998 $2,399,901 $2,430,298 8/31/1998 $2,057,411 $2,051,900 9/30/1998 $2,207,019 $2,185,889 10/31/1998 $2,375,172 $2,348,520 11/30/1998 $2,474,086 $2,496,476 12/31/1998 $2,567,974 $2,656,251 1/31/1999 $2,550,880 $2,754,001 2/28/1999 $2,457,523 $2,654,306 3/31/1999 $2,537,731 $2,756,762 4/30/1999 $2,766,521 $2,888,811 5/31/1999 $2,732,334 $2,825,546 6/30/1999 $2,836,350 $2,971,910 7/31/1999 $2,717,508 $2,876,511 8/31/1999 $2,622,435 $2,849,760 9/30/1999 $2,432,289 $2,775,381 10/31/1999 $2,433,609 $2,951,895 11/30/1999 $2,448,134 $3,050,784 12/31/1999 $2,463,992 $3,282,338 1/31/2000 $2,298,456 $3,146,121 2/29/2000 $2,110,947 $3,216,594 3/31/2000 $2,320,430 $3,407,660 4/30/2000 $2,412,720 $3,230,121 5/31/2000 $2,433,229 $3,117,390 6/30/2000 $2,354,123 $3,254,866 7/31/2000 $2,362,913 $3,188,467 8/31/2000 $2,513,799 $3,419,950 9/30/2000 $2,427,369 $3,260,238 10/31/2000 $2,509,404 $3,191,121 11/30/2000 $2,446,413 $2,873,605 12/31/2000 $2,543,689 $2,924,755 1/31/2001 $2,662,113 $3,036,773 2/28/2001 $2,561,534 $2,748,887 3/31/2001 $2,446,354 $2,563,887 4/30/2001 $2,581,001 $2,774,895 5/31/2001 $2,652,380 $2,802,644 6/30/2001 $2,610,252 $2,755,559
2/28/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 51 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Allergan, Inc. 3.20% 2. Burlington Northern Santa Fe Corp. 2.87 3. Wells Fargo and Co. 2.78 4. Microsoft Corp. 2.71 5. Baxter International, Inc. 2.51 6. Freddie Mac 2.37 7. GPU, Inc. 2.35 8. Advanced Micro Devices, Inc. 2.15 9. Masco Corp. 2.11 10. Johnson & Johnson Co. 2.07 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Basic Industries Chemicals 3.13% Housing/Paper 2.33 Metals 2.11 ------ 7.57 Capital Investment Capital Goods 3.81 Electronic Components 5.97 ------ 9.78 Computers Software 3.75 Systems 2.36 ------ 6.11 Consumer Autos/Durables 2.65 Food/House Products 3.38 Health: Drugs 10.91 Health: Non-Drugs 7.25 Retail/Apparel 6.10 ------ 30.29 Financial Banks 8.59% Non-Banks 7.69 ------ 16.28 Energy 2.41 Services/Miscellaneous 10.19 Telecommunications 4.65 Transportation 4.52 Utilities 4.88 ------ Total U.S. Equities 96.68* SHORT-TERM INVESTMENTS 3.40* ------ TOTAL INVESTMENTS 100.08 LIABILITIES, LESS CASH AND OTHER ASSETS (0.08) ------ NET ASSETS 100.00% ======
- -------------------------------------------------------------------------------- * THE FUND HELD A LONG POSITION IN STOCK INDEX FUTURES WHICH INCREASED U.S. EQUITY EXPOSURE FROM 96.68% TO 99.34%. THIS ADJUSTMENT RESULTS IN A NET DECREASE IN THE FUND'S EXPOSURE TO SHORT-TERM INVESTMENTS FROM 3.40% TO 0.74%. 52 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ U.S. EQUITIES -- 96.68% Abbott Laboratories 32,200 $ 1,545,922 Advanced Micro Devices, Inc. (b) 103,200 2,980,416 Allergan, Inc. 52,000 4,446,000 American General Corp. 36,200 1,681,490 American Home Products Corp. 36,800 2,150,592 American Standard Companies, Inc. (b) 27,800 1,670,780 Analog Devices, Inc. (b) 35,500 1,535,375 Baxter International, Inc. 71,200 3,488,800 Burlington Northern Santa Fe Corp. 132,000 3,982,440 Cardinal Health, Inc. 31,550 2,176,950 Carnival Corp., Class A 51,900 1,593,330 Cephalon, Inc. (b) 14,700 1,036,350 CIGNA Corp. 23,150 2,218,233 Cisco Systems, Inc. (b) 47,100 857,220 Citigroup, Inc. 31,361 1,657,115 Clear Channel Communications, Inc. (b) 17,500 1,097,250 CMS Energy Corp. 31,750 884,238 CommScope, Inc. (b) 31,300 735,550 Compaq Computer Corp. 102,100 1,581,529 Computer Sciences Corp. (b) 58,700 2,031,020 Compuware Corp. (b) 103,800 1,452,162 COR Therapeutics, Inc. (b) 26,600 811,300 Dow Chemical Co. 41,500 1,379,875 Eastman Chemical Co. 10,450 497,734 Electronic Data Systems Corp. 16,900 1,056,250 Eli Lilly and Co. 36,000 2,664,000 Emerson Electric Co. 33,800 2,044,900 Entergy Corp. 26,600 1,021,174 Exelon Corp. 25,100 1,609,412 Exxon Mobil Corp. 20,200 1,764,470 Federated Department Stores, Inc. (b) 20,100 854,250 FedEx Corp. (b) 43,600 1,752,720 First Data Corp. 35,730 2,295,652 FleetBoston Financial Corp. 51,955 2,049,625 Freddie Mac 47,000 3,290,000 GATX Corp. 13,700 549,370 General Mills, Inc. 57,300 2,508,594 Genzyme Corp. (b) 21,200 1,293,200 GPU, Inc. 92,800 3,261,920 GreenPoint Financial Corp. 66,000 2,534,400 Household International, Inc. 30,900 2,061,030 Illinois Tool Works, Inc. 42,800 2,709,240 IMC Global, Inc. 69,600 709,920 Johnson & Johnson Co. 57,644 2,882,200 Johnson Controls, Inc. 11,600 840,652 JP Morgan Chase & Co. 38,900 1,734,940 Kimberly-Clark Corp. 12,450 695,955 KPMG Consulting, Inc. (b) 26,900 412,915 Kroger Co. (b) 100,300 2,507,500 Lear Corp. (b) 35,250 1,230,225 Lincoln National Corp. 14,000 724,500 Lyondell Chemical Co. 42,950 660,571 Martin Marietta Materials, Inc. 28,507 1,410,811 Masco Corp. 117,700 2,937,792 Mattel, Inc. 99,000 1,873,080 Mead Corp. 32,300 876,622 Microsoft Corp. (b) 51,500 3,759,500 Motorola, Inc. 64,223 1,063,533 Newell Rubbermaid, Inc. 66,400 $ 1,666,640 Nextel Communications, Inc. (b) 137,900 2,413,250 Omnicom Group 21,000 1,806,000 Pentair, Inc. 34,700 1,172,860 PNC Financial Services Group 26,600 1,750,014 Praxair, Inc. 23,300 1,095,100 Sapient Corp. (b) 44,200 430,950 Sara Lee Corp. 115,448 2,186,585 SBC Communications, Inc. 53,900 2,159,234 SCI Systems, Inc. (b) 45,200 1,152,600 SICOR, Inc. 49,300 1,138,830 Target Corp. 24,100 833,860 Tellabs, Inc. (b) 42,500 823,650 Ultramar Diamond Shamrock Corp. 33,618 1,588,450 UnitedHealth Group, Inc. 25,800 1,593,150 Viacom, Inc. (b) 25,500 1,319,625 Viad Corp. 33,750 891,000 W.W. Grainger, Inc. 39,000 1,605,240 Wells Fargo and Co. 83,100 3,858,333 XL Capital Ltd. 13,500 1,108,350 York International Corp. 16,700 584,834 ------------ Total U.S. Equities (Cost $108,451,896) 134,311,149 ------------ SHORT-TERM INVESTMENTS -- 3.40% INVESTMENT COMPANIES -- 2.68% Brinson Supplementary Trust U.S. Cash Management Prime Fund 3,732,834 3,732,834 ------------ FACE AMOUNT ---------- U.S. GOVERNMENT OBLIGATIONS -- 0.72% U.S. Treasury Bill, due 08/09/01 $1,000,000 996,207 ------------ Total Short-Term Investments (Cost $4,727,656) 4,729,041 ------------ Total Investments (Cost $113,179,552) -- 100.08% (a) 139,040,190 Liabilities, less cash and other assets -- (0.08%) (110,810) ------------ Net Assets -- 100% $138,929,380 ============
See accompanying notes to schedule of investments. 53 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $119,485,982; and net unrealized appreciation consisted of: Gross unrealized appreciation $27,597,088 Gross unrealized depreciation (8,042,880) ----------- Net unrealized appreciation $19,554,208 ===========
(b) Non-income producing security. FUTURES CONTRACTS The U.S. Equity Fund had the following open futures contracts as of June 30, 2001:
EXPIRATION CURRENT UNREALIZED DATE COST VALUE GAIN INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 12 contracts September 2001 $3,665,784 $3,695,100 $29,316
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2001 was $996,207. See accompanying notes to financial statements. 54 U.S. LARGE CAP EQUITY FUND The Brinson U.S. Large Cap Equity Fund outperformed its benchmark for the fiscal year ended June 30, 2001. Class I shares returned 12.12% compared to the S&P 500's decline of 14.83%, while Class N shares returned 11.74% as compared to the same benchmark. The U.S. equity market, as measured by the S&P 500 Index, had a volatile, uneven year. A sharp decline in large-cap stocks, falling technology valuations, and a synchronized global slowdown contributed to the market's downward trajectory. Other investor concerns included a deceleration in capital equipment spending and rising inventories. Despite these concerns, consumers displayed resilience, due in part to the Federal Reserve's aggressive attempts at reviving the economic engine. The Federal Reserve lowered the Fed Funds rate six times during the fiscal year, for a total 2.75% decrease. Underexposure to size was the most significant factor in the Fund's positive performance. The Fund was underweighted in the largest stocks that dominate major market benchmarks. The disparity between large- and small-cap stocks, which began developing in 1999 and early 2000, began to dissipate as many of the largest-cap stocks significantly underperformed. Stock selection also had a significant positive impact on Fund returns. The strongest contributors were UnitedHealth Group, Emerson Electric, CIGNA, SBC Communications and Kimberly-Clark. The worst performers were Compuware, Gateway, Lexmark, Advanced Micro Devices and FedEx. Industry exposures had a small negative effect on overall returns. The underweight to Internet stocks and telephone service companies, as well as the overweight to the electric utility industry made a positive contribution. This positive effect was more than offset, however, by the negative impact of the Fund underweight to the drug industry. 55 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 - -------------------------------------------------------------------------------------------------------------------------- BRINSON U.S. LARGE CAP EQUITY FUND CLASS I 1.36% 12.12% -0.77% -0.79% BRINSON U.S. LARGE CAP EQUITY FUND CLASS N 1.31 11.74 -1.01 -1.07 S&P 500 Equity Index -6.70 -14.83 3.89 4.42
* PERFORMANCE INCEPTION DATE OF THE BRINSON U.S. LARGE CAP EQUITY FUND CLASS I, CLASS N, THE S&P 500 EQUITY INDEX IS 4/30/98. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Cap Equity Fund Class I, and the S&P 500 Equity Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. LARGE CAP EQUITY FUND CLASS I VS. S&P 500 EQUITY INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S. LARGE CAP EQUITY FUND CLASS I S&P 500 EQUITY INDEX 4/30/98 $1,000,000 $1,000,000 5/31/98 $983,723 $982,800 6/30/98 $998,652 $1,022,702 7/31/98 $980,310 $1,011,759 8/31/98 $850,893 $865,661 9/30/98 $917,130 $920,890 10/31/98 $984,386 $995,850 11/30/98 $1,026,166 $1,056,299 12/31/98 $1,058,703 $1,117,141 1/31/99 $1,065,884 $1,163,838 2/28/99 $1,032,030 $1,127,642 3/31/99 $1,057,677 $1,172,748 4/30/99 $1,147,954 $1,218,134 5/31/99 $1,114,100 $1,189,386 6/30/99 $1,143,860 $1,255,396 7/31/99 $1,092,473 $1,216,228 8/31/99 $1,060,614 $1,210,269 9/30/99 $968,118 $1,177,107 10/31/99 $965,035 $1,251,618 11/30/99 $955,786 $1,277,276 12/31/99 $941,729 $1,352,252 1/31/00 $872,229 $1,284,369 2/29/00 $787,670 $1,260,095 3/31/00 $853,696 $1,383,332 4/30/00 $884,971 $1,341,694 5/31/00 $900,029 $1,314,189 6/30/00 $869,894 $1,346,649 7/31/00 $867,568 $1,325,642 8/31/00 $930,368 $1,407,964 9/30/00 $901,294 $1,333,624 10/31/00 $948,975 $1,328,022 11/30/00 $926,879 $1,223,374 12/31/00 $962,247 $1,229,369 1/31/01 $1,003,877 $1,273,011 2/28/01 $971,762 $1,156,913 3/31/01 $942,027 $1,083,564 4/30/01 $970,573 $1,167,757 5/31/01 $994,361 $1,175,581 6/30/01 $975,324 $1,147,015
4/30/98 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 56 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Baxter International, Inc. 4.07% 2. Freddie Mac 3.58 3. Microsoft Corp. 3.50 4. Wells Fargo and Co. 3.41 5. Masco Corp. 3.35 6. Exxon Mobil Corp. 3.07 7. Illinois Tool Works, Inc. 3.03 8. Burlington Northern Santa Fe Corp. 2.99 9. Kroger Co. 2.72 10. Computer Sciences Corp. 2.54 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Basic Industries Chemicals 1.17% Metals 3.35 ------ 4.52 Capital Investment Capital Goods 3.03 Electric Components 5.78 ------ 8.81 Computers Software 7.65 Systems 2.21 ------ 9.86 Consumer Food/House Products 4.83 Health: Drugs 10.60 Health: Non-Drugs 7.44 Leisure/Tourism 1.47 Retail/Apparel 7.44 ------ 31.78 Financial Banks 7.76% Non-Banks 9.42 ------ 17.18 Energy 5.48 Services/Miscellaneous 7.10 Telecommunications 5.19 Transportation 4.14 Utilities 1.10 ------ Total U.S. Equities 95.16 SHORT-TERM INVESTMENTS 4.38 ------ TOTAL INVESTMENTS 99.54 CASH AND OTHER ASSETS, LESS LIABILITIES 0.46 ------ NET ASSETS 100.00% ======
57 U.S. LARGE CAP EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ U.S. EQUITIES -- 95.16% Abbott Laboratories 1,600 $ 76,816 Advanced Micro Devices, Inc. (b) 2,100 60,648 Allergan, Inc. 900 76,950 American Electric Power Co., Inc. 660 30,472 American General Corp. 1,300 60,385 American Home Products Corp. 800 46,752 Analog Devices, Inc. (b) 1,100 47,575 Baxter International, Inc. 2,600 127,400 Burlington Northern Santa Fe Corp. 3,100 93,527 Cardinal Health, Inc. 1,150 79,350 Carnival Corp., Class A 1,500 46,050 CIGNA Corp. 700 67,074 Cisco Systems, Inc. (b) 1,500 27,300 Citigroup, Inc. 1,046 55,271 Clear Channel Communications, Inc. (b) 600 37,620 Compaq Computer Corp. 2,700 41,823 Computer Sciences Corp. (b) 2,300 79,580 Compuware Corp. (b) 3,600 50,364 Dow Chemical Co. 1,100 36,575 Eli Lilly and Co. 700 51,800 Emerson Electric Co. 1,200 72,600 Entergy Corp. 900 34,551 Exxon Mobil Corp. 1,100 96,085 FedEx Corp. (b) 900 36,180 First Data Corp. 1,100 70,675 FleetBoston Financial Corp. 1,785 70,418 Freddie Mac 1,600 112,000 General Mills, Inc. 1,700 74,426 Household International, Inc. 800 53,360 Illinois Tool Works, Inc. 1,500 94,950 Johnson & Johnson Co. 1,000 50,000 Kroger Co. (b) 3,400 85,000 Masco Corp. 4,200 104,832 Mattel, Inc. 3,300 62,436 Microsoft Corp. (b) 1,500 $ 109,500 Motorola, Inc. 1,000 16,560 Newell Rubbermaid, Inc. 2,300 57,730 Nextel Communications, Inc. (b) 2,900 50,750 Omnicom Group 700 60,200 PNC Financial Services Corp. 1,000 65,790 Progress Energy, Inc. 1,000 44,920 Sara Lee Corp. 4,045 76,612 SBC Communications, Inc. 1,700 68,102 Target Corp. 800 27,680 Tellabs, Inc. (b) 1,400 27,132 United Health Group, Inc. 900 55,575 Wells Fargo and Co. 2,300 106,789 ------------ Total U.S. Equities (Cost $2,818,427) 2,978,185 ------------ SHORT-TERM INVESTMENTS -- 4.38% INVESTMENT COMPANIES -- 1.20% Vista U.S. Government Money Market Fund 37,615 37,615 ------------ FACE AMOUNT -------- U.S. GOVERNMENT OBLIGATIONS -- 3.18% U.S. Treasury Bill, due 08/09/01 $100,000 99,621 ------------ Total Short-Term Investments (Cost $137,097) 137,236 ------------ Total Investments (Cost $2,955,524) -- 99.54% (a) 3,115,421 Cash and other assets, less liabilities -- 0.46% 14,250 ------------ Net Assets -- 100% $ 3,129,671 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $3,092,745; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 228,492 Gross unrealized depreciation (205,816) --------- Net unrealized appreciation $ 22,676 =========
(b) Non-income producing security. See accompanying notes to financial statements. 58 U.S. LARGE CAP GROWTH FUND For the fiscal year ended June 30, 2001, the Brinson U.S. Large Cap Growth Fund outperformed its benchmark, the Russell 1000 Growth Index. Class I and Class N shares declined 31.33% and 31.59%, respectively, compared to the benchmark's 36.17% decline. During the fiscal year, growth strategies have continued to underperform the broad market. While the overall market, as measured by the S&P 500 Index, fell 14.83% during the 12-months ended June 30, 2001, the BARRA Growth Index declined 32.43%. The biggest culprit was the slumping technology sector, which was down over 45% for the period as measured by the Nasdaq Composite Index. Some growth sectors performed well, however, including consumer staples, healthcare and subsectors of financials, which had been out of favor for the last one or two years. They had been unable to compete with the hyper-growth expectations for technology. These companies attracted attention as the economy slowed and earnings prospects became more defensive. The Fund benefited from an underweight position in technology and an overweight position in consumer staples, financials, energy and some portions of the healthcare sector. Security selection was also an important performance contributor. Our industry weightings and security selection resulted in a Fund that had more value and less price momentum than the benchmark, but which also had less risk and thus performed relatively well in a declining market. Looking ahead, we have seen more disappointments in technology, new respect for other growth areas and a market that is dealing with a government under pressure to halt the economic slide. We have not yet acted to balance our sector weights, largely because the market has done some of this job for us. We anticipate being more active in this regard as the year progresses. The long-run case for global technology expansion is intact, promising to deliver superior earnings growth over time. Individual issue selection, however, will remain extremely important for the foreseeable future. 59 U.S. LARGE CAP GROWTH FUND TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 - ------------------------------------------------------------------------------------------------------------------------------- BRINSON U.S. LARGE CAP GROWTH FUND CLASS I -14.87% -31.33% 1.53% 5.82% BRINSON U.S. LARGE CAP GROWTH FUND CLASS N -15.08 -31.59 N/A -2.46 S&P 500 Equity Index -6.70 -14.83 3.89 9.71 Russell 1000 Growth Index -14.24 -36.17 0.69 7.31
* PERFORMANCE INCEPTION DATE OF THE BRINSON U.S. LARGE CAP GROWTH FUND CLASS I, THE S&P 500 EQUITY INDEX, AND THE RUSSELL 1000 GROWTH INDEX IS 10/31/97. INCEPTION DATE OF CLASS N IS 12/31/98. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Large Cap Growth Fund Class I, the S&P 500 Equity Index, and the Russell 1000 Growth Index if you had invested $1,000,000 on October 31, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. LARGE CAP GROWTH FUND CLASS I VS. S&P 500 EQUITY INDEX AND RUSSELL 1000 GROWTH INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S. LARGE CAP GROWTH FUND CLASS I S&P 500 EQUITY INDEX RUSSELL 1000 GROWTH INDEX 10/31/97 $1,000,000 $1,000,000 $1,000,000 11/30/97 $974,700 $1,046,300 $1,042,500 12/31/97 $994,457 $1,064,296 $1,054,176 1/31/98 $987,141 $1,076,110 $1,085,696 2/28/98 $1,044,772 $1,153,698 $1,167,340 3/31/98 $1,085,865 $1,212,767 $1,213,917 4/30/98 $1,107,113 $1,225,016 $1,230,669 5/31/98 $1,082,758 $1,203,946 $1,195,718 6/30/98 $1,125,054 $1,252,826 $1,268,896 7/31/98 $1,120,944 $1,239,421 $1,260,521 8/31/98 $931,915 $1,060,448 $1,071,317 9/30/98 $982,549 $1,128,105 $1,153,594 10/31/98 $1,080,574 $1,219,933 $1,246,343 11/30/98 $1,158,653 $1,293,982 $1,341,190 12/31/98 $1,242,076 $1,368,516 $1,462,165 1/31/99 $1,320,754 $1,425,720 $1,547,994 2/28/99 $1,263,057 $1,381,380 $1,477,251 3/31/99 $1,324,951 $1,436,635 $1,555,102 4/30/99 $1,374,256 $1,492,233 $1,557,124 5/31/99 $1,357,471 $1,457,016 $1,509,320 6/30/99 $1,459,229 $1,537,881 $1,614,973 7/31/99 $1,399,433 $1,489,899 $1,563,616 8/31/99 $1,398,384 $1,482,598 $1,589,103 9/30/99 $1,351,177 $1,441,975 $1,555,732 10/31/99 $1,425,659 $1,533,252 $1,673,190 11/30/99 $1,498,044 $1,564,684 $1,763,542 12/31/99 $1,648,623 $1,656,531 $1,946,951 1/31/00 $1,584,653 $1,573,373 $1,855,639 2/29/00 $1,657,601 $1,543,636 $1,946,379 3/31/00 $1,766,461 $1,694,604 $2,085,740 4/30/00 $1,718,204 $1,643,596 $1,986,459 5/31/00 $1,650,867 $1,609,902 $1,886,341 6/30/00 $1,714,837 $1,649,667 $2,029,326 7/31/00 $1,673,313 $1,623,932 $1,944,703 8/31/00 $1,769,828 $1,724,778 $2,120,699 9/30/00 $1,610,465 $1,633,710 $1,920,081 10/31/00 $1,579,042 $1,626,848 $1,829,261 11/30/00 $1,406,211 $1,498,653 $1,559,628 12/31/00 $1,383,265 $1,505,996 $1,510,344 1/31/01 $1,459,240 $1,559,459 $1,614,708 2/28/01 $1,245,725 $1,417,236 $1,340,531 3/31/01 $1,114,734 $1,327,384 $1,194,681 4/30/01 $1,233,936 $1,430,521 $1,345,808 5/31/01 $1,219,527 $1,440,106 $1,326,025 6/30/01 $1,230,437 $1,405,111 $1,295,261
10/31/97 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 60 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Microsoft Corp. 5.84% 2. Pfizer, Inc. 5.34 3. AOL Time Warner, Inc. 4.59 4. General Electric Co. 4.55 5. Cisco Systems, Inc. 2.94 6. Wal-Mart Stores, Inc. 2.89 7. Intel Corp. 2.30 8. Citigroup, Inc. 2.29 9. Eli Lilly and Co. 2.19 10. Boeing Co. 2.06
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Capital Investment Electric Components 13.34% Technology 2.24 ------ 15.58 Computers Services 1.76 Software 8.90 Systems 8.24 ------ 18.90 Consumer Autos/Durables 2.83 Health: Drugs 12.39 Health: Non-Drugs 5.81 Non-Durables 1.78 Retail/Apparel 8.73 Food/House Products 1.73 ------ 33.27 Energy 5.03% Financial: Non-Banks 6.69 Services/Miscellaneous 10.70 Telecommunications 6.29 ------ Total U.S. Equities 96.46 SHORT-TERM INVESTMENTS 5.42 ------ TOTAL INVESTMENTS 101.88 LIABILITIES, LESS CASH AND OTHER ASSETS (1.88) ------ NET ASSETS 100.00% ======
61 U.S. LARGE CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ U.S. EQUITIES -- 96.46% AFLAC, Inc. 2,000 $ 62,980 Agilent Technologies, Inc. (b) 1,800 58,500 Allergan, Inc. 900 76,950 American Express Co. 1,800 69,840 American International Group, Inc. 1,537 132,182 Amgen, Inc. (b) 1,700 103,156 Anadarko Petroleum Corp. 1,000 54,030 Analog Devices, Inc. (b) 900 38,925 AOL Time Warner, Inc. 5,850 310,050 Applied Materials, Inc. (b) 900 44,190 AT&T Corp. - Liberty Media Group, Inc. (b) 6,912 120,891 Avon Products, Inc. 2,400 111,072 BEA Systems, Inc. (b) 900 27,639 Boeing Co. 2,500 139,000 Brocade Communications Systems, Inc. (b) 700 30,793 CIENA Corp. (b) 400 15,200 Cisco Systems, Inc. (b) 10,900 198,380 Citigroup, Inc. 2,933 154,980 Coca-Cola Co. 2,600 117,000 Compaq Computer Corp. 4,400 68,156 COX Communications, Inc. 1,500 66,450 CVS Corp. 1,000 38,600 Electronic Arts, Inc. (b) 500 28,950 Eli Lilly and Co. 2,000 148,000 EMC Corp. (b) 4,100 119,105 Forest Laboratories, Inc. (b) 800 56,800 Gap, Inc. 2,800 81,200 Gemstar - TV Guide International, Inc. (b) 1,800 76,680 General Electric Co. 6,300 307,125 Halliburton Co. 3,900 138,840 Harley-Davidson, Inc. 1,100 51,788 Hewlett-Packard Co. 1,000 28,600 Immunex Corp. (b) 3,400 60,350 Intel Corp. 5,300 155,025 International Business Machines Corp. 1,100 124,300 JDS Uniphase Corp. (b) 1,500 18,750 Johnson & Johnson Co. 2,172 108,600 McGraw-Hill Companies, Inc. 1,700 112,455 Merck & Co., Inc. 2,100 134,211 Merrill Lynch & Co. 1,600 94,800 Micron Technology, Inc. (b) 3,300 135,630 Microsoft Corp. (b) 5,400 394,200 Motorola, Inc. 2,100 34,776 Novellus Systems, Inc. (b) 700 $ 39,753 Oracle Corp. (b) 4,500 85,500 PeopleSoft, Inc. (b) 800 39,384 Pepsi Bottling Group, Inc. 1,700 68,170 Pfizer, Inc. 9,000 360,450 Pharmacia Corp. 1,400 64,330 Phillips Petroleum Co. 1,100 62,700 QUALCOMM, Inc. (b) 2,300 134,504 RadioShack Corp. 1,900 57,950 Safeway, Inc. (b) 800 38,400 Schlumberger Ltd. 1,600 84,240 Solectron Corp. (b) 3,100 56,730 Sprint Corp. (b) 2,200 53,130 Stryker Corp. 600 32,910 Sun Microsystems, Inc. (b) 5,000 78,600 Tellabs, Inc. (b) 2,700 52,326 Texas Instruments, Inc. 3,300 103,950 TJX Companies, Inc. 2,100 66,927 Tyco International Co. 1,900 103,550 United Technologies Corp. 400 29,304 Veritas Software Corp. (b) 800 53,224 Viacom, Inc. (b) 2,146 111,055 Wal-Mart Stores, Inc. 4,000 195,200 Waters Corp. (b) 300 8,283 Wellpoint Health Networks (b) 900 84,816 ------------ Total U.S. Equities (Cost $8,220,442) 6,514,535 ------------ SHORT-TERM INVESTMENTS -- 5.42% INVESTMENT COMPANIES -- 4.46% Vista U.S. Government Money Market Fund 300,907 300,907 ------------ FACE AMOUNT -------- U.S. GOVERNMENT OBLIGATIONS -- 0.96% U.S. Treasury Bill, due 08/09/01 $ 65,000 64,753 ------------ Total Short-Term Investments (Cost $365,570) 365,660 ------------ Total Investments (Cost $8,586,012) -- 101.88% (a) 6,880,195 Liabilities, less cash and other assets -- (1.88%) (126,688) ------------ Net Assets -- 100% $ 6,753,507 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $8,663,456; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 309,900 Gross unrealized depreciation (2,093,161) ------------ Net unrealized depreciation $ (1,783,261) ============
(b) Non-income producing security. See accompanying notes to financial statements. 62 U.S. SMALL CAP GROWTH FUND The Brinson U.S. Small Cap Growth Fund posted negative returns for the year ended June 30, 2001, with Class I shares losing 10.74% and Class N shares losing 11.00%. The Fund's benchmark, the Russell 2000 Growth Index, declined 23.34%. Since its inception on September 30, 1997, the Fund's Class I shares returned 10.48% on an annualized basis, versus 0.84% for its benchmark. The Fund's loss occurred against the backdrop of turbulent U.S. equity markets. Within the small capitalization universe, the Russell 2000 Value Index returned a robust 30.87% compared to the Russell 2000 Growth Index's 23.34% decline. The dispersion of returns of small capitalization value over growth stocks is attributable largely to the demise of the technology, media and telecommunications (TMT) sector which accounts for a significant percentage of the Russell 2000 Growth Index. We believe that there are reasons for optimism in the small cap universe. Historically, small-cap stocks have responded readily when the Fed has cut interest rates in an effort to revive the economy. We feel the Fed's aggressive easing of interest rates during the fiscal year provides plenty of fuel to launch small-cap performance. Another important, although subtle, factor in the rebound of small-cap stocks is the puncturing of the myth of large-cap invincibility. Small-cap stocks have rebounded as investors have begun to dig beyond the largest tier of the market. During the fiscal year ended June 30, 2001, we maintained an underweight in technology and healthcare stocks. Our largest overweights are in the financial and transportation sectors. We also overweighted energy stocks in the past year, but have moved to a more neutral stance in the past several months after these stock prices have enjoyed sharp run-ups in price. In the current market climate, the Fund's small cap growth strategy tends to be more conservatively positioned than the benchmark. The Fund favors slightly larger, more liquid names than the Russell 2000 Growth Index and it also leans toward stocks with less earnings variation and financial leverage. In considering our strategy going forward, we will continue to monitor the technology sector. Based on continuing concerns about technology fundamentals, we remain underweighted in the technology sector, though we have begun to reduce this underweight and will likely continue to do so as we gain confidence that the economy has stabilized. Similarly, we will raise our communications services and capital goods exposures as the economy begins to recover. 63 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 - ------------------------------------------------------------------------------------------------------------------------ BRINSON U.S. SMALL CAP GROWTH FUND CLASS I -4.89% -10.74% 14.36% 10.48% BRINSON U.S. SMALL CAP GROWTH FUND CLASS N -5.01 -11.00 N/A 21.85 Russell 2000 Growth Index 0.04 -23.34 2.75 0.84
* INCEPTION DATE OF THE BRINSON U.S. SMALL CAP GROWTH FUND CLASS I AND RUSSELL 2000 GROWTH INDEX IS 9/30/97. PERFORMANCE INCEPTION DATE OF CLASS N IS 12/31/98. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR REPRESENT AVERAGE ANNUALIZED RETURNS. THE FUND INVESTS IN IPOS WHICH MAY HAVE A MAGNIFIED IMPACT ON PERFORMANCE. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Small Cap Growth Fund Class I and the Russell 2000 Growth Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. SMALL CAP GROWTH FUND CLASS I VS. RUSSELL 2000 GROWTH INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S. SMALL CAP GROWTH FUND CLASS I RUSSELL 2000 GROWTH INDEX 9/30/97 $1,000,000 $1,000,000 10/31/97 $953,600 $939,937 11/30/97 $936,600 $917,525 12/31/97 $943,800 $918,043 1/31/98 $932,700 $905,796 2/28/98 $1,007,600 $985,767 3/31/98 $1,049,900 $1,027,116 4/30/98 $1,047,200 $1,033,415 5/31/98 $990,700 $958,334 6/30/98 $971,100 $968,127 7/31/98 $887,800 $887,283 8/31/98 $700,200 $682,460 9/30/98 $739,372 $751,655 10/31/98 $788,803 $790,859 11/30/98 $807,515 $852,209 12/31/98 $880,562 $929,328 1/31/99 $881,563 $971,130 2/28/99 $807,515 $882,295 3/31/99 $825,527 $913,719 4/30/99 $823,526 $994,410 5/31/99 $859,549 $995,985 6/30/99 $918,586 $1,048,449 7/31/99 $926,591 $1,016,028 8/31/99 $906,579 $978,029 9/30/99 $938,599 $996,894 10/31/99 $974,622 $1,022,429 11/30/99 $1,127,720 $1,130,536 12/31/99 $1,247,796 $1,329,796 1/31/00 $1,212,774 $1,317,421 2/29/00 $1,405,897 $1,623,938 3/31/00 $1,526,975 $1,453,236 4/30/00 $1,472,940 $1,306,510 5/31/00 $1,377,879 $1,192,108 6/30/00 $1,628,039 $1,346,106 7/31/00 $1,543,985 $1,230,743 8/31/00 $1,757,122 $1,360,205 9/30/00 $1,725,101 $1,292,632 10/31/00 $1,671,067 $1,187,702 11/30/00 $1,379,881 $972,058 12/31/00 $1,527,863 $1,031,536 1/31/01 $1,563,395 $1,115,029 2/28/01 $1,378,385 $962,189 3/31/01 $1,249,736 $874,708 4/30/01 $1,416,367 $981,791 5/31/01 $1,421,268 $1,004,532 6/30/01 $1,453,124 $1,031,927
9/30/97 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 64 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Career Education Corp. 2.52% 2. Patterson Dental Co. 2.19 3. SICOR, Inc. 2.16 4. Copart, Inc. 2.15 5. Richmond County Financial Corp. 2.08 6. Direct Focus, Inc. 2.03 7. Investors Financial Services Corp. 2.01 8. Quest Diagnostics, Inc. 1.97 9. Province Healthcare Co. 1.88 10. North Fork Bancorporation, Inc. 1.85 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. EQUITIES Basic Industries Housing/Paper 1.89% ------ Capital Investment Electronic Components 4.89 Technology 1.27 ------ 6.16 Computers Services 2.00 Software 6.23 Systems 6.09 ------ 14.32 Consumer Autos/Durables 4.37 Food/House Products 3.05 Health: Drugs 11.62 Health: Non-Drugs 14.69 Non-Durables 2.20 Retail/Apparel 8.61 ------ 44.54 Financial Banks 6.30% Non-Banks 4.59 ------ 10.89 Energy 7.02 Services/Miscellaneous 5.22 Telecommunications 0.62 Transportation 2.79 ------ Total U.S. Equities 93.45 SHORT-TERM INVESTMENTS 6.06 ------ TOTAL INVESTMENTS 99.51 CASH AND OTHER ASSESTS, LESS LIABILITIES 0.49 ------ NET ASSETS 100.00% ======
65 U.S. SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ U.S. EQUITIES -- 93.45% Action Performance Companies, Inc. (b) 23,100 $ 577,500 Annuity and Life Re (Holdings) Ltd. 7,700 275,275 Arch Coal, Inc. 13,100 338,897 Atlantic Coast Airlines Holdings, Inc. (b) 27,100 812,729 Aviron (b) 6,500 370,500 Avnet, Inc. 21,576 483,734 Beazer Homes U.S.A. Inc. (b) 4,400 279,356 Borland Software Corp. (b) 47,500 741,000 C & D Technologies, Inc. 14,200 440,200 CACI International, Inc. (b) 13,600 639,200 Career Education Corp. (b) 19,500 1,168,050 Cell Therapeutics, Inc. (b) 13,700 378,668 Chico's FAS, Inc. (b) 20,400 606,900 Cognex Corp. (b) 11,800 399,430 Cognizant Technology Solutions Corp. (b) 10,800 458,460 Constellation Brands, Inc. (b) 15,200 623,200 Copart, Inc. (b) 34,100 997,425 COR Therapeutics, Inc. (b) 9,200 280,600 Cubist Pharmaceuticals, Inc. (b) 8,500 323,000 CV Therapeutics, Inc. (b) 2,500 142,500 Cytyc Corp. (b) 25,000 576,250 Descartes Systems Group, Inc. (b) 30,900 560,835 Direct Focus, Inc. (b) 19,800 940,500 Elantec Semiconductor, Inc. (b) 14,000 473,060 ESC Medical Systems Ltd. (b) 21,000 605,850 ESCO Technologies, Inc. (b) 1,900 57,285 Exar Corp. (b) 18,900 373,464 Factset Research Systems, Inc. 15,600 556,920 Fair, Isaac & Company, Inc. 11,700 723,294 Fleming Companies, Inc. 18,600 664,020 Flowserve Corp. (b) 17,300 531,975 Forward Air Corp. (b) 16,300 488,185 Galyans Trading Co., Inc. (b) 4,400 89,760 Global Power Equipment Group, Inc. (b) 5,100 149,430 Greater Bay Bancorp 16,900 422,162 HOT Topic, Inc. (b) 18,500 575,350 HS Resources, Inc. (b) 9,400 609,120 I-Many, Inc.(b) 34,700 468,450 Insituform Technologies, Inc. (b) 16,800 613,200 Intercept Group, Inc. (b) 16,600 630,800 Intranet Solutions, Inc. (b) 17,800 677,290 Inverness Medical Technology, Inc. (b) 16,400 606,800 Investors Financial Services Corp. 13,900 931,300 Jack in the Box, Inc. (b) 22,500 587,250 Maverick Tube Corp. (b) 21,600 366,120 Medarex, Inc. (b) 13,200 310,200 Mercury Computer Systems, Inc. (b) 3,100 153,450 Mercury Interactive Corp. (b) 10,900 $ 652,910 Myriad Genetics, Inc. (b) 7,000 443,239 North Fork Bancorporation, Inc. 27,700 858,700 NVR, Inc. (b) 1,800 266,400 Oakley, Inc. (b) 22,900 423,650 Pacific Sunwear of California, Inc. (b) 4,650 104,300 Patterson Dental Co. (b) 30,800 1,016,400 Patterson-UTI Energy, Inc. 25,700 459,259 Pediatrix Medical Group, Inc. (b) 21,100 700,520 Peregrine Systems, Inc. (b) 21,200 614,800 Pericom Semiconductor Corp. (b) 20,900 328,548 Pharmaceutical Product Development, Inc. (b) 18,600 567,486 Praecis Pharmaceuticals, Inc. (b) 8,800 144,672 Province Healthcare Co. (b) 24,700 871,663 Quest Diagnostics, Inc. (b) 12,200 913,170 Regeneron Pharmaceutical (b) 9,200 318,780 ResMed, Inc. (b) 11,000 556,050 Richmond County Financial Corp. 25,700 964,264 Rightchoice Managed Care, Inc. 15,900 705,960 Ruby Tuesday, Inc. 27,600 471,960 Rudolph Technologies, Inc. (b) 3,000 141,000 Scios, Inc. (b) 11,300 282,613 Shaw Group, Inc. (b) 11,300 453,130 SICOR, Inc. (b) 43,400 1,002,540 Skechers U.S.A., Inc. (b) 21,800 637,214 Sterling Bancshares, Inc. 21,000 402,780 Stone Energy Corp. (b) 10,800 478,440 Syncor International Corp. (b) 20,300 629,300 Talx Corp. 6,400 236,800 Tetra Technologies, Inc. (b) 23,000 562,350 THQ, Inc. (b) 11,700 697,671 Triton PCS Holdings, Inc. (b) 7,000 287,000 UCBH Holdings, Inc. 21,100 640,385 Ultratech Stepper, Inc. (b) 18,200 466,830 Vertex Pharmaceuticals, Inc. (b) 9,200 455,400 Vintage Petroleum, Inc. 27,800 519,860 ------------ Total U.S. Equities (Cost $36,362,505) 43,354,988 ------------ SHORT-TERM INVESTMENTS -- 6.06% INVESTMENT COMPANIES -- 6.06% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,810,748) 2,810,748 2,810,748 ------------ Total Investments (Cost $39,173,253) -- 99.51% (a) 46,165,736 Cash and other assets, less liabilities -- 0.49% 229,024 ------------ Net Assets -- 100% $ 46,394,760 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $39,272,429; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 8,732,174 Gross unrealized depreciation (1,838,867) ----------- Net unrealized appreciation $ 6,893,307 ===========
(b) Non-income producing security. See accompanying notes to financial statements. 66 U.S. BOND FUND Since its inception on August 31, 1995, the Brinson U.S. Bond Fund Class I shares produced an annualized return of 6.84%. Its benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index, provided an annual return of 7.09% for the same period. For the fiscal year ending June 30, 2001, the Fund's Class I and Class N shares returned 10.86% and 10.56%, respectively, slightly underperforming the benchmark return of 11.26%. Overall, the fiscal year ended June 30, 2001 was a relatively strong year for the U.S. bond market. During this period, the weak economic environment and subsequent poor equity performance shifted attention to the fixed income markets. This shift, coupled with six interest rate reductions from the Federal Reserve Board totaling 2.75%, served to invigorate the bond market. Treasurys did well in the first half of the year, supported by an announced Treasury buyback and significantly reduced Treasury issuance. Spread sectors (non-government bonds) performed relatively poorly in the early part of the year. A by-product of aggressive Federal Reserve action to tighten interest rates has been excellent performance by the spread sectors in the latter part of the year, in anticipation of an economic recovery. Credit-sensitive sectors of the market have led the charge. In response, we have reduced our overall spread exposure to maintain a small overweight in non-Treasury securities, primarily in the AAA commercial mortgage-backed security market. 67 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - ----------------------------------------------------------------------------------------------------------------------------------- BRINSON U.S.BOND FUND CLASS I 3.40% 10.86% 5.79% 7.27% 6.84% BRINSON U.S.BOND FUND CLASS N 3.19 10.56 5.51 N/A 6.69 Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 3.62 11.26 6.23 7.47 7.09
* INCEPTION DATE OF THE BRINSON U.S. BOND FUND CLASS I AND SALOMON SMITH BARNEY BIG BOND INDEX IS 8/31/95. PERFORMANCE INCEPTION DATE OF CLASS N IS 6/30/97. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson U.S. Bond Fund Class I and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON U.S. BOND FUND CLASS I VS. SALOMON SMITH BARNEY BIG BOND INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON U.S.BOND SALOMON SMITH BARNEY FUND CLASS I BIG BOND INDEX 8/31/95 $1,000,000 $1,000,000 9/30/95 $1,009,000 $1,009,400 10/31/95 $1,024,000 $1,022,926 11/30/95 $1,040,000 $1,038,884 12/31/95 $1,054,932 $1,053,220 1/31/96 $1,061,071 $1,060,382 2/29/96 $1,038,561 $1,042,356 3/31/96 $1,031,398 $1,034,851 4/30/96 $1,023,213 $1,027,193 5/31/96 $1,020,143 $1,026,679 6/30/96 $1,035,997 $1,039,923 7/31/96 $1,039,127 $1,042,731 8/31/96 $1,032,867 $1,041,167 9/30/96 $1,054,776 $1,059,283 10/31/96 $1,081,902 $1,083,117 11/30/96 $1,109,028 $1,100,989 12/31/96 $1,092,169 $1,091,300 1/31/97 $1,094,338 $1,095,447 2/28/97 $1,096,507 $1,096,652 3/31/97 $1,081,323 $1,085,576 4/30/97 $1,098,676 $1,101,099 5/31/97 $1,109,522 $1,111,450 6/30/97 $1,123,558 $1,124,676 7/31/97 $1,158,669 $1,155,155 8/31/97 $1,148,794 $1,145,220 9/30/97 $1,164,156 $1,162,055 10/31/97 $1,180,614 $1,178,673 11/30/97 $1,183,906 $1,184,212 12/31/97 $1,197,458 $1,196,291 1/31/98 $1,211,341 $1,211,723 2/28/98 $1,211,341 $1,210,875 3/31/98 $1,214,812 $1,215,598 4/30/98 $1,220,597 $1,221,919 5/31/98 $1,232,167 $1,233,649 6/30/98 $1,242,614 $1,243,765 7/31/98 $1,243,789 $1,246,377 8/31/98 $1,264,930 $1,265,447 9/30/98 $1,287,245 $1,295,311 10/31/98 $1,282,547 $1,289,482 11/30/98 $1,291,943 $1,296,574 12/31/98 $1,297,674 $1,300,594 1/31/99 $1,308,672 $1,310,218 2/28/99 $1,286,677 $1,287,289 3/31/99 $1,295,231 $1,294,627 4/30/99 $1,298,896 $1,298,899 5/31/99 $1,285,455 $1,286,949 6/30/99 $1,279,528 $1,282,574 7/31/99 $1,273,304 $1,277,443 8/31/99 $1,269,570 $1,276,549 9/30/99 $1,285,751 $1,291,868 10/31/99 $1,286,996 $1,295,743 11/30/99 $1,289,485 $1,295,614 12/31/99 $1,284,169 $1,289,654 1/31/00 $1,278,906 $1,286,043 2/29/00 $1,293,379 $1,301,090 3/31/00 $1,309,168 $1,318,004 4/30/00 $1,301,274 $1,314,050 5/31/00 $1,296,011 $1,312,867 6/30/00 $1,327,337 $1,340,306 7/31/00 $1,337,956 $1,352,503 8/31/00 $1,356,539 $1,371,844 9/30/00 $1,365,830 $1,381,172 10/31/00 $1,371,139 $1,390,012 11/30/00 $1,397,686 $1,412,530 12/31/00 $1,423,076 $1,439,227 1/31/01 $1,445,642 $1,462,974 2/28/01 $1,459,746 $1,475,994 3/31/01 $1,468,208 $1,483,669 4/30/01 $1,456,925 $1,476,696 5/31/01 $1,465,387 $1,486,295 6/30/01 $1,471,530 $1,491,200
8/31/95 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 68 INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ U.S. BONDS Corporate Bonds Construction 0.37% Consumer 1.97 Electric Components 1.76 Energy 1.53 Financial Services 7.85 Publishing 0.23 Recreation 0.80 Services/Miscellaneous 2.69 Telecommunications 2.44 Utilities 0.40 ------ Total U.S. Corporate Bonds 20.04 Asset-Backed Securities 3.38% Corporate Mortgage-Backed Securities 27.54 International Dollar Bonds 2.26 U.S. Government Agencies 2.34 U.S. Government Mortgage-Backed Securities 21.16 U.S. Government Obligations 21.17 ------ Total U.S. Bonds 97.89 SHORT-TERM INVESTMENTS 0.05 ------ TOTAL INVESTMENTS 97.94 CASH AND OTHER ASSETS, LESS LIABILITIES 2.06 ------ NET ASSETS 100.00% ======
69 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
FACE AMOUNT VALUE ---------- ------------ BONDS -- 97.89% U.S. CORPORATE BONDS -- 20.04% AOL Time Warner, Inc. 6.750%, due 04/15/11 $ 155,000 $ 152,536 AT&T Wireless Services, Inc., 144A 7.875%, due 03/01/11 180,000 180,343 Avon Products, Inc. 7.150%, due 11/15/09 150,000 152,785 Bank of America Corp. 7.400%, due 01/15/11 260,000 270,155 Bank One Corp. 7.875%, due 08/01/10 155,000 165,883 Black & Decker Corp., 144A 7.125%, due 06/01/11 185,000 183,388 Boeing Capital Corp. 6.100%, due 03/01/11 305,000 297,256 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 80,000 79,257 Capital One Bank, BKNT 8.250%, due 06/15/05 250,000 258,549 Caterpillar, Inc. 6.550%, due 05/01/11 75,000 75,270 Cendant Corp. 7.750%, due 12/01/03 420,000 427,568 Centex Corp. 9.750%, due 06/15/05 155,000 168,450 CIT Group, Inc. 5.625%, due 05/17/04 345,000 343,787 Citigroup, Inc. 7.250%, due 10/01/10 480,000 499,305 Citizens Communications Co. 9.250%, due 05/15/11 310,000 322,271 Comcast Cable Communications 6.750%, due 01/30/11 140,000 136,830 Conoco, Inc. 6.950%, due 04/15/29 135,000 129,794 Consolidated Edison 7.500%, due 09/01/10 350,000 355,932 Delhaize America, Inc., 144A 8.125%, due 04/15/11 340,000 354,650 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 700,000 732,028 Duke Energy Field Services 6.875%, due 02/01/11 70,000 68,447 Equistar Chemicals LP 8.750%, due 02/15/09 200,000 183,529 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 190,000 194,254 First Union National Bank 7.800%, due 08/18/10 155,000 165,996 Ford Motor Credit Co. 6.875%, due 02/01/06 290,000 293,798 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 230,000 228,711 Harrah's Operating Co., Inc., 144A 7.125%, due 06/01/07 $ 100,000 $ 99,088 Household Finance Corp. 6.750%, due 05/15/11 440,000 434,081 HSBC Capital Funding, 144A 9.547%, due 12/31/49 140,000 158,207 ING Capital Funding Trust III 8.439%, due 12/31/49 95,000 100,784 Liberty Financial Co. 7.625%, due 11/15/28 135,000 133,244 MBNA Global Capital Securities FRN 5.140%, due 02/01/27 340,000 249,649 Mirant Americas Generation, Inc., 144A 7.625%, due 05/01/06 60,000 60,564 Morgan Stanley Dean Witter & Co. 6.750%, due 04/15/11 360,000 357,504 News America Holdings, Inc. 7.125%, due 04/08/28 175,000 152,454 Nisource Finance Corp. 7.875%, due 11/15/10 350,000 370,811 Northrop Grumman Corp., 144A 7.125%, due 02/15/11 170,000 167,992 Pacific Gas & Electric Co., 144A 7.375%, due 11/01/05 350,000 253,750 Phillips Petroleum Co. 8.750%, due 05/25/10 155,000 176,398 Pure Resources, Inc., 144A 7.125%, due 06/15/11 65,000 63,964 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 195,000 201,454 Sempra Energy 7.950%, due 03/01/10 385,000 382,050 Sprint Capital Corp. 7.625%, due 01/30/11 385,000 382,004 Telus Corp. 8.000%, due 06/01/11 350,000 357,778 Transocean Sedco Forex, Inc., 144A 6.625%, due 04/15/11 150,000 147,235 TRW, Inc. 7.625%, due 03/15/06 75,000 77,213 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 225,000 228,955 Verizon Global Funding Corp., 144A 7.750%, due 12/01/30 270,000 277,702 Viacom, Inc. 8.625%, due 08/01/12 685,000 754,437 Waste Management, Inc. 6.500%, due 12/15/02 400,000 402,873 Wells Fargo Bank NA 6.450%, due 02/01/11 355,000 349,098 WorldCom, Inc. 7.500%, due 05/15/11 355,000 345,646 ------------ 13,105,707 ------------
70
FACE AMOUNT VALUE ---------- ------------ ASSET-BACKED SECURITIES -- 3.38% Comed Transitional Funding Trust, 1998-1, Class A6, 5.630%, due 06/25/09 $ 260,000 $ 256,664 Green Tree Financial Corp. 6.160%, due 02/01/31 1,000,000 1,003,380 Green Tree Financial Corp., 94-5, Class A5 8.300%, due 11/15/19 320,000 333,231 Sears Credit Account Master Trust, 99-3, Class A, 6.450%, due 11/17/09 600,000 618,724 ------------ 2,211,999 ------------ CORPORATE MORTGAGE-BACKED SECURITIES -- 27.54% ABN AMRO Mortgage Corp., 99-2, Class A2 6.300%, due 04/25/29 2,100,000 2,117,010 ABN AMRO Mortgage Corp., 99-3, Class A2 6.300%, due 05/25/29 1,000,000 1,007,370 Bank One Mortgage, 2000-2, Class A6 6.761%, due 03/15/30 81,556 84,055 Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2 7.320%, due 08/15/10 425,000 442,855 Citicorp Mortgage Securities, Inc., 94-9, Class A8, 5.750%, due 06/25/09 833,476 823,308 CS First Boston Mortgage Securities Corp. 6.238%, due 02/15/34, 144A 250,000 247,457 7.545%, due 04/15/10 785,000 829,624 DLJ Commercial Mortgage Corp, 99-CG3, Class A1B, 7.340%, due 09/10/09 150,000 156,633 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B, 7.180%, due 08/10/10 850,000 876,895 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1, 6.500%, due 05/15/31 1,077,678 1,094,102 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1, 6.410%, due 06/15/31 643,707 653,010 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2, 7.325%, due 10/15/32 325,000 339,231 Merrill Lynch Mortgage Investors, Inc., 99-C1, Class A2, 7.560%, due 11/15/31 220,000 231,633 Morgan Stanley Dean Witter & Co. 6.660%, due 02/15/33 240,000 239,880 6.960%, due 07/15/08 362,005 372,226 PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%, due 07/25/24 375,000 385,763 Prudential Home Mortgage Securities, 93-43, Class A9, 6.750%, due 10/25/23 233,989 236,238 Prudential Mortgage Capital Funding, LLC, 00-ROCK, Class A2, 6.605%, due 05/10/34 135,000 134,156 Residential Accredit Loans, Inc., 98-QS4, Class A15, 7.000%, due 03/25/28 2,850,000 2,869,596 Residential Asset Securitization Trust, 97-A10, Class A1, 7.250%, due 12/25/27 21,302 21,243 Residential Funding Mortgage, 95-S6, Class A7, 7.500%, due 11/25/25 884,036 909,822 Salomon Brothers Mortgage Securities VII 6.592%, due 10/18/10 395,000 393,468 Structured Asset Securities Corp., 98-ALS1, Class A1, 6.900%, due 01/25/29 1,281,961 1,290,460 Structured Asset Securities Corp., 98-RF2, 144A, 8.582%, due 07/15/27 $ 105,360 $ 110,392 Vendee Mortgage Trust, 92-1, Class 2Z 7.750%, due 05/15/22 621,310 649,111 Washington Mutual, 99-WM2, Class 2A 7.000%, due 11/19/14 1,447,327 1,495,205 ------------ 18,010,743 ------------ INTERNATIONAL DOLLAR BONDS -- 2.26% Empresa Nacional de Electricidad S.A. 8.125%, due 02/01/97 250,000 193,608 Gulf Canada Resources Ltd. 7.125%, due 01/15/11 40,000 41,043 Petroleum Geo-Services 6.625%, due 03/30/08 50,000 46,797 7.500%, due 03/31/07 110,000 109,026 Ras Laffan Liquified Natural Gas Co., Ltd., 144A, 8.294%, due 03/15/14 155,000 152,481 Stora Enso Oyj 7.375%, due 05/15/11 60,000 60,771 Tyco International Group S.A. 6.750%, due 02/15/11 100,000 94,479 7.000%, due 06/15/28 285,000 282,331 United Mexican States 9.875%, due 02/01/10 310,000 339,140 Vodafone Group PLC 7.750%, due 02/15/10 150,000 157,597 ------------ 1,477,273 ------------ U.S. GOVERNMENT AGENCIES -- 2.34% Jordan Aid 8.750%, due 09/01/19 1,316,612 1,530,759 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 21.16% Fannie Mae 7.125%, due 01/15/30 1,980,000 2,116,545 Fannie Mae Grantor Trust 7.500%, due 06/19/30 345,965 358,565 Fannie Mae Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 79,301 83,892 Federal Home Loan Mortgage Corp. 7.000%, due 10/15/13 492,125 503,641 Federal Home Loan Mortgage Corp., Gold 8.000%, due 11/01/22 66,364 68,548 9.000%, due 07/01/30 111,695 117,075 Federal National Mortgage Association, 97-72, Class EG, 5.670%, due 09/25/22 (P.O.) 66,296 65,226 Federal National Mortgage Association 6.000%, due 10/01/14 204,705 201,715 6.000%, due 03/01/28 540,591 519,469 6.500%, due 03/01/19 414,329 411,765 6.500%, due 04/01/28 440,518 433,749 7.000%, due 12/01/24 464,932 467,068 7.000%, due 03/01/29 36,919 37,089 7.000%, due 03/01/31 166,902 168,697 7.500%, due 12/01/23 378,768 386,762 7.500%, due 01/01/28 204,502 208,818 8.000%, due 08/01/08 351,448 363,888
71
FACE AMOUNT VALUE ---------- ------------ Government National Mortgage Association 6.000%, due 05/20/29 $3,002,951 $ 2,898,755 6.500%, due 10/15/24 2,268,147 2,246,151 7.000%, due 07/15/25 68,124 68,795 7.500%, due 12/15/22 162,292 166,579 7.500%, due 01/15/24 43,619 44,771 7.500%, due 06/15/25 55,421 56,885 7.500%, due 07/15/25 1,058,732 1,086,701 7.500%, due 04/15/27 701,413 719,942 8.000%, due 08/15/22 29,702 30,794 9.000%, due 11/15/04 5,588 5,930 ------------ 13,837,815 ------------ U.S. GOVERNMENT OBLIGATIONS -- 21.17% U.S. Treasury Note 4.625%, due 02/28/03 1,905,000 1,917,617 5.750%, due 08/15/03 800,000 822,335 6.500%, due 02/15/10 4,550,000 4,888,047 7.000%, due 07/15/06 1,825,000 1,980,008 7.500%, due 02/15/05 965,000 1,050,183 U.S. Treasury Bond 6.625%, due 02/15/27 $2,910,000 $ 3,187,736 ------------ 13,845,926 ------------ Total Bonds (Cost $64,077,130) 64,020,222 ------------ SHARES ------------ SHORT-TERM INVESTMENTS -- 0.05% INVESTMENT COMPANIES -- 0.05% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $35,070) 35,070 35,070 ------------ Total Investments (Cost $64,112,200) -- 97.94% (a) 64,055,292 Cash and other assets, less liabilities -- 2.06% 1,339,282 ------------ Net Assets -- 100% $ 65,394,574 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $64,257,401; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 526,897 Gross unrealized depreciation (729,006) ------------ Net unrealized depreciation $ (202,109) ============
E.E.T.C.: Enhanced Equipment Trust Certificate FRN: Floating Rate Note-- The rate disclosed is that in effect at June 30, 2001. P.O.: Principal Only. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2001, the value of these securities amounted to $2,730,724 or 4.18% of net assets. See accompanying notes to financial statements. 72 HIGH YIELD FUND The Brinson High Yield Fund Class I shares earned an annualized return of 2.93% since inception on September 30, 1997. During this same period, the Fund's benchmark, the Merrill Lynch High Yield Master Index, returned 2.32%. For fiscal year ended June 30, 2001, the Fund's Class I shares fell 1.83% and Class N shares fell 2.28%. For the same period, the benchmark posted a 2.10% return. The high-yield market's 2.10% return for the fiscal year (as measured by the Merrill Lynch High Yield Master Index) comes on the heels of what was a poor 2000 for high-yield funds in general. In 2000, the high-yield market saw its worst year since 1990, the last year of the U.S. recession. In 2001, however, investors have shown a renewed interest, with $1.4 billion flowing into the high-yield mutual fund market in the second quarter alone. More than $22 billion in new deals were priced during the previous 12 months. During the first quarter of 2001, high-yield bonds surged, but the second quarter began a slow pullback, when such bonds fell 1.27% as measured by the Merrill Lynch High Yield Master Index. Telecommunications bonds were the biggest drag on Fund performance and the sector in general during the second quarter; telecommunications continued to be plagued by a lack of access to capital, rising costs and a slowing economy. The return for the telecommunications sector during the second quarter was a dismal 18.5% decline, a significant blow to the high-yield market as this sector makes up 17% of the total universe. Conversely, issues for companies in automobile parts, gaming and healthcare performed well thus far in 2001. Concern over default levels continues, especially in the telecommunications sector, as the economy struggles back to its feet. B-rated issues are now trading at historic highs relative to BB-rated debt. We believe that the B sector offers better fundamental value and will continue our overweight there. We also expect to continue the Fund's overweight positions in gaming, wireless and cable television. We believe cable television companies should benefit from stable subscriber growth. Moreover, they have historically represented a safe sector in a volatile market. We continue to like the gaming sector as these companies are benefiting from strong operating momentum, are deleveraging, and could also face positive event risk from potential merger and acquisition activity. We are also positive on the wireless sector on the basis of long-term growth in penetration rates as well as strong asset coverage. At the end of June, we were underweighted in the electric utility, home building and steel and metals sectors. 73 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 - ------------------------------------------------------------------------------------------------------------------------ BRINSON HIGH YIELD FUND CLASS I 1.63% -1.83% 0.99% 2.93% BRINSON HIGH YIELD FUND CLASS N 1.38 -2.28 N/A 0.09 Merrill Lynch High Yield Master Index 4.87 2.10 0.55 2.32
* INCEPTION DATE OF THE BRINSON HIGH YIELD FUND CLASS I AND MERRILL LYNCH HIGH YIELD MASTER INDEX IS 9/30/97. INCEPTION DATE OF CLASS N IS 12/31/98. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson High Yield Fund Class I and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON HIGH YIELD FUND CLASS I VS. MERRILL LYNCH HIGH YIELD MASTER INDEX Wealth Value with Dividends Reinvested [CHART]
BRINSON HIGH YIELD MERRILL LYNCH HIGH FUND CLASS I YIELD MASTER INDEX 9/30/97 $1,000,000 $1,000,000 10/31/97 $995,405 $1,006,640 11/30/97 $1,005,534 $1,016,173 12/31/97 $1,023,434 $1,025,816 1/31/98 $1,047,259 $1,041,091 2/28/98 $1,054,152 $1,045,390 3/31/98 $1,066,777 $1,054,402 4/30/98 $1,068,387 $1,059,410 5/31/98 $1,070,928 $1,066,784 6/30/98 $1,081,780 $1,072,064 7/31/98 $1,098,343 $1,078,175 8/31/98 $1,042,275 $1,031,652 9/30/98 $1,057,065 $1,033,715 10/31/98 $1,049,791 $1,016,741 11/30/98 $1,109,624 $1,063,035 12/31/98 $1,102,713 $1,063,388 1/31/99 $1,129,231 $1,073,905 2/28/99 $1,134,755 $1,065,711 3/31/99 $1,146,909 $1,074,897 4/30/99 $1,163,483 $1,091,708 5/31/99 $1,140,280 $1,084,132 6/30/99 $1,134,755 $1,082,094 7/31/99 $1,133,616 $1,083,685 8/31/99 $1,127,919 $1,072,685 9/30/99 $1,124,501 $1,068,566 10/31/99 $1,124,501 $1,062,315 11/30/99 $1,147,288 $1,074,468 12/31/99 $1,156,238 $1,080,109 1/31/00 $1,141,800 $1,074,751 2/29/00 $1,138,191 $1,075,676 3/31/00 $1,111,721 $1,060,638 4/30/00 $1,118,940 $1,061,009 5/31/00 $1,115,331 $1,049,327 6/30/00 $1,134,974 $1,067,292 7/31/00 $1,147,324 $1,074,987 8/31/00 $1,160,909 $1,088,112 9/30/00 $1,145,993 $1,081,758 10/31/00 $1,110,181 $1,050,019 11/30/00 $1,059,549 $1,017,121 12/31/00 $1,096,306 $1,039,182 1/31/01 $1,153,292 $1,101,149 2/28/01 $1,165,504 $1,118,536 3/31/01 $1,145,151 $1,103,738 4/30/01 $1,143,794 $1,091,685 5/31/01 $1,153,292 $1,112,689 6/30/01 $1,114,143 $1,089,745
9/30/97 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 74 TOP TEN U.S. BOND HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Echostar DBS Corp. 9.375%, due 02/01/09 1.30% 2. Salem Communications Corp. 9.500%, due 10/01/07 1.17 3. Aztar Corp. 8.875%, due 05/15/07 0.99 4. National Wine & Spirits, Inc. 10.125%, due 01/15/09 0.99 5. Fedders North America 9.375%, due 08/15/07 0.95 6. Tembec Industries, Inc. 8.500%, due 02/01/11 0.90 7. Charter Communications Holdings 10.000%, due 04/01/09 0.90 8. Triton PCS, Inc. 0.000%, due 05/01/08 0.89 9. Samsonite Corp. 10.750%, due 06/15/08 0.89 10. Grey Wolf, Inc. 8.875%, due 07/01/07 0.89 - ------------------------------------------------------------
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ BONDS Corporate Bonds Aerospace 0.81% Appliances & Household Durables 0.95 Autos/Durables 3.28 Building Materials 1.54 Cable Television 5.51 Chemicals 3.42 Computer Software 0.13 Construction 1.45 Consumer 2.61 Electronics and Electric Components 1.99 Energy 7.52 Financial Services 2.15 Food & House Products 3.84 Health 4.36 Housing/Paper 2.08 Leisure & Tourism 1.54 Non-Durables 0.94 Publishing 2.55 Radio Broadcasting 3.52% Recreation 12.09 Retail/Apparel 3.58 Services/Miscellaneous 4.21 Technology 0.16 Telecommunications: Services 5.42 Telecommunications: Equipment 1.36 Telecommunications: Wireless 5.23 Television Broadcasting 8.22 ------ Total U.S. Corporate Bonds 90.46 International Dollar Bonds 6.00 ------ Total Bonds 96.46 Warrants 0.02 SHORT-TERM INVESTMENTS 0.12 ------ TOTAL INVESTMENTS 96.60 CASH AND OTHER ASSETS, LESS LIABILITIES 3.40 ------ NET ASSETS 100.00% ======
75 HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
FACE AMOUNT VALUE ---------- ------------ BONDS -- 96.46% U.S. CORPORATE BONDS -- 90.46% Acetex Corp. 9.750%, due 10/01/03 $ 300,000 $ 298,875 Adelphia Communications Corp. 7.875%, due 05/01/09 400,000 353,000 10.875%, due 10/01/10 270,000 273,375 Advances PCS 8.500%, due 04/01/08 100,000 102,000 AES Corp. 9.375%, due 09/15/10 350,000 353,500 Ainsworth Lumber Co., Ltd. 12.500%, due 07/15/07 160,000 147,200 AirGate PCS, Inc. (c) 0.000%, due 10/01/09 500,000 290,000 Alamosa Delaware, Inc., 144A 12.500%, due 02/01/11 300,000 270,000 Alamosa PCS Holdings, Inc. (c) 0.000%, due 02/15/10 150,000 69,000 Allbritton Communications Co. 9.750%, due 11/30/07 250,000 256,875 Allbritton Communications Co., Series B 8.875%, due 02/01/08 250,000 248,750 Alliance Gaming Corp. 10.000%, due 08/01/07 350,000 346,500 Allied Waste North America 7.875%, due 01/01/09 350,000 342,125 American Mobile Satellite Corp. 12.250%, due 04/01/08 182,000 38,220 American Restaurant Group, Inc., Series B 11.500%, due 02/15/03 300,000 285,000 American Tower Corp., 144A 9.375%, due 02/01/09 350,000 326,375 Ameristar Casino, Inc., 144A 10.750%, due 02/15/09 300,000 313,500 Amkor Technology, Inc., 144A 9.250%, due 02/15/08 150,000 141,000 Argosy Gaming Co. 10.750%, due 06/01/09 150,000 161,250 10.750%, due 06/01/09, 144A 400,000 430,000 Aztar Corp. 8.875%, due 05/15/07 555,000 557,775 B&G Foods, Inc. 9.625%, due 08/01/07 400,000 338,000 Bally Total Fitness Corp., Series D 9.875%, due 10/15/07 500,000 496,250 BE Aerospace, Inc., 144A 8.875%, due 05/01/11 160,000 158,400 Bear Island Paper Co. LLC 10.000%, due 12/01/07 375,000 352,500 Belden & Blake Corp. 9.875%, due 06/15/07 515,000 419,725 Building Materials Corp. 7.750%, due 07/15/05 350,000 213,500 Calpine Canada Energy Finance Ulc 8.500%, due 05/01/08 250,000 243,740 Century Communications Corp. (c) 0.000%, due 01/15/08 300,000 140,250 Charter Communications Holdings 0.000%, due 04/01/11 (c) $ 150,000 $ 102,750 10.000%, due 04/01/09 500,000 507,500 10.000%, due 05/15/11, 144A 150,000 152,250 10.750%, due 10/01/09 250,000 263,125 Chesapeake Energy Corp. 7.875%, due 03/15/04 250,000 248,125 8.125%, due 04/01/11, 144A 250,000 233,750 CMS Energy Corp. 8.500%, due 04/15/11 300,000 291,378 Coast Hotels and Casinos, Inc. 9.500%, due 04/01/09 370,000 378,325 Coaxial Communications of Central Ohio, Inc. 10.000%, due 08/15/06 425,000 422,875 Collins & Alkman Corp. 11.500%, due 04/15/06 400,000 378,000 Constellation Brands, Inc. 8.000%, due 02/15/08, 144A 275,000 274,312 Cross Timbers Oil Co. 8.750%, due 11/01/09 300,000 306,750 Crown Castle International Corp. 0.000%, due 05/15/11 (c) 630,000 392,175 9.000%, due 05/15/11 150,000 132,750 9.375%, due 08/01/11, 144A 150,000 135,375 CSC Holdings, Inc. 7.625%, due 04/01/11, 144A 175,000 166,951 7.625%, due 07/15/18 350,000 315,311 8.125%, due 07/15/09 175,000 173,768 Cumulus Media, Inc. 10.375%, due 07/01/08 355,000 353,225 Dayton Superior Corp. 13.000%, due 06/15/09 225,000 225,000 Del Monte Corp., 144A 9.250%, due 05/15/11 425,000 433,500 Delco Remy International, Inc. 8.625%, due 12/15/07 200,000 198,000 11.000%, due 05/01/09, 144A 200,000 208,000 Dobson Communications Corp. 10.875%, due 07/01/10 200,000 200,000 Dobson Sygnet Communications, Inc. 12.250%, due 12/15/08 250,000 252,500 Dura Operating Corp., 144A 9.000%, due 05/01/09 375,000 352,500 Echostar DBS Corp. 9.375%, due 02/01/09 750,000 735,000 eKabel Hessen, 144A 14.500%, due 09/01/10 125,000 96,250 El Paso Energy Partners, 144A 8.500%, due 06/01/11 300,000 300,000 Exodus Communications, Inc. 11.250%, due 07/01/08 100,000 34,500 11.625%, due 07/15/10 105,000 36,225 Fairchild Semiconductor Corp. 10.500%, due 02/01/09 250,000 243,750 Fedders North America 9.375%, due 08/15/07 600,000 534,000 Felcor Lodging, 144A 8.500%, due 06/01/11 350,000 334,250
76
FACE AMOUNT VALUE ---------- ------------ Fleming Co., Inc. 10.125%, due 04/01/08, 144A $ 75,000 $ 76,875 10.625%, due 07/31/07 125,000 128,125 Four M Corp., Series B 12.000%, due 06/01/06 425,000 416,500 Fox Sports Network LLC (c) 0.000%, due 08/15/07 500,000 475,000 Fresenius Medical Care Capital Trust, 144A 7.875%, due 06/15/11 300,000 292,500 Frontiervision Holdings (c) 0.000%, due 09/15/07 275,000 280,500 GEO Specialty Chemicals 10.125%, due 08/01/08 250,000 240,000 Granite Broadcasting Corp. 10.375%, due 05/15/05 200,000 139,000 Grey Wolf, Inc. 8.875%, due 07/01/07 500,000 500,000 Hayes Lemmerz International, Inc. 8.250%, due 12/15/08 495,000 346,500 HCA - The Healthcare Co. 7.125%, due 06/01/06 150,000 148,013 7.875%, due 02/01/11 250,000 252,035 8.750%, due 09/01/10 150,000 159,194 HMH Properties, Series B 7.875%, due 08/01/08 425,000 408,000 Hollinger International Publishing Corp. 9.250%, due 02/01/06 250,000 251,250 Hollywood Casino Corp. 11.250%, due 05/01/07 175,000 184,625 Horseshoe Gaming Holdings 8.625%, due 05/15/09 350,000 350,000 Horseshoe Gaming LLC, Series B 9.375%, due 06/15/07 150,000 158,250 Huntsman Corp., 144A 9.500%, due 07/01/07 300,000 165,000 IMC Global, Inc., 144A 10.875%, due 06/01/08 250,000 248,750 Insight Communications, Inc., 144A 0.000%, due 02/15/11 (c) 660,000 372,900 10.500%, due 11/01/10 120,000 126,600 Integrated Electrical Services, Inc., Series B 9.375%, due 02/01/09 325,000 318,500 Interep National Radio Sales, Series B 10.000%, due 07/01/08 300,000 252,000 Intermedia Communications 0.000%, due 07/15/07 (c) 240,000 211,200 8.500%, due 01/15/08 35,000 34,300 International Game Technology 7.875%, due 05/15/04 465,000 470,812 8.375%, due 05/15/09 75,000 76,875 Intrawest Corp. 10.500%, due 02/01/10 250,000 260,000 Iron Mountain, Inc. 8.625%, due 04/01/13 100,000 100,750 8.750%, due 09/30/09 400,000 408,000 Jackson Products, Inc., Series B 9.500%, due 04/15/05 350,000 308,000 Lamar Media Co. 8.625%, due 09/15/07 200,000 204,000 Leap Wireless International, Inc. 12.500%, due 04/15/10 $ 200,000 $ 132,000 Level 3 Communications, Inc. 0.000%, due 12/01/08 (c) 600,000 153,000 9.125%, due 05/01/08 90,000 37,350 Levi Straus & Co. 6.800%, due 11/01/03 150,000 133,500 11.625%, due 01/15/08 150,000 135,000 Liberty Group Operating 9.375%, due 02/01/08 400,000 280,000 Lifepoint Hospital Holdings, Inc., Series B 10.750%, due 05/15/09 250,000 272,500 LIN Holdings Corp. (c) 0.000%, due 03/01/08 450,000 351,000 LIN Television Corp., 144A 8.000%, due 01/15/08 100,000 96,500 Loral Space & Communications Ltd. 9.500%, due 01/15/06 200,000 150,000 Luigino's, Inc. 10.000%, due 02/01/06 375,000 322,500 Lyondell Chemical Co., Series B 9.875%, due 05/01/07 400,000 397,000 MacDermid, Inc., 144A 9.125%, due 07/15/11 110,000 110,550 Mail Well Corp., Series B 8.750%, due 12/15/08 500,000 430,000 Majestic Star Casino LLC, Series B 10.875%, due 07/01/06 550,000 495,000 McLeod USA, Inc. 8.125%, due 02/15/09 450,000 238,500 9.250%, due 07/15/07 250,000 145,000 Mediacom LLC 7.875%, due 02/15/11 300,000 264,000 9.500%, due 01/15/13, 144A 275,000 264,000 Methanex Corp. 7.400%, due 08/15/02 300,000 298,500 Metromedia Fiber Network 10.000%, due 12/15/09 240,000 91,200 MGM Grand, Inc. 9.750%, due 06/01/07 200,000 213,500 MGM Mirage, Inc. 8.500%, due 09/15/10 150,000 155,597 Millennium America, Inc., 144A 9.250%, due 06/15/08 175,000 174,125 Motors & Gears, Inc., Series D 10.750%, due 11/15/06 450,000 448,875 National Wine & Spirits, Inc. 10.125%, due 01/15/09 550,000 556,875 Nexstar Finance, Inc., LLC, 144A 12.000%, due 04/01/08 300,000 312,000 Nextel Communications, Inc. 0.000%, due 09/15/07 (c) 120,000 84,750 9.375%, due 11/15/09 20,000 15,850 9.500%, due 02/01/11 275,000 215,531 Nextel International, Inc. 12.750%, due 08/01/10 350,000 101,500 Nextel Partners, Inc. 11.000%, due 03/15/10 400,000 315,000
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FACE AMOUNT VALUE ---------- ------------ Nextmedia Operating Inc. 10.750%, due 07/01/11 $ 150,000 $ 147,765 Nortek, Inc. 9.875%, due 03/01/04 350,000 355,075 9.875%, due 06/15/11, 144A 450,000 433,125 NTL Communications, Inc., Series B 12.375%, due 10/01/08 400,000 176,000 NTL, Inc., Series A (c) 12.750%, due 04/15/05 350,000 252,000 Pacifica Papers, Inc. 10.000%, due 03/15/09 355,000 374,525 Packaging Corp. of America 9.625%, due 04/01/09 250,000 265,312 Pantry, Inc. 10.250%, due 10/15/07 475,000 460,750 Paxson Communications Corp. 11.625%, due 10/01/02 325,000 328,250 Pegasus Communications Corp., Series B 9.750%, due 12/01/06 100,000 88,000 12.500%, due 08/01/07 300,000 297,000 Pegasus Satellite Communications, Inc. (c) 0.000%, due 03/01/07 375,000 217,500 Penn National Gaming, Inc., 144A 11.125%, due 03/01/08 220,000 228,800 Phillips-Van Heusen 9.500%, due 05/01/08 325,000 331,500 Pioneer Natural Resources Co. 9.625%, due 04/01/10 360,000 394,488 Plains Resources, Inc. 10.250%, due 03/15/06 200,000 204,000 10.250%, due 03/15/06, Series B 300,000 306,000 Playtex Products, Inc., 144A 9.375%, due 06/01/11 225,000 228,938 Pogo Producing Co. 8.250%, due 04/15/11 300,000 300,000 Potlatch Corp., 144A 10.000%, due 07/15/11 225,000 226,125 Premier Parks, Inc. (c) 0.000%, due 04/01/08 175,000 141,313 PRIMEDIA, Inc., 144A 8.875%, due 05/15/11 250,000 231,250 R.H. Donnelly, Inc. 9.125%, due 06/01/08 315,000 319,725 Radio One, Inc., 144A 8.875%, due 07/01/11 410,000 410,000 Radio Unica Communications Corp. (c) 0.000%, due 08/01/06 400,000 224,000 RCN Corp. 10.000%, due 10/15/07 400,000 168,000 Remington Product Co. LLC, Series B 11.000%, due 05/15/06 250,000 242,813 Repap New Brunswick 9.000%, due 06/01/04 150,000 158,250 Riverwood International Corp. 10.250%, due 04/01/06 335,000 336,675 10.875%, due 04/01/08 200,000 192,000 Salem Communications Corp. 9.500%, due 10/01/07 650,000 663,000 Samsonite Corp. 10.750%, due 06/15/08 $ 600,000 $ 501,000 SBA Communications Corp. 0.000%, due 03/01/08 (c) 390,000 312,000 10.250%, due 02/01/09 200,000 183,000 Sbarro, Inc. 11.000%, due 09/15/09 400,000 412,500 Sequa Corp. 8.875%, due 04/01/08, 144A 125,000 123,750 9.000%, due 08/01/09 175,000 174,125 Sinclair Broadcast Group 10.000%, due 09/30/05 400,000 402,000 Six Flags, Inc., 144A 9.500%, due 02/01/09 300,000 299,625 Snyder Oil Corp. 8.750%, due 06/15/07 450,000 477,000 Spectrasite Holdings, Inc. (c) 0.000%, due 07/15/08 440,000 236,500 0.000%, due 04/15/09 225,000 103,500 Speedway Motorsports, Inc. 8.500%, due 08/15/07 350,000 357,000 Station Casinos, Inc. 8.375%, due 02/15/08 275,000 276,031 9.750%, due 04/15/07 105,000 107,625 9.875%, due 07/01/10 245,000 253,881 T/SF Communications Corp., Series B 10.375%, due 11/01/07 250,000 240,625 Team Health, Inc. 12.000%, due 03/15/09 375,000 393,750 Tenet Healthcare Corp. 7.625%, due 06/01/08 440,000 447,150 Time Warner Telecom, Inc. 10.125%, due 02/01/11 275,000 247,500 Tommy Hilfiger U.S.A. 6.500%, due 06/01/03 325,000 315,250 TransWestern Publishing Co., Series D 9.625%, due 11/15/07 350,000 352,625 TransWestern Publishing Co., Series E, 144A 9.625%, due 11/15/07 200,000 201,500 Triad Hospitals, Inc., 144A 8.750%, due 05/01/09 150,000 152,625 Triad Hospitals Holdings, Inc. 11.000%, due 05/15/09 229,000 246,747 Triton PCS, Inc. 0.000%, due 05/01/08 (c) 625,000 503,906 9.375%, due 02/01/11 100,000 97,000 US Unwired, Inc. (c) 0.000%, due 11/01/09 250,000 122,813 Voicestream Wireless Corp. 10.375%, due 11/15/09 267,000 304,380 Weirton Steel Corp. 11.375%, due 07/01/04 200,000 60,000 Westpoint Stevens, Inc. 7.875%, due 06/15/05 350,000 136,500 Winsloew Furniture, Inc., Series B 12.750%, due 08/15/07 190,000 176,225 Wiser Oil Co. 9.500%, due 05/15/07 500,000 440,000
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FACE AMOUNT VALUE ---------- ------------ XO Communications, Inc. (c) 0.000%, due 12/01/09 $ 712,000 $ 106,800 Young Broadcasting, Inc., 144A 10.000%, due 03/01/11 350,000 336,000 Ziff Davis Media, Inc. 12.000%, due 07/15/10 300,000 165,000 ------------ Total U.S. Corporate Bonds 51,101,724 ------------ INTERNATIONAL DOLLAR BONDS -- 6.00% Callahan Nordrhein-Westfalen, 144A 0.000%, due 07/15/10 (c) 300,000 114,000 14.000%, due 07/15/10 200,000 164,000 COLT Telecom Group (c) 0.000%, due 12/15/06 550,000 495,000 Energis PLC 9.750%, due 06/15/09 500,000 435,000 Global Crossing Holding Ltd. 9.500%, due 11/15/09 550,000 430,375 Microcell Telecommunications, Inc., Series B (c) 0.000%, due 06/01/06 435,000 321,900 Norampac, Inc. 9.500%, due 02/01/08 150,000 156,750 Rogers Communications, Inc. 9.125%, due 01/15/06 250,000 250,000 TeleWest Communications PLC 11.000%, due 10/01/07 500,000 421,250 Tembec Industries, Inc. 8.500%, due 02/01/11 500,000 510,000 United Pan-Europe Communications NV, Series B, 0.000%, due 02/01/10 (c) 25,000 3,750 11.500%, due 02/01/10 225,000 84,375 ------------ Total International Dollar Bonds 3,386,400 ------------ Total Bonds (Cost $58,502,838) 54,488,124 ------------ NUMBER OF WARRANTS VALUE ---------- ------------ WARRANTS -- 0.02% Dayton Superior Corp., 144A, Expires 06/15/09 (b) 225 $ 2,250 Leap Wireless International, Inc., 144A, Expires 04/15/10 (b) 200 8,000 Motient Corp., 144A, Expires 04/01/08 (b) 182 137 Pliant Corp., 144A, Expires 06/01/10 (b) 160 16 Winsloew Furniture, Inc., 144A, Expires 08/15/07 (b) 190 1,876 ------------ Total Warrants (Cost $15,890) 12,279 ------------ SHARES ---------- SHORT-TERM INVESTMENTS -- 0.12% INVESTMENT COMPANIES -- 0.12% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $69,394) 69,394 69,394 ------------ Total Investments (Cost $58,588,122) -- 96.60% (a) 54,569,797 Cash and other assets, less liabilities -- 3.40% 1,918,769 ------------ Net Assets -- 100% $ 56,488,566 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $58,728,028; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 888,492 Gross unrealized depreciation (5,046,723) ------------ Net unrealized depreciation $ (4,158,231) ============
(b) Non-income producing security. (c) Step bonds - coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2001. Maturity date disclosed is the ultimate maturity date. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2001, the value of these securities amounted to $9,728,230 or 17.22% of net assets. See accompanying notes to financial statements. 79 INTERNATIONAL EQUITY FUND The Brinson International Equity Fund Class I shares returned an annualized 5.08% since the Fund's performance inception on August 31, 1993 through June 30, 2001. During this period, the Fund's benchmark, the MSCI World Ex USA (Free) Index returned 4.90% on an annualized basis. For the 12 months ended June 30, 2001, Class I shares declined 16.15% and Class N declined 16.37%, outperforming the benchmark's 23.84% decline. During the fiscal year ended June 30, 2001, equities buckled under the twin pressures of a manufacturing slowdown, which has had a domino effect throughout related industries, and poor earnings reports. Growth and blue chip stocks were hit particularly hard during the period, with technology stocks struggling as capital spending plans shrunk. Due largely to the market volatility of recent months, earnings and solid fundamentals are once again in the forefront of investors' thoughts. Our exposure to technology stocks remained underweight during the first six months of 2001 and, in fact, companies continued to miss earnings estimates as the period closed. There are few signs that a technology turnaround is imminent, with the telecommunications subsector suffering the most. Even within these sectors, opportunities continued to exist. We bought shares of British Telecom as it restructured and new management was brought in. We have also underweighted the consumer discretionary sector, as consumers have slowed spending on big-ticket purchases such as automobiles. Conversely, we have overweighted companies producing basic materials such as paper, forest products and chemicals. We also maintain an overweight position in utility stocks. Geographically, we have an overweight in securities from Great Britain and a smaller overweight in Australian stocks, while we have underweighted positions in the remainder of Europe, including the European Union countries. Japan continues to remain a significant underweight, although the new reform government may yet jolt the Japanese economy from its years-long malaise. Financial turmoil in Argentina has yet to show that it will have a larger negative effect on the global economy. 80 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/01 6/30/01 6/30/01 6/30/01 6/30/01 - ------------------------------------------------------------------------------------------------------------------------------------ BRINSON INTERNATIONAL EQUITY FUND CLASS I** -11.35% -16.15% -0.97% 4.12% 5.08% BRINSON INTERNATIONAL EQUITY FUND CLASS N** -11.46 -16.37 -1.24 N/A 0.17 MSCI World Ex USA (Free) Index -14.62 -23.84 -1.03 3.16 4.90
* PERFORMANCE INCEPTION DATE OF THE BRINSON INTERNATIONAL EQUITY FUND CLASS I AND THE MSCI WORLD EX USA (FREE) INDEX IS 8/31/93. INCEPTION DATE OF CLASS N IS 6/30/97. ** FORMERLY KNOWN AS THE GLOBAL (EX-U.S.) EQUITY FUND. PERFORMANCE IS NET OF WITHHOLDING TAXES ON DIVIDENDS. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the Brinson International Equity Fund Class I and the MSCI World Ex USA (Free) Index if you had invested $1,000,000 on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2001. The performance of Class N shares will vary based upon the different inception dates and class specific expenses. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON INTERNATIONAL EQUITY FUND CLASS I VS. MSCI WORLD EX USA (FREE) INDEX, Wealth Value with Dividends Reinvested [CHART]
BRINSON INTERNATIONAL EQUITY MSCI WORLD EX FUND CLASS I USA (FREE) INDEX 8/31/1993 $1,000,000 $1,000,000 9/30/1993 $972,000 $976,801 10/31/1993 $997,000 $1,009,609 11/30/1993 $929,000 $923,179 12/31/1993 $965,500 $988,755 1/31/1994 $1,033,606 $1,070,906 2/28/1994 $1,002,558 $1,065,670 3/31/1994 $957,488 $1,019,802 4/30/1994 $984,530 $1,061,898 5/31/1994 $985,531 $1,056,877 6/30/1994 $975,547 $1,068,785 7/31/1994 $990,648 $1,080,675 8/31/1994 $1,019,844 $1,107,765 9/30/1994 $990,648 $1,075,156 10/31/1994 $1,007,763 $1,109,502 11/30/1994 $974,540 $1,055,987 12/31/1994 $974,540 $1,062,772 1/31/1995 $940,310 $1,021,301 2/28/1995 $936,283 $1,020,962 3/31/1995 $952,391 $1,083,954 4/30/1995 $983,601 $1,124,091 5/31/1995 $984,608 $1,113,638 6/30/1995 $974,540 $1,095,523 7/31/1995 $1,032,932 $1,161,849 8/31/1995 $1,049,040 $1,119,128 9/30/1995 $1,066,155 $1,140,631 10/31/1995 $1,056,087 $1,111,129 11/30/1995 $1,082,263 $1,142,653 12/31/1995 $1,126,103 $1,187,454 1/31/1996 $1,148,603 $1,195,636 2/29/1996 $1,144,317 $1,199,068 3/31/1996 $1,159,318 $1,224,307 4/30/1996 $1,202,176 $1,260,385 5/31/1996 $1,196,819 $1,238,756 6/30/1996 $1,204,891 $1,244,664 7/31/1996 $1,171,452 $1,208,121 8/31/1996 $1,176,845 $1,213,340 9/30/1996 $1,212,442 $1,246,304 10/31/1996 $1,209,206 $1,237,791 11/30/1996 $1,270,691 $1,289,534 12/31/1996 $1,269,637 $1,271,881 1/31/1997 $1,262,768 $1,232,993 2/28/1997 $1,283,375 $1,251,326 3/31/1997 $1,291,389 $1,251,906 4/30/1997 $1,300,548 $1,259,866 5/31/1997 $1,385,267 $1,343,154 6/30/1997 $1,449,115 $1,414,417 7/31/1997 $1,475,588 $1,440,677 8/31/1997 $1,371,998 $1,332,367 9/30/1997 $1,449,115 $1,407,159 10/31/1997 $1,358,186 $1,301,256 11/30/1997 $1,335,166 $1,285,967 12/31/1997 $1,342,509 $1,298,194 1/31/1998 $1,387,259 $1,353,928 2/28/1998 $1,460,600 $1,441,978 3/31/1998 $1,516,538 $1,488,741 4/30/1998 $1,528,968 $1,500,219 5/31/1998 $1,528,968 $1,493,498 6/30/1998 $1,518,353 $1,499,786 7/31/1998 $1,533,349 $1,509,687 8/31/1998 $1,343,399 $1,316,936 9/30/1998 $1,310,908 $1,279,301 10/31/1998 $1,412,131 $1,412,763 11/30/1998 $1,484,612 $1,484,559 12/31/1998 $1,535,729 $1,540,535 1/31/1999 $1,531,928 $1,540,305 2/28/1999 $1,482,511 $1,501,559 3/31/1999 $1,525,592 $1,563,636 4/30/1999 $1,596,550 $1,631,163 5/31/1999 $1,512,921 $1,547,710 6/30/1999 $1,573,726 $1,607,439 7/31/1999 $1,619,637 $1,653,936 8/31/1999 $1,610,710 $1,658,375 9/30/1999 $1,603,058 $1,676,894 10/31/1999 $1,641,317 $1,741,709 11/30/1999 $1,680,851 $1,802,392 12/31/1999 $1,830,034 $1,968,324 1/31/2000 $1,691,356 $1,848,754 2/29/2000 $1,696,540 $1,900,647 3/31/2000 $1,752,270 $1,978,709 4/30/2000 $1,683,579 $1,875,810 5/31/2000 $1,666,731 $1,830,372 6/30/2000 $1,758,751 $1,909,384 7/31/2000 $1,691,356 $1,836,375 8/31/2000 $1,697,836 $1,860,337 9/30/2000 $1,625,257 $1,763,940 10/31/2000 $1,582,487 $1,715,862 11/30/2000 $1,574,710 $1,646,579 12/31/2000 $1,663,635 $1,703,212 1/31/2001 $1,647,067 $1,706,390 2/28/2001 $1,551,805 $1,571,304 3/31/2001 $1,459,305 $1,464,720 4/30/2001 $1,546,283 $1,567,068 5/31/2001 $1,503,484 $1,515,985 6/30/2001 $1,474,753 $1,454,141
8/31/93 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 81 TOP TEN INTERNATIONAL EQUITY HOLDINGS AS OF JUNE 30, 2001
PERCENT OF NET ASSETS - ------------------------------------------------------------ 1. Total Fina S.A., Class B 1.93% 2. GlaxoSmithKline PLC 1.76 3. Aventis S.A., Class A 1.54 4. BP Amoco PLC 1.41 5. Westpac Banking Corp., Ltd. 1.32 6. Shell Transport & Trading PLC 1.30 7. Roche Holding AG (Gen.) 1.28 8. Nokia Oyj 1.21 9. Groupe Danone 1.20 10. Nestle S.A. (Reg.) 1.17 - ------------------------------------------------------------
MARKET AND CURRENCY STRATEGY AS OF JUNE 30, 2001
FUND BENCHMARK ---------------------- ----------------------- MARKET CURRENCY MARKET CURRENCY STRATEGY STRATEGY STRATEGY STRATEGY - ---------------------------------------------------------------------- Australia 4.2% 10.4% 2.9% 2.8% Austria 0.0 0.0 0.2 0.0 Belgium 1.4 0.0 0.8 0.0 Canada 3.0 4.6 4.6 4.6 Denmark 1.6 0.9 0.9 0.9 Euro 1.3 47.7 0.0 35.7 Finland 3.1 0.0 2.0 0.0 France 10.5 0.0 10.5 0.0 Germany 3.5 0.0 8.0 0.0 Greece 0.0 0.0 0.6 0.0 Hong Kong 1.3 0.0 2.0 2.0 Ireland 1.4 0.0 0.7 0.0 Italy 2.1 0.0 4.3 0.0 Japan 20.0 13.5 23.5 23.5 Netherlands 6.5 0.0 5.3 0.0 New Zealand 0.4 0.4 0.1 0.1 Norway 0.3 0.5 0.5 0.5 Portugal 1.2 0.0 0.5 0.0 Singapore 1.0 0.9 0.8 0.9 Spain 2.2 0.0 3.0 0.0 Sweden 2.4 2.2 2.1 2.1 Switzerland 5.7 6.4 6.4 6.4 U.K. 26.9 12.5 20.5 20.5 - ---------------------------------------------------------------------- 100.0% 100.0% 100.0% 100.0%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2001 - ------------------------------------------------------------------------ INTERNATIONAL EQUITIES Aerospace & Military 0.58% Appliances & Households 1.54 Autos/Durables 0.69 Banking 11.29 Beverages and Tobacco 3.22 Broadcasting & Publishing 3.36 Building Materials 0.94 Business & Public Service 1.73 Chemicals 2.53 Construction 0.48 Data Processing 0.94 Electric Components 2.74 Electronics 0.85 Energy 5.59 Financial Services 5.38 Food & House Products 4.81 Forest Products 0.81 Health & Personal Care 9.11 Housing/Paper 1.06 Industrial Components 0.49 Insurance 4.48 Leisure & Tourism 0.80 Machinery & Engineering 0.68 Metals: Steel 0.30% Multi-Industry 1.92 Non-Durables 0.18 Non-Ferrous Metals 0.84 Real Estate 0.72 Retail/Apparel 0.44 Services/Miscellaneous 0.57 Telecommunications 7.61 Transportation 2.32 Utilities 3.69 Wholesale & International Trade 0.22 ------ Total International Equities 82.91 CONVERTIBLE PREFERRED 0.12 SHORT-TERM INVESTMENTS 17.68 ------ TOTAL INVESTMENTS 100.71 SECURITIES LENDING CASH COLLATERAL RECEIVED 7.90 LIABILITIES, LESS CASH AND OTHER ASSETS (8.61) ------ NET ASSETS 100.00% ======
82 INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2001
SHARES VALUE -------- ------------ INTERNATIONAL EQUITIES -- 82.91% AUSTRALIA -- 3.70% Amcor Ltd. 98,240 $ 330,442 Cable & Wireless Optus Ltd. 553,500 1,043,374 National Australia Bank Ltd., Preferred 41,300 1,282,365 News Corp., Ltd., Preferred 83,935 672,548 QBE Insurance Group Ltd. 89,800 538,858 Rio Tinto Ltd. 46,560 807,653 Westpac Banking Corp., Ltd. 354,771 2,606,182 ------------ 7,281,422 ------------ BELGIUM -- 1.14% Electrabel S.A. 4,190 827,217 Fortis B 58,647 1,415,035 ------------ 2,242,252 ------------ CANADA -- 2.58% Alcan Aluminum Ltd. 19,640 825,667 BCE, Inc. 46,100 1,236,340 Canadian Pacific Ltd. 11,814 456,492 Magna International, Inc., Class A 8,260 507,433 Nortel Networks Corp. 50,400 464,945 Nova Chemicals Corp. 2,000 42,831 Royal Bank of Canada 28,900 924,929 Shaw Communications, Inc., Class B 25,860 611,057 ------------ 5,069,694 ------------ DENMARK -- 1.42% Danske Bank A/S 44,100 792,336 Novo-Nordisk A/S 28,900 1,278,383 Tele Danmark A/S 19,850 715,539 ------------ 2,786,258 ------------ FINLAND -- 2.87% Nokia Oyj 104,792 2,374,942 Sampo Oyj, Class A (c) 101,360 862,401 Stora Enso Oyj 100,900 1,093,396 UPM-Kymmene Corp. 46,989 1,328,279 ------------ 5,659,018 ------------ FRANCE -- 8.61% Air Liquide (c) 7,785 1,118,451 Alcatel S.A. (c) 30,575 639,352 Aventis S.A., Class A 38,052 3,037,846 Axa (c) 40,364 1,149,889 Banque Nationale de Paris (c) 17,037 1,482,732 Cie de Saint Gobain (c) 8,108 1,101,705 Groupe Danone (c) 17,212 2,362,060 Societe Generale 25,700 1,521,940 Suez S.A 13,680 440,095 Total Fina S.A., Class B 27,099 3,794,594 Usinor Sacilor 29,011 304,306 ------------ 16,952,970 ------------ GERMANY -- 3.00% Allianz AG (c) 7,178 2,106,851 Bayer AG 20,705 806,324 Bayerische Motoren Werke AG 23,010 757,779 Continental AG 25,490 359,303 E.on AG (c) 34,328 1,784,405 Volkswagen AG (c) 1,800 84,118 ------------ 5,898,780 ------------ HONG KONG -- 0.89% Esprit Holdings Ltd. 23,000 $ 25,212 Hong Kong Electric Holdings 450,500 1,732,714 ------------ 1,757,926 ------------ IRELAND -- 0.66% Bank of Ireland 94,355 934,603 Eircom PLC 334,930 367,198 ------------ 1,301,801 ------------ ITALY -- 1.83% Assicurazioni Generali (c) 36,446 1,095,355 ENI-Ente Nazionale Idrocarburi Spa (c) 153,500 1,871,317 San Paolo-imi Spa (c) 50,000 640,874 ------------ 3,607,546 ------------ JAPAN -- 16.76% Benesse Corp. 21,300 667,760 Canon, Inc. 23,000 929,442 Dai Nippon Printing Co., Ltd. 51,000 622,370 Daikin Kogyo Industries Ltd. 23,000 425,994 East Japan Railway Co. 237 1,368,185 Fanuc 9,600 477,999 Fuji Photo Film Co., Ltd. 36,000 1,552,918 Fujitsu 86,000 903,303 Hirose Electric Co., Ltd. 200 15,234 Hitachi Ltd. 101,000 992,022 Hoya Corp. 8,300 525,738 Kamigumi Co., Ltd. 103,000 503,768 Kao Corp. 33,000 820,237 Kuraray Co., Ltd. 62,000 461,321 Matsushita Electric Industrial Co. 45,000 704,298 Minebea Co., Ltd. 154,000 1,013,743 Mitsubishi Corp. 54,000 435,135 Mitsubishi Estate Co., Ltd. 96,000 882,874 Mizuho Holding, Inc. 251 1,167,255 Murata Manufacturing Co., Inc. 19,200 1,276,203 Nikko Securities Co., Ltd. 91,000 728,905 Nippon Steel Co. 177,000 268,225 Nippon Telegraph & Telephone Corp. 394 2,053,400 Nomura Securities Co., Ltd. 60,000 1,149,775 Omron Corp. 12,000 216,966 Ono Pharmaceutical Co., Ltd. 38,000 1,206,543 Orix Corp. 17,500 1,702,012 Rohm Co. 9,600 1,491,725 Sekisui House Ltd. 42,000 356,623 Seven-Eleven Japan Co., Ltd. 21,000 819,997 Shin-Etsu Chemical Co., Ltd. 12,000 440,667 Sony Corp. 16,200 1,065,106 Sumitomo Bank 77,000 635,904 Sumitomo Chemical Co. 131,000 591,349 Taiheiyo Cement Corp. 600 1,270 Takeda Chemical Industries 38,000 1,767,158 Takefuji Corp. 5,200 472,386 Tokio Marine & Fire Insurance Co. 46,000 429,682 West Japan Railway Co. 103 558,275 Yamanouchi Pharmaceutical Co., Ltd. 46,000 1,290,892 ------------ 32,992,659 ------------
83
SHARES VALUE -------- ------------ NETHERLANDS -- 5.70% ABN AMRO Holdings NV 71,760 $ 1,348,082 Aegon NV 62,189 1,750,579 Akzo Nobel NV 36,400 1,540,806 Elsevier NV 153,550 1,910,925 ING Groep NV 6,200 405,215 Philips Electronics NV 34,322 909,771 TNT Post Group NV 63,402 1,323,112 Wolters Kluwer NV 75,579 2,031,522 ------------ 11,220,012 ------------ NEW ZEALAND -- 0.35% Lion Nathan Ltd. 314,970 694,960 ------------ NORWAY -- 0.35% Telenor ASA 168,200 693,634 ------------ PORTUGAL -- 1.01% Brisa-Auto Estradas de Portugal S.A. 80,407 680,723 Electricidade de Portugal S.A. 509,170 1,215,594 Portugal Telecom 11,800 82,316 ------------ 1,978,633 ------------ SINGAPORE -- 0.84% DBS Group Holdings Ltd. (c) 150,000 1,103,183 Neptune Orient Lines 717,000 550,933 ------------ 1,654,116 ------------ SPAIN -- 1.95% Altadis S.A. 4,875 69,501 Banco Popular Espanol S.A. 39,438 1,378,594 Banco Santander Central Hispano S.A. 129,836 1,176,131 Telefonica S.A. (b) 98,233 1,210,864 ------------ 3,835,090 ------------ SWEDEN -- 2.08% Sandvik AB 29,000 583,442 Svenska Cellulosa AB 11,750 248,808 Svenska Handelsbanken AB 86,280 1,232,526 Swedish Match AB 432,190 2,024,886 ------------ 4,089,662 ------------ SWITZERLAND -- 4.54% Givaudan S.A. (Reg.) (b) 2,741 760,161 Nestle S.A. (Reg.) 10,830 2,301,563 Novartis AG (Reg.) 53,969 1,953,092 Roche Holding AG (Gen.) 35,100 2,528,762 Swiss Reinsurance Co. (Reg.) 262 523,563 Zurich Financial Services AG (Reg.) 2,536 864,850 ------------ 8,931,991 ------------ UNITED KINGDOM -- 22.63% BAE Systems PLC 233,000 1,115,781 Barclays PLC 48,000 1,471,647 BP Amoco PLC 336,884 2,769,306 British Land Company PLC (c) 76,000 518,396 British Telecommunications PLC 356,600 2,241,789 Carlton Communications PLC 77,000 363,861 Charter PLC 282,907 897,214 Compass Group PLC 86,000 688,203 Diageo PLC 138,322 1,517,371 Dixons Group PLC 62,000 203,167 Emap PLC 55,000 $ 541,460 Gallaher Group PLC 228,620 1,437,235 GlaxoSmithKline PLC (b) 122,840 3,455,220 Hanson PLC 99,000 728,883 HSBC Holdings PLC 145,884 1,728,556 Invensys PLC 413,000 784,133 Kelda Group PLC 175,011 959,922 Lattice Group PLC (b) 683,000 1,524,897 Lloyds TSB Group PLC 181,725 1,818,426 Marconi PLC 148,269 527,566 Nycomed Amersham PLC 112,876 817,551 Powergen PLC 38,812 392,465 Prudential PLC 123,964 1,501,083 Reckitt Benckiser PLC 113,497 1,636,116 Rentokil Initial PLC 278,000 942,254 RMC Group PLC 60,000 578,027 Rolls-Royce PLC 14,000 46,172 Royal Bank of Scotland Group PLC 99,168 2,185,478 Scottish & Newcastle PLC 75,000 588,047 Scottish & Southern Energy PLC 139,875 1,318,017 Scottish Power PLC 114,000 838,518 Shell Transport & Trading PLC 308,404 2,563,383 Smurfit (Jefferson) Group PLC 535,000 978,145 Tesco PLC 459,592 1,657,929 Trinity Mirror PLC 85,279 477,344 United Business Media PLC 53,787 437,231 Vodafone Group PLC 1,034,032 2,290,448 ------------ 44,541,241 ------------ Total International Equities (Cost $145,247,798) 163,189,665 ------------ CONVERTIBLE PREFERRED -- 0.12% LUXEMBOURG 0.12% Hellenic Exchangeable Finance SCA (Cost $245,513) 290,000 245,513 ------------ SHORT-TERM INVESTMENTS -- 17.68% INVESTMENT COMPANIES -- 17.68% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $34,810,488) 34,810,488 34,810,488 ------------ Total Investments (Cost $180,303,799) -- 100.71% (a) 198,245,666 Total Cash Collateral Received for Securities Loaned (Cost $15,553,849) -- 7.90% (a) 15,553,849 Liabilities, less cash and other assets -- (8.61%) (16,960,616) ------------ Net Assets -- 100% $196,838,899 ============ CASH COLLATERAL RECEIVED FOR SECURITIES LOANED -- 7.90% INVESTMENT COMPANIES -- 7.90% Brinson Supplementary Trust U.S. Cash Management Prime Fund (Cost $15,553,849) 15,553,849 $ 15,553,849 ============
See accompanying notes to schedule of investments. 84 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $198,894,346; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 28,785,192 Gross unrealized depreciation (13,880,023) ------------ Net unrealized appreciation $ 14,905,169 ============
(b) Non-income producing security. (c) Security, or portion thereof, was on loan at June 30, 2001. FORWARD FOREIGN CURRENCY CONTRACTS The International Equity Fund had the following open forward foreign currency contracts as of June 30, 2001:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ------------ ------------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 08/08/01 42,300,000 $ 21,468,684 $ (1,322,499) British Pound (GBP) 08/08/01 12,200,000 17,135,557 (470,483) Canadian Dollar (CAD) 08/08/01 11,100,000 7,309,412 (73,213) Danish Krone (DKK) 08/08/01 9,700,000 1,101,770 (53,198) Euro (EUR) 08/08/01 69,200,000 58,623,502 (5,099,320) Hong Kong Dollar (HKD) 08/08/01 13,800,000 1,769,445 (159) Japanese Yen (JPY) 08/08/01 6,441,000,000 51,846,804 (3,466,693) New Zealand Dollar (NZD) 08/08/01 12,000,000 4,825,701 (470,499) Swedish Krona (SEK) 08/08/01 31,300,000 2,874,139 (357,830) Swiss Franc (CHF) 08/08/01 12,300,000 6,847,058 (459,445) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) 08/08/01 20,900,000 10,607,459 244,276 British Pound (GBP) 08/08/01 28,150,000 39,538,192 1,432,086 Canadian Dollar (CAD) 08/08/01 5,900,000 3,885,183 (31,491) Danish Krone (DKK) 08/08/01 17,700,000 2,010,446 102,484 Euro (EUR) 08/08/01 34,600,000 29,311,751 1,890,464 Hong Kong Dollar (HKD) 08/08/01 26,000,000 3,333,735 3,063 Japanese Yen (JPY) 08/08/01 7,812,000,000 62,882,664 5,597,281 New Zealand Dollar (NZD) 08/08/01 12,000,000 4,825,701 333,579 Swedish Krona (SEK) 08/08/01 31,300,000 2,874,139 178,114 Swiss Franc (CHF) 08/08/01 10,400,000 5,789,382 205,026 ----------- Total $(1,818,457) ===========
See accompanying notes to financial statements. 85 THE BRINSON FUNDS -- FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001
GLOBAL GLOBAL GLOBAL GLOBAL EQUITY TECHNOLOGY BIOTECH GLOBAL BOND FUND FUND FUND FUND FUND - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 133,276,659 $ 60,904,394 $ 1,873,280 $ 2,913,598 $ 39,416,618 Affiliated issuers 29,982,234 5,984,286 -- -- 1,092,304 Foreign currency, at cost 478,447 152,674 -- -- 286,946 Investments of cash collateral received for securities loaned, at cost 34,552,487 -- -- -- -- ------------- ------------ ------------ ------------ ------------ $ 198,289,827 $ 67,041,354 $ 1,873,280 $ 2,913,598 $ 40,795,868 ============= ============ ============ ============ ============ Investments, at value: Unaffiliated issuers $ 133,308,351 $ 63,104,437 $ 1,588,492 $ 2,883,345 $ 36,781,803 Affiliated issuers 31,859,243 5,984,286 -- -- 1,092,304 Foreign currency, at value 475,478 152,892 -- -- 286,542 Investments of cash collateral received for securities loaned, at value 34,000,528 -- -- -- -- Cash 167 -- -- -- -- Receivables: Investment securities sold 3,330,664 836,769 -- 26,619 76,136 Due from Advisor -- -- 16,836 13,693 -- Dividends 104,867 87,400 383 449 -- Interest 815,114 5,051 52 403 552,874 Fund shares sold 95,318 651,199 100 100 731,843 Variation margin -- -- -- -- -- Other assets 360,046 -- -- -- -- ------------- ------------ ------------ ------------ ------------ TOTAL ASSETS 204,349,776 70,822,034 1,605,863 2,924,609 39,521,502 ------------- ------------ ------------ ------------ ------------ LIABILITIES: Payables: Securities loaned 34,552,487 -- -- -- -- Investment securities purchased 1,805,460 788,616 -- 1,993 160,027 Investment advisory fees 108,295 36,930 -- -- 22,788 Fund shares redeemed 1,172,043 134,117 833 1,091 33,608 Variation margin 62,357 -- -- -- -- Due to custodian bank -- -- -- -- -- Accrued expenses 377,515 293,222 16,509 13,529 62,579 Net unrealized depreciation on forward foreign currency contracts 2,934,392 13,041 -- -- 373,526 ------------- ------------ ------------ ------------ ------------ TOTAL LIABILITIES 41,012,549 1,265,926 17,342 16,613 652,528 ------------- ------------ ------------ ------------ ------------ NET ASSETS $ 163,337,227 $ 69,556,108 $ 1,588,521 $ 2,907,996 $ 38,868,974 ============= ============ ============ ============ ============ NET ASSETS CONSIST OF: Paid in capital $ 155,569,086 $ 66,270,905 $ 2,879,894 $ 3,308,729 $ 46,318,627 Accumulated undistributed net investment income (loss) 3,449,304 323,622 1,885 (23,194) (1,584,511) Accumulated net realized gain (loss) 5,603,460 780,604 (1,008,470) (347,283) (2,837,157) Net unrealized appreciation (depreciation) (1,284,623) 2,180,977 (284,788) (30,256) (3,027,985) ------------- ------------ ------------ ------------ ------------ NET ASSETS $ 163,337,227 $ 69,556,108 $ 1,588,521 $ 2,907,996 $ 38,868,974 ============= ============ ============ ============ ============ BRINSON CLASS I: Net assets $ 156,130,350 $ 49,306,265 $ 894,745 $ 2,321,788 $ 37,822,458 ============= ============ ============ ============ ============ Shares outstanding 13,959,105 4,618,708 154,271 254,779 4,413,759 ============= ============ ============ ============ ============ Net asset value, offering and redemption price per share $ 11.18 $ 10.68 $ 5.80 $ 9.11 $ 8.57 ============= ============ ============ ============ ============ BRINSON CLASS N: Net assets $ 237,090 $ 302,224 $ 579 $ 926 $ 2,522 ============= ============ ============ ============ ============ Shares outstanding 21,353 28,473 100 102 292 ============= ============ ============ ============ ============ Net asset value, offering and redemption price per share $ 11.10 $ 10.61 $ 5.79 $ 9.08 $ 8.64 ============= ============ ============ ============ ============ UBS INVESTMENT FUNDS CLASS: Net assets $ 6,969,787 $ 19,947,619 $ 693,197 $ 585,282 $ 1,043,994 ============= ============ ============ ============ ============ Shares outstanding 632,365 1,892,319 120,896 64,862 122,083 ============= ============ ============ ============ ============ Net asset value, offering and redemption price per share $ 11.02 $ 10.54 $ 5.73 $ 9.02 $ 8.55 ============= ============ ============ ============ ============
See accompanying notes to financial statements. 86
U.S. U.S. U.S. BALANCED U.S. EQUITY LARGE CAP LARGE CAP FUND FUND EQUITY FUND GROWTH FUND - ------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 24,626,851 $ 109,446,718 $ 2,955,524 $ 8,586,012 Affiliated issuers 1,514,779 3,732,834 -- -- Foreign currency, at cost -- -- -- -- Investments of cash collateral received for securities loaned, at cost -- -- -- -- -------------- -------------- ------------- -------------- $ 26,141,630 $ 113,179,552 $ 2,955,524 $ 8,586,012 ============== ============== ============= ============== Investments, at value: Unaffiliated issuers $ 25,303,415 $ 135,307,356 $ 3,115,421 $ 6,880,195 Affiliated issuers 1,514,779 3,732,834 -- -- Foreign currency, at value -- -- -- -- Investments of cash collateral received for securities loaned, at value -- -- -- -- Cash -- -- -- -- Receivables: Investment securities sold 277,322 496,470 7,311 -- Due from Advisor -- -- 18,124 -- Dividends 10,336 106,939 3,029 2,217 Interest 203,530 19,306 76 629 Fund shares sold 33,404 248,739 42,488 1,518 Variation margin -- 14,100 -- -- Other assets -- -- -- -- -------------- -------------- ------------- -------------- TOTAL ASSETS 27,342,786 139,925,744 3,186,449 6,884,559 -------------- -------------- ------------- -------------- LIABILITIES: Payables: Securities loaned -- -- -- -- Investment securities purchased 189,190 443,883 8,768 59,354 Investment advisory fees 12,673 83,318 -- 882 Fund shares redeemed 30,662 359,991 3,455 11,383 Variation margin 4,613 -- -- -- Due to custodian bank 23,325 -- -- -- Accrued expenses 57,379 109,172 44,555 59,433 Net unrealized depreciation on forward foreign currency contracts -- -- -- -- -------------- -------------- ------------- -------------- TOTAL LIABILITIES 317,842 996,364 56,778 131,052 -------------- -------------- ------------- -------------- NET ASSETS $ 27,024,944 $ 138,929,380 $ 3,129,671 $ 6,753,507 ============== ============== ============= ============== NET ASSETS CONSIST OF: Paid in capital $ 27,476,227 $ 114,261,816 $ 9,036,160 $ 8,999,526 Accumulated undistributed net investment income (loss) 209,168 348,525 13,535 -- Accumulated net realized gain (loss) (1,350,493) (1,570,915) (6,079,921) (540,202) Net unrealized appreciation (depreciation) 690,042 25,889,954 159,897 (1,705,817) -------------- -------------- ------------- -------------- NET ASSETS $ 27,024,944 $ 138,929,380 $ 3,129,671 $ 6,753,507 ============== ============== ============= ============== BRINSON CLASS I: Net assets $ 25,719,098 $ 125,996,511 $ 2,859,383 $ 3,298,586 ============== ============== ============= ============== Shares outstanding 2,732,021 7,840,671 349,574 367,039 ============== ============== ============= ============== Net asset value, offering and redemption price per share $ 9.41 $ 16.07 $ 8.18 $ 8.99 ============== ============== ============= ============== BRINSON CLASS N: Net assets $ 1,257 $ 7,066,724 $ 20,334 $ 943 ============== ============== ============= ============== Shares outstanding 134 442,393 2,468 106 ============== ============== ============= ============== Net asset value, offering and redemption price per share $ 9.38 $ 15.97 $ 8.24 $ 8.90 ============== ============== ============= ============== UBS INVESTMENT FUNDS CLASS: Net assets $ 1,304,589 $ 5,866,145 $ 249,954 $ 3,453,978 ============== ============== ============= ============== Shares outstanding 139,772 364,841 30,827 394,409 ============== ============== ============= ============== Net asset value, offering and redemption price per share $ 9.33 $ 16.08 $ 8.11 $ 8.76 ============== ============== ============= ============== U.S. SMALL CAP U.S. BOND HIGH YIELD INTERNATIONAL GROWTH FUND FUND FUND EQUITY FUND - ------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 36,362,505 $ 64,077,130 $ 58,518,728 $ 145,493,311 Affiliated issuers 2,810,748 35,070 69,394 34,810,488 Foreign currency, at cost -- -- -- 4,266,649 Investments of cash collateral received for securities loaned, at cost -- -- -- 15,553,849 -------------- -------------- -------------- --------------- $ 39,173,253 $ 64,112,200 $ 58,588,122 $ 200,124,297 ============== ============== ============== =============== Investments, at value: Unaffiliated issuers $ 43,354,988 $ 64,020,222 $ 54,500,403 $ 163,435,178 Affiliated issuers 2,810,748 35,070 69,394 34,810,488 Foreign currency, at value -- -- -- 4,238,056 Investments of cash collateral received for securities loaned, at value -- -- -- 15,553,849 Cash -- -- -- 803 Receivables: Investment securities sold 1,085,103 13,852,775 690,375 3,734,607 Due from Advisor -- -- -- -- Dividends 5,317 -- -- 334,637 Interest 9,116 1,627,587 1,344,925 81,062 Fund shares sold 1,814 653,248 108,602 1,781,118 Variation margin -- -- -- -- Other assets -- -- -- 11,512 -------------- -------------- -------------- --------------- TOTAL ASSETS 47,267,086 80,188,902 56,713,699 223,981,310 -------------- -------------- -------------- --------------- LIABILITIES: Payables: Securities loaned -- -- -- 15,553,849 Investment securities purchased 803,086 3,230,273 147,765 2,509,430 Investment advisory fees 31,775 20,263 20,519 126,539 Fund shares redeemed 13,688 764,391 4,700 7,034,847 Variation margin -- -- -- -- Due to custodian bank -- 10,284,801 -- -- Accrued expenses 23,777 494,600 52,149 99,289 Net unrealized depreciation on forward foreign currency contracts -- -- -- 1,818,457 -------------- -------------- -------------- --------------- TOTAL LIABILITIES 872,326 14,794,328 225,133 27,142,411 -------------- -------------- -------------- --------------- NET ASSETS $ 46,394,760 $ 65,394,574 $ 56,488,566 $ 196,838,899 ============== ============== ============== =============== NET ASSETS CONSIST OF: Paid in capital $ 37,733,627 $ 68,047,903 $ 68,065,237 $ 161,368,936 Accumulated undistributed net investment income (loss) -- 1,231,051 1,891,428 1,834,880 Accumulated net realized gain (loss) 1,668,650 (3,827,472) (9,449,774) 17,578,355 Net unrealized appreciation (depreciation) 6,992,483 (56,908) (4,018,325) 16,056,728 -------------- -------------- -------------- --------------- NET ASSETS $ 46,394,760 $ 65,394,574 $ 56,488,566 $ 196,838,899 ============== ============== ============== =============== BRINSON CLASS I: Net assets $ 44,057,264 $ 62,513,551 $ 54,559,659 $ 192,407,814 ============== ============== ============== =============== Shares outstanding 3,713,336 6,038,954 6,910,214 18,080,581 ============== ============== ============== =============== Net asset value, offering and redemption price per share $ 11.86 $ 10.35 $ 7.90 $ 10.64 ============== ============== ============== =============== BRINSON CLASS N: Net assets $ 1,635 $ 123,354 $ 1,000 $ 301,116 ============== ============== ============== =============== Shares outstanding 139 11,937 127 28,385 ============== ============== ============== =============== Net asset value, offering and redemption price per share $ 11.76 $ 10.33 $ 7.87 $ 10.61 ============== ============== ============== =============== UBS INVESTMENT FUNDS CLASS: Net assets $ 2,335,861 $ 2,757,669 $ 1,927,907 $ 4,129,969 ============== ============== ============== =============== Shares outstanding 201,599 267,813 244,678 397,255 ============== ============== ============== =============== Net asset value, offering and redemption price per share $ 11.59 $ 10.30 $ 7.88 $ 10.40 ============== ============== ============== ===============
See accompanying notes to financial statements. 87 STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2001
GLOBAL GLOBAL GLOBAL GLOBAL EQUITY TECHNOLOGY BIOTECH GLOBAL BOND FUND FUND FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 1,683,032 $ 1,230,176 $ 2,288 $ 2,014 $ 3,178 Interest 3,969,676 135,614 4,818 5,953 1,922,753 Securities lending-net 194,406 -- -- -- -- Foreign tax withheld (80,138) (61,786) -- (114) (4,057) ------------ ------------ ------------ ---------- ------------ TOTAL INCOME 5,766,976 1,304,004 7,106 7,853 1,921,874 ------------ ------------ ------------ ---------- ------------ EXPENSES: Advisory 1,629,697 516,271 25,043 23,776 290,895 Administration 142,118 -- -- -- -- Professional 111,618 55,733 19,203 15,834 44,748 Printing 96,028 62,170 1,573 1,255 23,986 Distribution 51,781 176,988 9,966 4,146 7,880 Custodian 47,137 19,327 281 245 14,367 Registration 34,675 33,215 25,044 26,829 31,820 Other 71,895 37,881 10,968 11,778 29,430 ------------ ------------ ------------ ---------- ------------ TOTAL OPERATING EXPENSES 2,184,949 901,585 92,078 83,863 443,126 ------------ ------------ ------------ ---------- ------------ Expenses waived by Advisor -- (72,994) (54,478) (52,816) (84,285) Earnings credits (1,303) (6,354) -- -- (1,761) ------------ ------------ ------------ ---------- ------------ NET OPERATING EXPENSES 2,183,646 822,237 37,600 31,047 357,080 Interest expense 16,622 -- -- -- -- ------------ ------------ ------------ ---------- ------------ NET INVESTMENT INCOME (LOSS) 3,566,708 481,767 (30,494) (23,194) 1,564,794 ------------ ------------ ------------ ---------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments 6,450,269 3,016,026 (1,007,036) (315,487) 162,703 Futures contracts 7,256,131 -- -- -- -- Foreign currency transactions (4,972,830) 57,055 -- (10,035) (2,910,809) ------------ ------------ ------------ ---------- ------------ Net realized gain (loss) 8,733,570 3,073,081 (1,007,036) (325,522) (2,748,106) ------------ ------------ ------------ ---------- ------------ Change in net unrealized appreciation or depreciation on: Investments and foreign currency (1,742,512) (6,087,412) (331,524) (130,460) (195,090) Futures contracts (534,354) -- -- -- -- Forward contracts (2,244,517) (426,654) -- -- (318,619) Translation of other assets and liabilities denominated in foreign currency 19,122 (16,393) -- (3) (58,840) ------------ ------------ ------------ ---------- ------------ Change in net unrealized appreciation or depreciation (4,502,261) (6,530,459) (331,524) (130,463) (572,549) ------------ ------------ ------------ ---------- ------------ Net realized and unrealized gain (loss) 4,231,309 (3,457,378) (1,338,560) (455,985) (3,320,655) ------------ ------------ ------------ ---------- ------------ Net increase (decrease) in net assets resulting from operations $ 7,798,017 $ (2,975,611) $ (1,369,054) $ (479,179) $ (1,755,861) ============ ============ ============ ========== ============
See accompanying notes to financial statements. 88
U.S. U.S. U.S. BALANCED U.S. EQUITY LARGE CAP LARGE CAP FUND FUND EQUITY FUND GROWTH FUND - ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: Dividends $ 94,417 $ 1,969,178 $ 93,376 $ 43,162 Interest 596,609 326,257 31,488 20,691 Securities lending-net -- -- -- -- Foreign tax withheld -- -- -- -- ----------- -------------- ----------- ----------- TOTAL INCOME 691,026 2,295,435 124,864 63,853 ----------- -------------- ----------- ----------- EXPENSES: Advisory 113,210 1,050,438 48,938 65,657 Administration -- -- -- -- Professional 31,108 62,462 39,997 11,893 Printing 705 153,268 16,709 6,868 Distribution 6,362 59,512 1,254 39,613 Custodian 473 3,729 681 261 Registration 28,181 29,087 24,254 27,092 Other 13,266 69,848 11,698 14,041 ----------- -------------- ----------- ----------- TOTAL OPERATING EXPENSES 193,305 1,428,344 143,531 165,425 ----------- -------------- ----------- ----------- Expenses waived by Advisor (55,432) (175,110) (86,264) (50,978) Earnings credits (69) -- -- -- ----------- -------------- ----------- ----------- NET OPERATING EXPENSES 137,804 1,253,234 57,267 114,447 Interest expense -- -- -- -- ----------- -------------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 553,222 1,042,201 67,597 (50,594) ----------- -------------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments 521,945 12,408,324 116,335 (249,878) Futures contracts 333,616 (472,868) (109,459) 17,119 Foreign currency transactions -- -- -- -- ----------- -------------- ----------- ----------- Net realized gain (loss) 855,561 11,935,456 6,876 (232,759) ----------- -------------- ----------- ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency 774,625 3,138,968 1,153,845 (3,255,387) Futures contracts (111,230) 33,738 7,896 1,821 Forward contracts -- -- -- -- Translation of other assets and liabilities denominated in foreign currency -- -- -- -- ----------- -------------- ----------- ----------- Change in net unrealized appreciation or depreciation 663,395 3,172,706 1,161,741 (3,253,566) ----------- -------------- ----------- ----------- Net realized and unrealized gain (loss) 1,518,956 15,108,162 1,168,617 (3,486,325) ----------- -------------- ----------- ----------- Net increase (decrease) in net assets resulting from operations $ 2,072,178 $ 16,150,363 $ 1,236,214 $(3,536,919) =========== ============== =========== =========== U.S. SMALL CAP U.S. BOND HIGH YIELD INTERNATIONAL GROWTH FUND FUND FUND EQUITY FUND - ----------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 88,933 $ -- $ -- $ 5,954,076 Interest 220,763 4,413,949 5,703,323 703,421 Securities lending-net -- -- -- 114,502 Foreign tax withheld -- -- -- (492,321) ------------ ----------- ------------ ------------- TOTAL INCOME 309,696 4,413,949 5,703,323 6,279,678 ------------ ----------- ------------ ------------- EXPENSES: Advisory 507,842 321,255 317,198 2,413,368 Administration -- -- -- 82,105 Professional 22,717 38,699 44,413 128,668 Printing 40,094 48,786 38,450 148,870 Distribution 25,891 17,369 18,100 40,438 Custodian 1,456 1,607 3,822 183,201 Registration 27,904 31,468 32,974 53,211 Other 25,625 27,789 23,811 92,983 ------------ ----------- ------------ ------------- TOTAL OPERATING EXPENSES 651,529 486,973 478,768 3,142,844 ------------ ----------- ------------ ------------- Expenses waived by Advisor (42,110) (83,670) (89,950) (14,630) Earnings credits -- -- -- (72,200) ------------ ----------- ------------ ------------- NET OPERATING EXPENSES 609,419 403,303 388,818 3,056,014 Interest expense -- 1,980 9,485 88,426 ------------ ----------- ------------ ------------- NET INVESTMENT INCOME (LOSS) (299,723) 4,008,666 5,305,020 3,135,238 ------------ ----------- ------------ ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments 3,225,926 119,289 (5,794,063) 24,492,863 Futures contracts -- -- -- -- Foreign currency transactions -- -- -- (215,950) ------------ ----------- ------------ ------------- Net realized gain (loss) 3,225,926 119,289 (5,794,063) 24,276,913 ------------ ----------- ------------ ------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency (9,250,074) 2,228,358 (487,323) (76,216,428) Futures contracts -- -- -- -- Forward contracts -- -- -- (235,547) Translation of other assets and liabilities denominated in foreign currency -- -- -- (24,272) ------------ ----------- ------------ ------------- Change in net unrealized appreciation or depreciation (9,250,074) 2,228,358 (487,323) (76,476,247) ------------ ----------- ------------ ------------- Net realized and unrealized gain (loss) (6,024,148) 2,347,647 (6,281,386) (52,199,334) ------------ ----------- ------------ ------------- Net increase (decrease) in net assets resulting from operations $ (6,323,871) $ 6,356,313 $ (976,366) $ (49,064,096) ============ =========== ============ =============
See accompanying notes to financial statements. 89 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2001
GLOBAL FUND --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 7,798,017 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Net realized and unrealized gain on investments (8,358,970) Increase in receivable for investment securities sold (1,560,605) Decrease in dividends and interest receivable 629,938 Increase in other assets (357,862) Decrease in payable for securities purchased (504,172) Decrease in payable for investment advisory fee (86,502) Increase in accrued expenses 2,479,053 Increase in variation margin (209,789) Net accretion of discount (1,543,369) Purchases of investments (416,569,151) Proceeds from sales of investments 570,090,962 Net realized gain on futures contracts 7,256,131 Net realized loss on foreign currency transactions (4,972,830) Change in net unrealized appreciation or depreciation on futures contracts (534,354) Change in net unrealized appreciation or depreciation on other assets and liabilities 19,122 Net increase in foreign currency (247,167) --------------- Net cash provided by operating activities 153,328,452 --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net capital shares transactions (133,835,111) Net decrease from securities lending (17,138,878) Dividends and capital gain distributions paid (2,354,296) --------------- Net cash used for financing activities (153,328,285) --------------- Net increase in cash 167 CASH AT BEGINNING OF YEAR -- --------------- CASH AT END OF YEAR $ 167 ===============
See accompanying notes to financial statements. 90 This page intentionally left blank. 91 STATEMENTS OF CHANGES IN NET ASSETS
GLOBAL FUND GLOBAL EQUITY FUND ------------------------------- ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 3,566,708 $ 7,094,949 $ 481,767 $ 162,257 Net realized gain (loss) 8,733,570 8,976,951 3,073,081 8,474,282 Change in net unrealized appreciation or depreciation (4,502,261) (21,444,707) (6,530,459) (7,646,954) -------------- -------------- ------------- -------------- Net increase (decrease) in net assets from operations 7,798,017 (5,372,807) (2,975,611) 989,585 -------------- -------------- ------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income -- (4,971,880) (79,603) (229,745) Distributions from and in excess of net realized gains (9,702,495) (14,468,448) (4,104,552) (3,607,561) -------------- -------------- ------------- -------------- Total Brinson Class I distributions (9,702,495) (19,440,328) (4,184,155) (3,837,306) -------------- -------------- ------------- -------------- Brinson Class N: Distributions from and in excess of net investment income -- (18,729) (11,410) (986) Distributions from and in excess of net realized gains (11,340) (59,854) (2,498,356) (19,859) -------------- -------------- ------------- -------------- Total Brinson Class N distributions (11,340) (78,583) (2,509,766) (20,845) -------------- -------------- ------------- -------------- UBS Investment Funds Class: Distributions from and in excess of net investment income -- (181,202) (444) (77,666) Distributions from and in excess of net realized gains (459,422) (720,519) (34,788) (3,756,176) -------------- -------------- ------------- -------------- Total UBS Investment Funds Class distributions (459,422) (901,721) (35,232) (3,833,842) -------------- -------------- ------------- -------------- Decrease in net assets from distributions (10,173,257) (20,420,632) (6,729,153) (7,691,993) -------------- -------------- ------------- -------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 148,059,955 378,057,007 95,186,592 31,965,448 Shares issued on reinvestment of distributions 7,392,619 17,592,753 2,877,959 3,143,195 Shares redeemed (281,289,752) (556,236,057) (83,354,000) (33,431,209) -------------- -------------- ------------- -------------- Total Brinson Class I transactions (125,837,178) (160,586,297) 14,710,551 1,677,434 -------------- -------------- ------------- -------------- Brinson Class N: Shares sold 40,708 85,811 100,000 -- Shares issued on reinvestment of distributions 3,867 68,059 24,164 20,844 Shares redeemed (7,231) (1,405,050) -- (1,198) -------------- -------------- ------------- -------------- Total Brinson Class N transactions 37,344 (1,251,180) 124,164 19,646 -------------- -------------- ------------- -------------- UBS Investment Funds Class: Shares sold 432,323 385,340 429,378 3,098,087 Shares issued on reinvestment of distributions 422,475 863,834 2,289,192 3,281,750 Shares redeemed. (2,556,696) (13,120,314) (7,155,696) (18,879,433) -------------- -------------- ------------- -------------- Total UBS Investment Funds Class transactions (1,701,898) (11,871,140) (4,437,126) (12,499,596) -------------- -------------- ------------- -------------- Net increase (decrease) in net assets resulting from capital share transactions (127,501,732) (173,708,617) 10,397,589 (10,802,516) -------------- -------------- ------------- -------------- INCREASE (DECREASE) IN NET ASSETS (129,876,972) (199,502,056) 692,825 (17,504,924) NET ASSETS, BEGINNING OF PERIOD 293,214,199 492,716,255 68,863,283 86,368,207 -------------- -------------- ------------- -------------- NET ASSETS, END OF PERIOD $ 163,337,227 $ 293,214,199 $ 69,556,108 $ 68,863,283 ============== ============== ============= ============== Net assets include accumulated undistributed net investment income (loss) $ 3,449,304 $ -- $ 323,622 $ -- ============== ============== ============= ============== SHARE TRANSACTIONS: Brinson Class I: Shares sold 13,170,765 33,602,761 8,564,732 2,577,643 Shares issued on reinvestment of distributions 682,606 1,590,665 257,001 257,009 Shares redeemed (25,149,917) (48,975,929) (7,452,703) (2,721,479) -------------- -------------- ------------- -------------- Total Brinson Class I transactions (11,296,546) (13,782,503) 1,369,030 113,173 -------------- -------------- ------------- -------------- Brinson Class N: Shares sold 3,612 7,386 8,271 -- Shares issued on reinvestment of distributions 360 6,165 2,169 1,707 Shares redeemed (654) (127,026) -- (98) -------------- -------------- ------------- -------------- Total Brinson Class N transactions 3,318 (113,475) 10,440 1,609 -------------- -------------- ------------- -------------- UBS Investment Funds Class: Shares sold 39,462 33,492 37,501 243,526 Shares issued on reinvestment of distributions 39,447 78,388 206,290 268,566 Shares redeemed (232,932) (1,170,744) (615,995) (1,533,100) -------------- -------------- ------------- -------------- Total UBS Investment Funds Class transactions (154,023) (1,058,864) (372,204) (1,021,008) -------------- -------------- ------------- --------------
See accompanying notes to financial statements. 92
GLOBAL GLOBAL TECHNOLOGY FUND BIOTECH FUND ---------------------------- --------------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000* 2001 2000** - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (30,494) $ (464) $ (23,194) $ (235) Net realized gain (loss) (1,007,036) 1,624 (325,522) 7,976 Change in net unrealized appreciation or depreciation (331,524) 46,736 (130,463) 100,207 ------------ ----------- ------------ ----------- Net increase (decrease) in net assets from operations (1,369,054) 47,896 (479,179) 107,948 ------------ ----------- ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (785) -- (22,723) -- ------------ ----------- ------------ ----------- Total Brinson Class I distributions (785) -- (22,723) -- ------------ ----------- ------------ ----------- Brinson Class N: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (1) -- (21) -- ------------ ----------- ------------ ----------- Total Brinson Class N distributions (1) -- (21) -- ------------ ----------- ------------ ----------- UBS Investment Funds Class: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (2,011) -- (6,758) -- ------------ ----------- ------------ ----------- Total UBS Investment Funds Class distributions (2,011) -- (6,758) -- ------------ ----------- ------------ ----------- Decrease in net assets from distributions (2,797) -- (29,502) -- ------------ ----------- ------------ ----------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 2,477,857 208,013 2,694,167 87,520 Shares issued on reinvestment of distributions 785 -- 22,723 -- Shares redeemed (1,252,617) -- (708,088) -- ------------ ----------- ------------ ----------- Total Brinson Class I transactions 1,226,025 208,013 2,008,802 87,520 ------------ ----------- ------------ ----------- Brinson Class N: Shares sold -- -- -- -- Shares issued on reinvestment of distributions 1 -- 21 -- Shares redeemed -- -- -- -- ------------ ----------- ------------ ----------- Total Brinson Class N transactions 1 -- 21 -- ------------ ----------- ------------ ----------- UBS Investment Funds Class: Shares sold 1,557,760 320,741 625,322 144,960 Shares issued on reinvestment of distributions 1,400 -- 6,744 -- Shares redeemed. (403,474) -- (64,650) -- ------------ ----------- ------------ ----------- Total UBS Investment Funds Class transactions 1,155,686 320,741 567,416 144,960 ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from capital share transactions 2,381,712 528,754 2,576,239 232,480 ------------ ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS 1,009,861 576,650 2,067,558 340,428 NET ASSETS, BEGINNING OF PERIOD 578,660 2,010 840,438 500,010 ------------ ----------- ------------ ----------- NET ASSETS, END OF PERIOD $ 1,588,521 $ 578,660 $ 2,907,996 $ 840,438 ============ =========== ============ =========== Net assets include accumulated undistributed net investment income (loss) $ 1,885 $ -- $ (23,194) $ -- ============ =========== ============ =========== SHARE TRANSACTIONS: Brinson Class I: Shares sold 284,244 19,785 262,496 7,462 Shares issued on reinvestment of distributions 96 -- 1,959 -- Shares redeemed (149,855) -- (66,939) -- ------------ ----------- ------------ ----------- Total Brinson Class I transactions 134,485 19,785 197,516 7,462 ------------ ----------- ------------ ----------- Brinson Class N: Shares sold -- -- -- -- Shares issued on reinvestment of distributions -- -- 2 -- Shares redeemed -- -- -- -- ------------ ----------- ------------ ----------- Total Brinson Class N transactions -- -- 2 -- ------------ ----------- ------------ ----------- UBS Investment Funds Class: Shares sold 151,006 31,255 57,847 12,140 Shares issued on reinvestment of distributions 173 -- 584 -- Shares redeemed (61,638) -- (5,809) -- ------------ ----------- ------------ ----------- Total UBS Investment Funds Class transactions 89,541 31,255 52,622 12,140 ------------ ----------- ------------ ----------- GLOBAL BOND FUND U.S. BALANCED FUND ----------------------------- ----------------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 1,564,794 $ 3,527,958 $ 553,222 $ 846,394 Net realized gain (loss) (2,748,106) (8,536,498) 855,561 (2,003,095) Change in net unrealized appreciation or depreciation (572,549) 3,924,705 663,395 (2,296,787) ------------ ------------ ------------- ------------- Net increase (decrease) in net assets from operations (1,755,861) (1,083,835) 2,072,178 (3,453,488) ------------ ------------ ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income (331,177) (1,118,342) (476,453) (815,029) Distributions from and in excess of net realized gains -- (82,557) -- (225,248) ------------ ------------ ------------- ------------- Total Brinson Class I distributions (331,177) (1,200,899) (476,453) (1,040,277) ------------ ------------ ------------- ------------- Brinson Class N: Distributions from and in excess of net investment income (11) -- (47) (31) Distributions from and in excess of net realized gains -- (1) -- (7) ------------ ------------ ------------- ------------- Total Brinson Class N distributions (11) (1) (47) (38) ------------ ------------ ------------- ------------- UBS Investment Funds Class: Distributions from and in excess of net investment income (4,729) (43,991) (46,051) (37,261) Distributions from and in excess of net realized gains -- (4,026) -- (10,418) ------------ ------------ ------------- ------------- Total UBS Investment Funds Class distributions (4,729) (48,017) (46,051) (47,679) ------------ ------------ ------------- ------------- Decrease in net assets from distributions (335,917) (1,248,917) (522,551) (1,087,994) ------------ ------------ ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 14,479,767 25,700,559 19,666,739 11,292,015 Shares issued on reinvestment of distributions 242,044 1,040,704 423,258 1,016,548 Shares redeemed (18,340,807) (73,843,125) (6,941,267) (34,385,369) ------------ ------------ ------------- ------------- Total Brinson Class I transactions (3,618,996) (47,101,862) 13,148,730 (22,076,806) ------------ ------------ ------------- ------------- Brinson Class N: Shares sold 2,672 1,912 -- -- Shares issued on reinvestment of distributions -- 1 47 38 Shares redeemed (849) (1,106,396) -- (96) ------------ ------------ ------------- ------------- Total Brinson Class N transactions 1,823 (1,104,483) 47 (58) ------------ ------------ ------------- ------------- UBS Investment Funds Class: Shares sold 156,620 366,668 200,000 147,189 Shares issued on reinvestment of distributions 3,519 38,350 45,287 41,422 Shares redeemed. (1,163,438) (2,630,429) (293,128) (588,978) ------------ ------------ ------------- ------------- Total UBS Investment Funds Class transactions (1,003,299) (2,225,411) (47,841) (400,367) ------------ ------------ ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (4,620,472) (50,431,756) 13,100,936 (22,477,231) ------------ ------------ ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (6,712,250) (52,764,508) 14,650,563 (27,018,713) NET ASSETS, BEGINNING OF PERIOD 45,581,224 98,345,732 12,374,381 39,393,094 ------------ ------------ ------------- ------------- NET ASSETS, END OF PERIOD $ 38,868,974 $ 45,581,224 $ 27,024,944 $ 12,374,381 ============ ============ ============= ============= Net assets include accumulated undistributed net investment income (loss) $ (1,584,511) $ 335,909 $ 209,168 $ 178,497 ============ ============ ============= ============= SHARE TRANSACTIONS: Brinson Class I: Shares sold 1,633,523 2,835,427 2,159,047 1,279,917 Shares issued on reinvestment of distributions 27,821 113,243 47,172 119,214 Shares redeemed (2,073,452) (8,240,771) (770,837) (4,112,896) ------------ ------------ ------------- ------------- Total Brinson Class I transactions (412,108) (5,292,101) 1,435,382 (2,713,765) ------------ ------------ ------------- ------------- Brinson Class N: Shares sold 302 210 -- -- Shares issued on reinvestment of distributions -- -- 5 4 Shares redeemed (96) (118,588) -- (10) ------------ ------------ ------------- ------------- Total Brinson Class N transactions 206 (118,378) 5 (6) ------------ ------------ ------------- ------------- UBS Investment Funds Class: Shares sold 17,470 40,841 22,321 16,973 Shares issued on reinvestment of distributions 404 4,177 5,101 4,883 Shares redeemed (131,350) (292,883) (32,886) (68,563) ------------ ------------ ------------- ------------- Total UBS Investment Funds Class transactions (113,476) (247,865) (5,464) (46,707) ------------ ------------ ------------- -------------
* Commencement of investment operations was May 26, 2000. ** Commencement of investment operations was June 2, 2000. See accompanying notes to financial statements. 93 STATEMENTS OF CHANGES IN NET ASSETS
U.S. LARGE CAP U.S EQUITY FUND EQUITY FUND ------------------------------- ----------------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 1,042,201 $ 4,244,116 $ 67,597 $ 268,499 Net realized gain (loss) 11,935,456 11,296,209 6,876 (4,170,075) Change in net unrealized appreciation or depreciation 3,172,706 (145,732,574) 1,161,741 (3,197,720) -------------- -------------- -------------- ------------- Net increase (decrease) in net assets from operations 16,150,363 (130,192,249) 1,236,214 (7,099,296) -------------- -------------- -------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income (2,310,563) (1,354,937) (134,581) (260,485) Distributions from and in excess of net realized gains (9,027,121) (46,078,258) -- (2,112,124) -------------- -------------- -------------- ------------- Total Brinson Class I distributions (11,337,684) (47,433,195) (134,581) (2,372,609) -------------- -------------- -------------- ------------- Brinson Class N: Distributions from and in excess of net investment income (136,402) (12,687) (360) (3,358) Distributions from and in excess of net realized gains (626,092) (773,650) -- (67,254) -------------- -------------- -------------- ------------- Total Brinson Class N distributions (762,494) (786,337) (360) (70,612) -------------- -------------- -------------- ------------- UBS Investment Funds Class: Distributions from and in excess of net investment income (43,540) -- (5,236) (854) Distributions from and in excess of net realized gains (471,358) (5,191,383) -- (6,269) -------------- -------------- -------------- ------------- Total UBS Investment Funds Class distributions (514,898) (5,191,383) (5,236) (7,123) -------------- -------------- -------------- ------------- Decrease in net assets from distributions (12,615,076) (53,410,915) (140,177) (2,450,344) -------------- -------------- -------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 59,473,592 122,681,959 3,121,581 20,498,512 Shares issued on reinvestment of distributions 10,320,990 46,438,462 109,658 1,882,863 Shares redeemed (114,970,733) (549,708,344) (17,203,370) (20,540,523) -------------- -------------- -------------- ------------- Total Brinson Class I transactions (45,176,151) (380,587,923) (13,972,131) 1,840,852 -------------- -------------- -------------- ------------- Brinson Class N: Shares sold 4,531,959 6,190,218 -- 23,427 Shares issued on reinvestment of distributions 11,498 39,033 360 70,611 Shares redeemed (4,650,226) (4,286,205) (17,725) (3,038,230) -------------- -------------- -------------- ------------- Total Brinson Class N transactions (106,769) 1,943,046 (17,365) (2,944,192) -------------- -------------- -------------- ------------- UBS Investment Funds Class: Shares sold 708,297 885,348 77,826 184,571 Shares issued on reinvestment of distributions 400,452 1,938,596 5,215 7,113 Shares redeemed (7,995,833) (43,062,328) (10,746) (17,573) -------------- -------------- -------------- ------------- Total UBS Investment Funds Class transactions (6,887,084) (40,238,384) 72,295 174,111 -------------- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (52,170,004) (418,883,261) (13,917,201) (929,229) -------------- -------------- -------------- ------------- INCREASE (DECREASE) IN NET ASSETS (48,634,717) (602,486,425) (12,821,164) (10,478,869) NET ASSETS, BEGINNING OF PERIOD 187,564,097 790,050,522 15,950,835 26,429,704 -------------- -------------- -------------- ------------- NET ASSETS, END OF PERIOD $ 138,929,380 $ 187,564,097 $ 3,129,671 $ 15,950,835 ============== ============== ============== ============= Net assets include accumulated undistributed net investment income $ 348,525 $ 4,239,650 $ 13,535 $ -- ============== ============== ============== ============= SHARE TRANSACTIONS: Brinson Class I: Shares sold 3,772,869 7,021,481 393,712 2,464,710 Shares issued on reinvestment of distributions 663,992 2,790,780 13,686 231,926 Shares redeemed (7,044,608) (32,569,089) (2,164,332) (2,626,652) -------------- -------------- -------------- ------------- Total Brinson Class I transactions (2,607,747) (22,756,828) (1,756,934) 69,984 -------------- -------------- -------------- ------------- Brinson Class N: Shares sold 282,952 355,231 -- 952 Shares issued on reinvestment of distributions 744 2,356 45 8,644 Shares redeemed. (291,478) (260,962) (2,239) (342,514) -------------- -------------- -------------- ------------- Total Brinson Class N transactions (7,782) 96,625 (2,194) (332,918) -------------- -------------- -------------- ------------- UBS Investment Funds Class: Shares sold 50,554 44,999 10,314 22,263 Shares issued on reinvestment of distributions 25,701 116,996 655 884 Shares redeemed (495,064) (2,612,305) (1,342) (2,479) -------------- -------------- -------------- ------------- Total UBS Investment Funds Class transactions (418,809) (2,450,310) 9,627 20,668 -------------- -------------- -------------- -------------
See accompanying notes to financial statements. 94
U.S. LARGE CAP U.S. SMALL CAP GROWTH FUND GROWTH FUND ------------------------------ ----------------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (50,594) $ (40,633) $ (299,723) $ (283,391) Net realized gain (loss) (232,759) 1,307,241 3,225,926 14,184,229 Change in net unrealized appreciation or depreciation (3,253,566) 495,586 (9,250,074) 12,102,689 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (3,536,919) 1,762,194 (6,323,871) 26,003,527 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (582,801) (226,909) (8,814,507) -- ------------- ------------- ------------- ------------- Total Brinson Class I distributions (582,801) (226,909) (8,814,507) -- ------------- ------------- ------------- ------------- Brinson Class N: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (173) (80) (322) -- ------------- ------------- ------------- ------------- Total Brinson Class N distributions (173) (80) (322) -- ------------- ------------- ------------- ------------- UBS Investment Funds Class: Distributions from and in excess of net investment income -- -- -- -- Distributions from and in excess of net realized gains (798,399) (376,172) (707,080) -- ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions (798,399) (376,172) (707,080) -- ------------- ------------- ------------- ------------- Decrease in net assets from distributions (1,381,373) (603,161) (9,521,909) -- ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 890,634 4,048,482 26,763,500 29,765,229 Shares issued on reinvestment of distributions 557,236 217,384 7,277,911 -- Shares redeemed (1,863,805) (1,701,110) (26,330,137) (38,928,066) ------------- ------------- ------------- ------------- Total Brinson Class I transactions (415,935) 2,564,756 7,711,274 (9,162,837) ------------- ------------- ------------- ------------- Brinson Class N: Shares sold -- -- -- -- Shares issued on reinvestment of distributions 173 80 322 -- Shares redeemed -- -- -- -- ------------- ------------- ------------- ------------- Total Brinson Class N transactions 173 80 322 -- ------------- ------------- ------------- ------------- UBS Investment Funds Class: Shares sold 528,204 5,084,906 1,781,567 2,415,418 Shares issued on reinvestment of distributions 751,964 376,172 676,885 -- Shares redeemed (2,261,874) (4,200,579) (2,577,682) (459,900) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (981,706) 1,260,499 (119,230) 1,955,518 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (1,397,468) 3,825,335 7,592,366 (7,207,319) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (6,315,760) 4,984,368 (8,253,414) 18,796,208 NET ASSETS, BEGINNING OF PERIOD 13,069,267 8,084,899 54,648,174 35,851,966 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 6,753,507 $ 13,069,267 $ 46,394,760 $ 54,648,174 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income $ -- $ -- $ -- $ -- ============= ============= ============= ============= SHARE TRANSACTIONS: Brinson Class I: Shares sold 78,058 276,574 2,035,204 2,526,985 Shares issued on reinvestment of distributions 48,752 15,996 577,154 -- Shares redeemed (144,949) (119,266) (2,031,226) (3,231,011) ------------- ------------- ------------- ------------- Total Brinson Class I transactions (18,139) 173,304 581,132 (704,026) ------------- ------------- ------------- ------------- Brinson Class N: Shares sold -- -- -- -- Shares issued on reinvestment of distributions 16 6 25 -- Shares redeemed. -- -- -- -- ------------- ------------- ------------- ------------- Total Brinson Class N transactions 16 6 25 -- ------------- ------------- ------------- ------------- UBS Investment Funds Class: Shares sold 36,350 363,462 110,194 193,136 Shares issued on reinvestment of distributions 67,020 27,906 54,734 -- Shares redeemed (185,074) (286,213) (191,641) (34,814) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (81,704) 105,155 (26,713) 158,322 ------------- ------------- ------------- ------------- U.S. BOND FUND -------------------------------------- YEAR ENDED JUNE 30, 2001 2000 - ---------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 4,008,666 $ 5,580,977 Net realized gain (loss) 119,289 (2,898,299) Change in net unrealized appreciation or depreciation 2,228,358 218,149 ------------- ------------- Net increase (decrease) in net assets from operations 6,356,313 2,900,827 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from and in excess of net investment income (3,998,606) (4,678,165) Distributions from and in excess of net realized gains -- -- ------------- ------------- Total Brinson Class I distributions (3,998,606) (4,678,165) ------------- ------------- Brinson Class N: Distributions from and in excess of net investment income (992) (71) Distributions from and in excess of net realized gains -- -- ------------- ------------- Total Brinson Class N distributions (992) (71) ------------- ------------- UBS Investment Funds Class: Distributions from and in excess of net investment income (195,266) (374,662) Distributions from and in excess of net realized gains -- -- ------------- ------------- Total UBS Investment Funds Class distributions (195,266) (374,662) ------------- ------------- Decrease in net assets from distributions (4,194,864) (5,052,898) ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 132,318,463 70,180,980 Shares issued on reinvestment of distributions 3,591,657 4,552,534 Shares redeemed (133,516,288) (106,749,956) ------------- ------------- Total Brinson Class I transactions 2,393,832 (32,016,442) ------------- ------------- Brinson Class N: Shares sold 123,495 -- Shares issued on reinvestment of distributions 812 71 Shares redeemed (1,422) -- ------------- ------------- Total Brinson Class N transactions 122,885 71 ------------- ------------- UBS Investment Funds Class: Shares sold 1,507,160 1,492,544 Shares issued on reinvestment of distributions 170,655 310,529 Shares redeemed (2,609,246) (4,032,375) ------------- ------------- Total UBS Investment Funds Class transactions (931,431) (2,229,302) ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 1,585,286 (34,245,673) ------------- ------------- INCREASE (DECREASE) IN NET ASSETS 3,746,735 (36,397,744) NET ASSETS, BEGINNING OF PERIOD 61,647,839 98,045,583 ------------- ------------- NET ASSETS, END OF PERIOD $ 65,394,574 $ 61,647,839 ============= ============= Net assets include accumulated undistributed net investment income $ 1,231,051 $ 1,417,249 ============= ============= SHARE TRANSACTIONS: Brinson Class I: Shares sold 12,781,260 6,936,124 Shares issued on reinvestment of distributions 357,842 461,106 Shares redeemed (12,913,593) (10,539,673) ------------- ------------- Total Brinson Class I transactions 225,509 (3,142,443) ------------- ------------- Brinson Class N: Shares sold 11,879 -- Shares issued on reinvestment of distributions 78 7 Shares redeemed. (137) -- ------------- ------------- Total Brinson Class N transactions 11,820 7 ------------- ------------- UBS Investment Funds Class: Shares sold 147,598 146,887 Shares issued on reinvestment of distributions 17,092 31,628 Shares redeemed (251,733) (411,376) ------------- ------------- Total UBS Investment Funds Class transactions (87,043) (232,861) ------------- -------------
See accompanying notes to financial statements. 95 STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL HIGH YIELD FUND EQUITY FUND ------------------------------- ---------------------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2001 2000 2001 2000 -------------- -------------- ---------------- --------------- OPERATIONS: Net investment income $ 5,305,020 $ 5,274,444 $ 3,135,238 $ 4,208,084 Net realized gain (loss) (5,794,063) (3,589,002) 24,276,913 41,417,003 Change in net unrealized appreciation or depreciation (487,323) (1,386,533) (76,476,247) 15,371,143 ------------- ------------- --------------- --------------- Net increase (decrease) in net assets from operations (976,366) 298,909 (49,064,096) 60,996,230 ------------- ------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Brinson Class I: Distributions from net investment income (4,665,809) (3,997,434) (663,935) (2,727,974) Distributions from net realized gains -- (384,243) (19,686,583) (5,283,152) ------------- ------------- --------------- --------------- Total Brinson Class I distributions (4,665,809) (4,381,677) (20,350,518) (8,011,126) ------------- ------------- --------------- --------------- Brinson Class N: Distributions from net investment income (124) (74) (4) -- Distributions from net realized gains -- (7) (68) (13) ------------- ------------- --------------- --------------- Total Brinson Class N distributions (124) (81) (72) (13) ------------- ------------- --------------- --------------- UBS Investment Funds Class: Distributions from net investment income (242,944) (315,019) (10,203) (9,831) Distributions from net realized gains -- (40,374) (307,666) (74,353) ------------- ------------- --------------- --------------- Total UBS Investment Funds Class distributions (242,944) (355,393) (317,869) (84,184) ------------- ------------- --------------- --------------- Decrease in net assets from distributions (4,908,877) (4,737,151) (20,668,459) (8,095,323) ------------- ------------- --------------- --------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Brinson Class I: Shares sold 167,750,223 75,679,660 1,068,404,548 1,049,008,547 Shares issued on reinvestment of distributions 4,317,900 3,943,554 18,935,302 7,708,071 Shares redeemed (162,774,488) (84,709,596) (1,238,414,502) (1,187,345,955) ------------- ------------- --------------- --------------- Total Brinson Class I transactions 9,293,635 (5,086,382) (151,074,652) (130,629,337) ------------- ------------- --------------- --------------- Brinson Class N: Shares sold -- -- 310,000 373 Shares issued on reinvestment of distributions 123 81 72 13 Shares redeemed -- -- (9,495) (14,890) ------------- ------------- --------------- --------------- Total Brinson Class N transactions 123 81 300,577 (14,504) ------------- ------------- --------------- --------------- UBS Investment Funds Class: Shares sold 259,383 484,592 1,238,857 1,895,728 Shares issued on reinvestment of distributions 117,825 274,449 316,754 81,724 Shares redeemed (306,671) (4,562,131) (2,014,627) (3,506,844) ------------- ------------- --------------- --------------- Total UBS Investment Funds Class transactions 70,537 (3,803,090) (459,016) (1,529,392) ------------- ------------- --------------- --------------- Net increase (decrease) in net assets resulting from capital share transactions 9,364,295 (8,889,391) (151,233,091) (132,173,233) ------------- ------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS 3,479,052 (13,327,633) (220,965,646) (79,272,326) NET ASSETS, BEGINNING OF PERIOD 53,009,514 66,337,147 417,804,545 497,076,871 ------------- ------------- --------------- --------------- NET ASSETS, END OF PERIOD $ 56,488,566 $ 53,009,514 $ 196,838,899 $ 417,804,545 ============= ============= =============== =============== Net assets include accumulated undistributed net investment income $ 1,891,428 $ 1,495,285 $ 3,594,471 $ -- ============= ============= =============== =============== SHARE TRANSACTIONS: Brinson Class I: Shares sold 19,421,713 8,072,340 89,527,090 80,245,905 Shares issued on reinvestment of distributions 545,121 416,227 1,613,416 575,659 Shares redeemed (18,586,243) (8,988,112) (103,415,131) (90,203,629) ------------- ------------- --------------- --------------- Total Brinson Class I transactions 1,380,591 (499,545) (12,274,625) (9,382,065) ------------- ------------- --------------- --------------- Brinson Class N: Shares sold -- -- 29,190 30 Shares issued on reinvestment of distributions 15 9 6 1 Shares redeemed -- -- (900) (1,174) ------------- ------------- --------------- --------------- Total Brinson Class N transactions 15 9 28,296 (1,143) ------------- ------------- --------------- --------------- UBS Investment Funds Class: Shares sold 28,962 50,427 104,031 146,606 Shares issued on reinvestment of distributions 14,868 28,713 27,545 6,167 Shares redeemed (35,174) (475,553) (169,681) (269,636) ------------- ------------- --------------- --------------- Total UBS Investment Funds Class transactions 8,656 (396,413) (38,105) (116,863) ------------- ------------- --------------- ---------------
See accompanying notes to financial statements. 96 GLOBAL FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, --------------------------------------------------------------- BRINSON CLASS I 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.25 $ 12.02 $ 12.77 $ 13.13 $ 12.22 --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.25 0.23* 0.30 0.37 0.38 Net realized and unrealized gain (loss) 0.31 (0.30) 0.25 0.62 1.79 --------- --------- --------- --------- --------- Total income (loss) from investment operations 0.56 (0.07) 0.55 0.99 2.17 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income -- (0.18) (0.46) (0.65) (0.61) Distributions from net realized gains (0.63) (0.52) (0.84) (0.70) (0.65) --------- --------- --------- --------- --------- Total distributions (0.63) (0.70) (1.30) (1.35) (1.26) --------- --------- --------- --------- --------- Net asset value, end of period $ 11.18 $ 11.25 $ 12.02 $ 12.77 $ 13.13 ========= ========= ========= ========= ========= Total return (non-annualized) 5.20% (0.48)% 4.76% 8.28% 18.79% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 156,130 $ 284,229 $ 469,080 $ 667,745 $ 586,667 Ratio of gross expenses to average net assets 1.05% 0.99% 0.96% 0.94% 0.99% Ratio of net investment income to average net assets 1.77% 1.99% 2.23% 2.70% 3.03% Portfolio turnover rate 115% 98% 105% 88% 150% - ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, --------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.20 $ 11.99 $ 12.75 $ 13.13 --------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.22 0.19* 0.27 0.63 Net realized and unrealized gain (loss) 0.31 (0.30) 0.25 0.32 --------- --------- --------- --------- Total income (loss) from investment operations 0.53 (0.11) 0.52 0.95 --------- --------- --------- --------- Less distributions: Distributions from net investment income -- (0.16) (0.44) (0.63) Distributions from net realized gains (0.63) (0.52) (0.84) (0.70) --------- --------- --------- --------- Total distributions (0.63) (0.68) (1.28) (1.33) --------- --------- --------- --------- Net asset value, end of period $ 11.10 $ 11.20 $ 11.99 $ 12.75 ========= ========= ========= ========= Total return (non-annualized) 4.95% (0.80)% 4.47% 7.90% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 237 $ 202 $ 1,576 $ 1,163 Ratio of gross expenses to average net assets 1.30% 1.24% 1.21% 1.19% Ratio of net investment income to average net assets 1.52% 1.74% 1.98% 2.45% Portfolio turnover rate 115% 98% 105% 88% - ---------------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. 97 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, --------------------------------------------------------------- BRINSON CLASS I 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.47 $ 13.42 $ 12.54 $ 12.76 $ 11.57 --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.09 0.07* 0.14* 0.22 0.16 Net realized and unrealized gain (loss) (0.54) 0.27 1.09 0.78 2.14 --------- --------- --------- --------- --------- Total income (loss) from investment operations (0.45) 0.34 1.23 1.00 2.30 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income (0.02) (0.08) (0.17) (0.17) (0.12) Distributions from net realized gains (1.32) (1.21) (0.18) (1.05) (0.99) --------- --------- --------- --------- --------- Total distributions (1.34) (1.29) (0.35) (1.22) (1.11) --------- --------- --------- --------- --------- Net asset value, end of period $ 10.68 $ 12.47 $ 13.42 $ 12.54 $ 12.76 ========= ========= ========= ========= ========= Total return (non-annualized) (4.07)% 2.69% 10.14% 8.99% 21.26% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 49,306 $ 40,538 $ 42,106 $ 22,724 $ 48,054 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.12% 1.08% 1.05% 1.02% 1.25% After expense reimbursement and earnings credits 1.00% 1.00% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.90% 0.48% 1.05% 1.29% 1.35% After expense reimbursement and earnings credits 1.02% 0.56% 1.10% 1.31% 1.60% Portfolio turnover rate 81% 111% 86% 46% 32% - ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, - --------------------------------------------------------------------------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.44 $ 13.40 $ 12.53 $ 12.76 --------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.07 0.04* 0.10* 0.13 Net realized and unrealized gain (loss) (0.56) 0.27 1.09 0.82 --------- ---------- ---------- ---------- Total income (loss) from investment operations (0.49) 0.31 1.19 0.95 --------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.02) (0.06) (0.14) (0.13) Distributions from net realized gains (1.32) (1.21) (0.18) (1.05) --------- ---------- ---------- ---------- Total distributions (1.34) (1.27) (0.32) (1.18) --------- ---------- ---------- ---------- Net asset value, end of period $ 10.61 $ 12.44 $ 13.40 $ 12.53 ========= ========== ========== ========== Total return (non-annualized) (4.45)% 2.49% 9.80% 8.60% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 302 $ 224 $ 220 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.37% 1.33% 1.30% 1.27% After expense reimbursement and earnings credits 1.25% 1.25% 1.25% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.65% 0.23% 0.80% 1.04% After expense reimbursement and earnings credits 0.77% 0.31% 0.85% 1.06% Portfolio turnover rate 81% 111% 86% 46% - ---------------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements 98 GLOBAL TECHNOLOGY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM MAY 26, 2000* YEAR ENDED TO BRINSON CLASS I JUNE 30, 2001 JUNE 30, 2000 - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.30 $ 10.00 ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (0.08)** -- Net realized and unrealized gain (loss) (5.41) 1.30 ---------- ---------- Total income (loss) from investment operations (5.49) 1.30 ---------- ---------- Less distributions: Distributions from net investment income -- -- Distributions from and in excess of net realized gains (0.01) -- ---------- ---------- Total distributions (0.01) -- ---------- ---------- Net asset value, end of period $ 5.80 $ 11.30 ========== ========== Total return (non-annualized) (48.58)% 13.00% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 895 $ 224 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.60% 13.28%*** After expense reimbursement and earnings credits 1.55% 1.55%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (4.20)% (12.26)%*** After expense reimbursement and earnings credits (1.15)% (0.53)%*** Portfolio turnover rate 221% 14% - --------------------------------------------------------------------------------------------------------------------
PERIOD FROM MAY 26, 2000* YEAR ENDED TO BRINSON CLASS N JUNE 30, 2001 JUNE 30, 2000 - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.30 $ 10.00 ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (0.12)** -- Net realized and unrealized gain (loss) (5.38) 1.30 ---------- ---------- Total income (loss) from investment operations (5.50) 1.30 ---------- ---------- Less distributions: Distributions from net investment income -- -- Distributions from and in excess of net realized gains (0.01) -- ---------- ---------- Total distributions (0.01) -- ---------- ---------- Net asset value, end of period $ 5.79 $ 11.30 ========== ========== Total return (non-annualized) (48.67)% 13.00% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.85% 13.53%*** After expense reimbursement and earnings credits 1.80% 1.80%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (4.45)% (12.51)%*** After expense reimbursement and earnings credits (1.40)% (0.78)%*** Portfolio turnover rate 221% 14% - --------------------------------------------------------------------------------------------------------------------
* Commencement of investment operations. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. See accompanying notes to financial statements. 99 GLOBAL BIOTECH FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM JUNE 2, 2000* YEAR ENDED TO BRINSON CLASS I JUNE 30, 2001 JUNE 30, 2000 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.08 $ 10.00 ------------ ---------- Income (loss) from investment operations: Net investment loss (0.09)** --** Net realized and unrealized gain (loss) (2.67) 2.08 ------------ ---------- Total income (loss) from investment operations (2.76) 2.08 ------------ ---------- Less distributions: Distributions from and in excess of net realized gains (0.21) -- ------------ ---------- Total distributions (0.21) -- ------------ ---------- Net asset value, end of period $ 9.11 $ 12.08 ============ ========== Total return (non-annualized) (23.25)% 20.80% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,322 $ 691 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.86% 10.10%*** After expense reimbursement and earnings credits 1.30% 1.30%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (3.48)% (9.29)%*** After expense reimbursement and earnings credits (0.92)% (0.49)%*** Portfolio turnover rate 205% 19% - ---------------------------------------------------------------------------------------------
PERIOD FROM JUNE 2, 2000* YEAR ENDED TO BRINSON CLASS N JUNE 30, 2001 JUNE 30, 2000 - -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.07 $ 10.00 ----------- --------- Income (loss) from investment operations: Net investment loss (0.12)** (0.01)** Net realized and unrealized gain (loss) (2.66) 2.08 ----------- --------- Total income (loss) from investment operations (2.78) 2.07 ----------- --------- Less distributions: Distributions from and in excess of net realized gains (0.21) -- ----------- --------- Total distributions (0.21) -- ----------- --------- Net asset value, end of period $ 9.08 $ 12.07 =========== ========= Total return (non-annualized) (23.44)% 20.70% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.11% 10.35%*** After expense reimbursement and earnings credits 1.55% 1.55%*** Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (3.73)% (9.54)%*** After expense reimbursement and earnings credits (1.17)% (0.74)%*** Portfolio turnover rate 205% 19% - --------------------------------------------------------------------------------------------------
* Commencement of investment operations. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. See accompanying notes to financial statements. 100 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, - ----------------------------------------------------------------------------------------------------------------------------------- BRINSON CLASS I 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.01 $ 9.18 $ 9.41 $ 9.64 $ 10.04 ---------- ----------- ------------- ------------- ------------- Income (loss) from investment operations: Net investment income 0.36* 0.40* 0.39* 0.43* 0.67 Net realized and unrealized gain (loss) (0.72) (0.43) (0.07) (0.18) 0.08 ---------- ----------- ------------- ------------- ------------- Total income (loss) from investment operations (0.36) (0.03) 0.32 0.25 0.75 ---------- ----------- ------------- ------------- ------------- Less distributions: Distributions from net investment income (0.08) (0.13) (0.47) (0.31) (0.96) Distributions from net realized gains -- (0.01) (0.08) (0.17) (0.19) ---------- ----------- ------------- ------------- ------------- Total distributions (0.08) (0.14) (0.55) (0.48) (1.15) ---------- ----------- ------------- ------------- ------------- Net asset value, end of period $ 8.57 $ 9.01 $ 9.18 $ 9.41 $ 9.64 ========== =========== ============= ============= ============= Total return (non-annualized) (4.02)% (0.34)% 3.13% 2.69% 7.71% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 37,822 $ 43,467 $ 92,832 $ 91,274 $ 54,157 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.12% 1.05% 0.90% 0.96% 1.32% After expense reimbursement and earnings credits 0.90% 0.94%+ N/A 0.90% 0.90% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 3.85% 4.34% 4.05% 4.47% 4.90% After expense reimbursement and earnings credits 4.07% 4.45% N/A 4.53% 5.32% Portfolio turnover rate 165% 87% 138% 151% 235% - -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, - --------------------------------------------------------------------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.09 $ 9.16 $ 9.40 $ 9.64 ------------ --------- ----------- ------- Income (loss) from investment operations: Net investment income 0.33* 0.37* 0.37* 0.42* Net realized and unrealized loss (0.72) (0.43) (0.07) (0.20) ------------ --------- ----------- ------- Total income (loss) from investment operations (0.39) (0.06) 0.30 0.22 ------------ --------- ----------- ------- Less distributions: Distributions from net investment income (0.06) -- (0.46) (0.29) Distributions from net realized gains -- (0.01) (0.08) (0.17) ------------ --------- ----------- ------- Total distributions (0.06) (0.01) (0.54) (0.46) ------------ --------- ----------- ------- Net asset value, end of period $ 8.64 $ 9.09 $ 9.16 $ 9.40 ============ ========= =========== ======= Total return (non-annualized) (4.27)% (0.66)% 2.89% 2.37% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 3 $ 1 $ 1,085 $ 9 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.37% 1.30% 1.15% 1.21% After expense reimbursement and earnings credits 1.15% 1.19%+ N/A 1.15% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 3.60% 4.09% 3.80% 4.22% After expense reimbursement and earnings credits 3.82% 4.20% N/A 4.28% Portfolio turnover rate 165% 87% 138% 151% - ---------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. + The ratio of net operating expenses to average net assets for Class I and Class N was 0.90% and 1.15%, respectively. N/A Not Applicable. See accompanying notes to financial statements. 101 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, - ------------------------------------------------------------------------------------------------------------------------------------ BRINSON CLASS I 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 8.59 $ 9.38 $ 12.24 $ 12.53 $ 11.71 ---------- ----------- ----------- ------------- -------------- Income (loss) from investment operations: Net investment income 0.31 0.26* 0.34* 0.49* 0.47 Net realized and unrealized gain (loss) 0.89 (0.74) 0.18 0.93 1.29 ---------- ----------- ----------- ------------- -------------- Total income (loss) from investment operations 1.20 (0.48) 0.52 1.42 1.76 ---------- ----------- ----------- ------------- -------------- Less distributions: Distributions from net investment income (0.38) (0.25) (0.73) (0.77) (0.40) Distributions from and in excess of net realized gains -- (0.06) (2.65) (0.94) (0.54) ---------- ----------- ----------- ------------- -------------- Total distributions (0.38) (0.31) (3.38) (1.71) (0.94) ---------- ----------- ----------- ------------- -------------- Net asset value, end of period $ 9.41 $ 8.59 $ 9.38 $ 12.24 $ 12.53 ========== =========== =========== ============= ============== Total return (non-annualized) 14.18% (5.07)% 4.74% 12.19% 15.50% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 25,719 $ 11,136 $ 37,603 $ 80,556 $ 282,860 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.14% 1.01% 0.96% 0.81% 0.88% After expense reimbursement and earnings credits 0.80% 0.81%+ 0.80% 0.80% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 3.06% 2.80% 3.00% 3.88% 3.78% After expense reimbursement and earnings credits 3.40% 3.00% 3.16% 3.89% 3.86% Portfolio turnover rate 159% 96% 113% 194% 329% - ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, - ---------------------------------------------------------------------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.57 $ 9.38 $ 12.27 $ 12.53 ---------- -------- ------- -------- Income (loss) from investment operations: Net investment income 0.28 0.23* 0.29* 0.47* Net realized and unrealized gain (loss) 0.89 (0.74) 0.18 0.94 ---------- -------- ------- -------- Total income (loss) from investment operations 1.17 (0.51) 0.47 1.41 ---------- -------- ------- -------- Less distributions: Distributions from net investment income (0.36) (0.24) (0.71) (0.73) Distributions from and in excess of net realized gains -- (0.06) (2.65) (0.94) ---------- -------- ------- -------- Total distributions (0.36) (0.30) (3.36) (1.67) ---------- -------- ------- -------- Net asset value, end of period $ 9.38 $ 8.57 $ 9.38 $ 12.27 ========== ======== ======= ======== Total return (non-annualized) 13.89% (5.39)% 4.17% 12.15% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.39% 1.26% 1.21% 1.06% After expense reimbursement and earnings credits 1.05% 1.06%+ 1.05% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 2.81% 2.55% 2.75% 3.63% After expense reimbursement and earnings credits 3.15% 2.75% 2.91% 3.64% Portfolio turnover rate 159% 96% 113% 194% - ----------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. + The ratio of net operating expenses to average net assets for Class I and Class N was 0.80% and 1.05%, respectively. See accompanying notes to financial statements. 102 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, - ------------------------------------------------------------------------------------------------------------------------------------ BRINSON CLASS I 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 16.07 $ 21.48 $ 19.91 $ 17.64 $ 14.59 ------------ ------------ --------- ------------ ---------- Income (loss) from investment operations: Net investment income 0.12* 0.16* 0.17* 0.19 0.15 Net realized and unrealized gain (loss) 1.57 (3.75) 2.67 3.39 4.27 ------------ ------------ --------- ------------ ---------- Total income (loss) from investment operations 1.69 (3.59) 2.84 3.58 4.42 ------------ ------------ --------- ------------ ---------- Less distributions: Distributions from net investment income (0.34) (0.05) (0.15) (0.18) (0.14) Distributions from net realized gains (1.35) (1.77) (1.12) (1.13) (1.23) ------------ ------------ --------- ------------ ---------- Total distributions (1.69) (1.82) (1.27) (1.31) (1.37) ------------ ------------ --------- ------------ ---------- Net asset value, end of period $ 16.07 $ 16.07 $ 21.48 $ 19.91 $ 17.64 ============ ============ ========= ============ ========== Total return (non-annualized) 10.88% (17.00)% 15.22% 21.48% 31.87% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 125,997 $ 167,870 $ 713,321 $ 605,768 $ 337,949 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.92% 0.84% 0.80% 0.80% 0.89% After expense reimbursement and earnings credits 0.80% 0.80% N/A N/A 0.80% Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits 0.62% 0.89% 0.82% 1.12% 1.06% After expense reimbursement and earnings credits 0.74% 0.93% N/A N/A 1.15% Portfolio turnover rate 54% 55% 48% 42% 43% - ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, - ------------------------------------------------------------------------------------------------------------------------------------ BRINSON CLASS N 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 15.97 $ 21.39 $ 19.88 $ 17.64 ---------- --------- ---------- ------- Income (loss) from investment operations: Net investment income 0.08* 0.13* 0.08* 0.15 Net realized and unrealized gain (loss) 1.56 (3.75) 2.67 3.37 ---------- --------- ---------- ------- Total income (loss) from investment operations 1.64 (3.62) 2.75 3.52 ---------- --------- ---------- ------- Less distributions: Distributions from net investment income (0.29) (0.03) (0.12) (0.15) Distributions from net realized gains (1.35) (1.77) (1.12) (1.13) ---------- --------- ---------- ------- Total distributions (1.64) (1.80) (1.24) (1.28) ---------- --------- ---------- ------- Net asset value, end of period $ 15.97 $ 15.97 $ 21.39 $ 19.88 ========== ========= ========== ======= Total return (non-annualized) 10.63% (17.24)% 14.75% 21.10% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 7,067 $ 7,191 $ 7,563 $ 268 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.17% 1.09% 1.05% 1.05% After expense reimbursement and earnings credits 1.05% 1.05% N/A N/A Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits 0.37% 0.64% 0.57% 0.87% After expense reimbursement and earnings credits 0.49% 0.68% N/A N/A Portfolio turnover rate 54% 55% 48% 42% - ------------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. N/A Not Applicable. See accompanying notes to financial statements. 103 U.S. LARGE CAP EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM YEAR ENDED JUNE 30, APRIL 6, 1998* ----------------------------------------- TO BRINSON CLASS I 2001 2000 1999 JUNE 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 7.48 $ 11.13 $ 9.80 $ 10.00 -------- -------- --------- ------- Income (loss) from investment operations: Net investment income 0.08** 0.09** 0.11** 0.02 Net realized and unrealized gain (loss) 0.82 (2.68) 1.31 (0.20) -------- -------- --------- ------- Total income (loss) from investment operations 0.90 (2.59) 1.42 (0.18) -------- -------- --------- ------- Less distributions: Distributions from and in excess of net investment income (0.20) (0.11) (0.09) (0.02) Distributions from net realized gains -- (0.95) -- -- -------- -------- --------- ------- Total distributions (0.20) (1.06) (0.09) (0.02) -------- -------- --------- ------- Net asset value, end of period $ 8.18 $ 7.48 $ 11.13 $ 9.80 ======== ======== ========= ======= Total return (non-annualized) 12.12% (23.95)% 14.54% (1.83)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,859 $ 15,758 $ 22,668 $ 154 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.03% 1.27% 1.29% 1.59%*** After expense reimbursement and earnings credits 0.80% 0.80% 0.80% 0.80%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (0.25)% 0.70% 0.57% 0.52%*** After expense reimbursement and earnings credits 0.98% 1.17% 1.06% 1.31%*** Portfolio turnover rate 94% 174% 88% 12% - ------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM YEAR ENDED JUNE 30, APRIL 6, 1998* ----------------------------------------- TO BRINSON CLASS N 2001 2000 1999 JUNE 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 7.51 $ 11.13 $ 9.78 $ 10.00 ------------ --------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.06** 0.07** 0.09** 0.02 Net realized and unrealized gain (loss) 0.82 (2.68) 1.31 (0.23) ------------ --------- ---------- ---------- Total income (loss) from investment operations 0.88 (2.61) 1.40 (0.21) ------------ --------- ---------- ---------- Less distributions: Distributions from and in excess of net investment income (0.15) (0.06) (0.05) (0.01) Distributions from net realized gains -- (0.95) -- -- ------------ --------- ---------- ---------- Total distributions (0.15) (1.01) (0.05) (0.01) ------------ --------- ---------- ---------- Net asset value, end of period $ 8.24 $ 7.51 $ 11.13 $ 9.78 ============ ========= ========== ========== Total return (non-annualized) 11.74% (24.12)% 14.40% (2.02)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 20 $ 35 $ 3,756 $ 16,033 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.28% 1.52% 1.54% 1.84%*** After expense reimbursement and earnings credits 1.05% 1.05% 1.05% 1.05%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (0.49)% 0.45% 0.32% 0.27%*** After expense reimbursement and earnings credits 0.74% 0.92% 0.81% 1.06%*** Portfolio turnover rate 94% 174% 88% 12% - ------------------------------------------------------------------------------------------------------------------------------
* Commencement of investment operations. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. See accompanying notes to financial statements. 104 U.S. LARGE CAP GROWTH FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM YEAR ENDED JUNE 30, SIX MONTHS YEAR ENDED OCTOBER 14, 1997(1) ------------------- ENDED DECEMBER 31, TO BRINSON CLASS I 2001 2000 JUNE 30, 1999(3) 1998(2) DECEMBER 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 15.28 $ 13.91 $ 11.84 $ 9.92 $10.00 ------- --------- --------- -------- ------ Income (loss) from investment operations: Net investment income (loss) (0.01) 0.03(4) 0.02 0.06 0.02 Net realized and unrealized gain (loss) (4.37) 2.29 2.05 2.38 (0.08) ------- --------- --------- -------- ------ Total income (loss) from investment operations (4.38) 2.32 2.07 2.44 (0.06) ------- --------- --------- -------- ------ Less distributions: Distributions from net investment income -- -- -- (0.06) (0.02) Distributions from and in excess of net realized gains (1.91) (0.95) -- (0.46) -- ------- --------- --------- -------- ------ Total distributions (1.91) (0.95) -- (0.52) (0.02) ------- --------- --------- -------- ------ Net asset value, end of period $ 8.99 $ 15.28 $ 13.91 $ 11.84 $ 9.92 ======= ========= ========= ======== ====== Total return (non-annualized) (31.33)% 17.52% 17.48% 24.90% (0.55)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 3,299 $ 5,885 $ 2,947 $ 4,147 $4,137 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.34% 1.86% 2.38%(5) 2.76% 8.54%(5) After expense reimbursement and earnings credits 0.80% 0.80% 0.80%(5) 0.99% 1.00%(5) Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (0.66)% (0.97)% (1.26)%(5) (1.40)% (6.19)%(5) After expense reimbursement and earnings credits (0.12)% 0.09% 0.32%(5) 0.37% 1.35%(5) Portfolio turnover rate 56% 86% 51% N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, PERIOD FROM ---------------------------------- DECEMBER 31, 1998(1) BRINSON CLASS N 2001 2000 JUNE 30, 1999 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.20 $ 13.88 $ 11.84 ------------ ------------ ------------ Income (loss) from investment operations: Net investment income (loss) (0.07) (0.02)(4) (0.01) Net realized and unrealized gain (loss) (4.32) 2.29 2.05 ------------ ------------ ------------ Total income (loss) from investment operations (4.39) 2.27 2.04 ------------ ------------ ------------ Less distributions: Distributions from and in excess of net realized gains (1.91) (0.95) -- ------------ ------------ ------------ Total distributions (1.91) (0.95) -- ------------ ------------ ------------ Net asset value, end of period $ 8.90 $ 15.20 $ 13.88 ============ ============ ============ Total return (non-annualized) (31.59)% 17.18% 17.23% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.59% 2.11% 2.63%(5) After expense reimbursement and earnings credits 1.05% 1.05% 1.05%(5) Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (0.91)% (1.22)% (1.51)%(5) After expense reimbursement and earnings credits (0.37)% (0.16)% 0.07%(5) Portfolio turnover rate 56% 86% 51% - -----------------------------------------------------------------------------------------------------------------------------
(1) Commencement of investment operations. (2) Reflects 10 for 1 share split effective December 9, 1998. (3) Reflects the Fund's change in fiscal year end from December 31 to June 30. (4) The net investment income per share data was determined by using average shares outstanding throughout the period. (5) Annualized. N/A = Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 105 U.S. SMALL CAP GROWTH FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM YEAR ENDED JUNE 30, SIX MONTHS YEAR ENDED SEPTEMBER 30, ----------------------- ENDED DECEMBER 31, 1997(1) TO BRINSON CLASS I 2001 2000 JUNE 30, 1999(3) 1998(2) DECEMBER 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 16.27 $ 9.18 $ 8.80 $ 9.44 $ 10.00 -------- -------- -------- -------- ---------- Income (loss) from investment operations: Net investment loss (0.07) (0.03)(4) (0.02) (0.02) -- Net realized and unrealized gain (loss) (1.51) 7.12 0.40 (0.57) (0.56) -------- -------- -------- -------- ---------- Total income (loss) from investment operations (1.58) 7.09 0.38 (0.59) (0.56) -------- -------- -------- -------- ---------- Less distributions: Distributions from net realized gains (2.83) -- -- (0.05) -- -------- -------- -------- -------- ---------- Total distributions (2.83) -- -- (0.05) -- -------- -------- -------- -------- ---------- Net asset value, end of period $ 11.86 $ 16.27 $ 9.18 $ 8.80 $ 9.44 ======== ======== ======== ======== ========== Total return (non-annualized) (10.74)% 77.23% 4.32% (6.70)% (5.62)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 44,057 $ 50,975 $ 35,211 $ 22,607 $ 11,954 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.23% 1.31% 1.32%(5) 1.69% 3.63%(5) After expense reimbursement and earnings credits 1.15% 1.15% 1.15%(5) 1.20% 1.20%(5) Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (0.62)% (0.76)% (0.62)%(5) (0.76)% (2.53)%(5) After expense reimbursement and earnings credits (0.54)% (0.60)% (0.45)%(5) (0.27)% (0.10)%(5) Portfolio turnover rate 93% 104% 71% N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM YEAR ENDED JUNE 30, DECEMBER 31, 1998(1) ---------------------------------- TO BRINSON CLASS N 2001 2000 JUNE 30, 1999 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.20 $ 9.16 $ 8.80 ------------ ------------ ------------- Income (loss) from investment operations: Net investment loss (0.09) (0.08)(4) (0.04) Net realized and unrealized gain (loss) (1.52) 7.12 0.40 ------------ ------------ ------------- Total income (loss) from investment operations (1.61) 7.04 0.36 ------------ ------------ ------------- Less distributions: Distributions from net realized gains (2.83) -- -- ------------ ------------ ------------- Total distributions (2.83) -- -- ------------ ------------ ------------- Net asset value, end of period $ 11.76 $ 16.20 $ 9.16 ============ ============ ============= Total return (non-annualized) (11.00)% 76.86% 4.09% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2 $ 2 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.48% 1.56% 1.57%(5) After expense reimbursement and earnings credits 1.40% 1.40% 1.40%(5) Ratio of net investment loss to average net assets: Before expense reimbursement and earnings credits (0.87)% (1.01)% (0.87)%(5) After expense reimbursement and earnings credits (0.79)% (0.85)% (0.70)%(5) Portfolio turnover rate 93% 104% 71% - ----------------------------------------------------------------------------------------------------------------------------
(1) Commencement of investment operations. (2) Reflects 10 for 1 share split effective December 9, 1998. (3) Reflects the Fund's change in fiscal year end from December 31 to June 30. (4) The net investment income per share data was determined by using average shares outstanding throughout the period. (5) Annualized. N/A = Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 106 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, - ------------------------------------------------------------------------------------------------------------------------------------ BRINSON CLASS I 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.00 $ 10.28 $ 10.58 $ 10.24 $ 9.93 ---------- ------------- ------------- ------------- ------------- Income from investment operations: Net investment income 0.64* 0.62* 0.58* 0.53 0.51* Net realized and unrealized gain (loss) 0.42 (0.25) (0.26) 0.53 0.32 ---------- ------------- ------------- ------------- ------------- Total income from investment operations 1.06 0.37 0.32 1.06 0.83 ---------- ------------- ------------- ------------- ------------- Less distributions: Distributions from net investment income (0.71) (0.65) (0.47) (0.58) (0.52) Distributions from net realized gains -- -- (0.15) (0.14) -- ---------- ------------- ------------- ------------- ------------- Total distributions (0.71) (0.65) (0.62) (0.72) (0.52) ---------- ------------- ------------- ------------- ------------- Net asset value, end of period $ 10.35 $ 10.00 $ 10.28 $ 10.58 $ 10.24 ========== ============= ============= ============= ============= Total return (non-annualized) 10.86% 3.74% 2.97% 10.60% 8.45% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 62,514 $ 58,121 $ 92,030 $ 38,874 $ 22,421 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.73% 0.67% 0.61% 0.84% 1.65% After expense reimbursement and earnings credits 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 6.11% 6.12% 5.42% 5.61% 5.14% After expense reimbursement and earnings credits 6.24% 6.19% 5.43% 5.85% 6.19% Portfolio turnover rate 314% 170% 260% 198% 410% - ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, - --------------------------------------------------------------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.99 $ 10.30 $ 10.58 $ 10.24 ------------ ----------- ---------- -------- Income from investment operations: Net investment income 0.62* 0.58* 0.57* 0.61 Net realized and unrealized gain (loss) 0.41 (0.25) (0.26) 0.42 ------------ ----------- ---------- -------- Total income from investment operations 1.03 0.33 0.31 1.03 ------------ ----------- ---------- -------- Less distributions: Distributions from net investment income (0.69) (0.64) (0.44) (0.55) Distributions from net realized gains -- -- (0.15) (0.14) ------------ ----------- ---------- -------- Total distributions (0.69) (0.64) (0.59) (0.69) ------------ ----------- ---------- -------- Net asset value, end of period $ 10.33 $ 9.99 $ 10.30 $ 10.58 ============ =========== ========== ======== Total return (non-annualized) 10.56% 3.29% 2.88% 10.30% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 123 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.98% 0.92% 0.86% 1.09% After expense reimbursement and earnings credits 0.85% 0.85% 0.85% 0.85% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 5.86% 5.87% 5.17% 5.36% After expense reimbursement and earnings credits 5.99% 5.94% 5.18% 5.60% Portfolio turnover rate 314% 170% 260% 198% - ---------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. See accompanying notes to financial statements. 107 HIGH YIELD FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
PERIOD FROM SEPTEMBER 30, 1997(1) YEAR ENDED JUNE 30, SIX MONTHS YEAR ENDED TO ------------------------- ENDED DECEMBER 31, DECEMBER 31, BRINSON CLASS I 2001 2000 JUNE 30, 1999(3) 1998(2) 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 9.19 $ 9.96 $ 9.98 $ 10.05 $ 10.00 --------- --------- --------- ------------- ------------ Income (loss) from investment operations: Net investment income 0.88(4) 0.91(4) 0.44(4) 7.30 0.18 Net realized and unrealized gain (loss) (1.08) (0.90) (0.15) 0.02 0.05 --------- --------- --------- ------------- ------------ Total income (loss) from investment operations (0.20) 0.01 0.29 7.32 0.23 --------- --------- --------- ------------- ------------ Less distributions: Distributions from net investment income (1.09) (0.71) (0.31) (7.33) (0.18) Distributions from net realized gains -- (0.07) -- (0.06) -- --------- --------- --------- ------------- ------------ Total distributions (1.09) (0.78) (0.31) (7.39) (0.18) --------- --------- --------- ------------- ------------ Net asset value, end of period $ 7.90 $ 9.19 $ 9.96 $ 9.98 $ 10.05 ========= ========= ========= ============= ============ Total return (non-annualized) (1.83)% 0.02% 2.91% 7.75% 2.34% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 54,560 $ 50,845 $ 60,044 $ 34,900 $ 7,861 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.89% 0.86% 0.83%(5) 1.59% 4.98%(5) After expense reimbursement and earnings credits 0.72%+ 0.70% 0.70%(5) 0.89% 0.90%(5) Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 9.90% 9.31% 8.54%(5) 7.38% 3.15%(5) After expense reimbursement and earnings credits 10.07% 9.47% 8.67%(5) 8.08% 7.23%(5) Portfolio turnover rate 87% 73% 77% N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM YEAR ENDED JUNE 30, DECEMBER 31, 1998(1) ---------------------------- TO BRINSON CLASS N 2001 2000 JUNE 30, 1999 - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.18 $ 9.95 $ 9.98 ------ ------ ------ Income (loss) from investment operations: Net investment income 0.85(4) 0.90(4) 0.42(4) Net realized and unrealized loss (1.08) (0.90) (0.15) ------ ------ ------ Total income (loss) from investment operations (0.23) -- 0.27 ------ ------ ------ Less distributions: Distributions from net investment income (1.08) (0.70) (0.30) Distributions from net realized gains -- (0.07) -- ------ ------ ------ Total distributions (1.08) (0.77) (0.30) ------ ------ ------ Net asset value, end of period $ 7.87 $ 9.18 $ 9.95 ====== ====== ====== Total return (non-annualized) (2.28)% (0.13)% 2.71% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.14% 1.11% 1.08%(5) After expense reimbursement and earnings credits 0.97%+ 0.95% 0.95%(5) Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 9.65% 9.06% 8.29%(5) After expense reimbursement and earnings credits 9.82% 9.22% 8.42%(5) Portfolio turnover rate 87% 73% 77% - ----------------------------------------------------------------------------------------------------------------------
(1) Commencement of investment operations. (2) Reflects 10 for 1 share split effective December 9, 1998. (3) Reflects the Fund's change in fiscal year end from December 31 to June 30. (4) The net investment income per share data was determined by using average shares outstanding throughout the period. (5) Annualized. + The ratio of net operating expenses to average net assets for Class I and Class N was 0.70% and 0.95%, respectively. N/A= Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 108 INTERNATIONAL EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, ------------------------------------------------------------------- BRINSON CLASS I 2001 2000 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.57 $ 12.34 $ 12.15 $ 12.59 $ 11.17 --------- ---------- ------------ ------------ ------------ Income (loss) from investment operations: Net investment income 0.13* 0.11* 0.16 0.18 0.18 Net realized and unrealized gain (loss) (2.25) 1.33 0.27 0.30 1.97 --------- ---------- ------------ ------------ ------------ Total income (loss) from investment operations (2.12) 1.44 0.43 0.48 2.15 --------- ---------- ------------ ------------ ------------ Less distributions: Distributions from net investment income (0.04) (0.07) (0.12) (0.18) (0.17) Distributions from net realized gains (0.77) (0.14) (0.12) (0.74) (0.56) --------- ---------- ------------ ------------ ------------ Total distributions (0.81) (0.21) (0.24) (0.92) (0.73) --------- ---------- ------------ ------------ ------------ Net asset value, end of period $ 10.64 $ 13.57 $ 12.34 $ 12.15 $ 12.59 ========= ========== ============ ============ ============ Total return (non-annualized) (16.15)% 11.76% 3.65% 4.78% 20.27% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 192,408 $ 411,985 $ 490,322 $ 439,329 $ 420,855 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.06% 1.00%+ 0.99% 1.00% 1.00% After expense reimbursement and earnings credits 1.03%++ N/A N/A N/A N/A Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 1.02% 0.89% 1.35% 1.52% 1.83% After expense reimbursement and earnings credits 1.05% N/A N/A N/A N/A Portfolio turnover rate 62% 59% 74% 49% 25% - ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, --------------------------------------------------------------------- BRINSON CLASS N 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.57 $ 12.30 $ 12.14 $ 12.59 -------------- -------------- -------------- -------------- Income (loss) from investment operations: Net investment income --* 0.08* 0.12 0.16 Net realized and unrealized gain (loss) (2.15) 1.33 0.27 0.29 -------------- -------------- -------------- -------------- Total income (loss) from investment operations (2.15) 1.41 0.39 0.45 -------------- -------------- -------------- -------------- Less distributions: Distributions from net investment income (0.04) -- (0.11) (0.16) Distributions from net realized gains (0.77) (0.14) (0.12) (0.74) -------------- -------------- -------------- -------------- Total distributions (0.81) (0.14) (0.23) (0.90) -------------- -------------- -------------- -------------- Net asset value, end of period $ 10.61 $ 13.57 $ 12.30 $ 12.14 ============== ============== ============== ============== Total return (non-annualized) (16.37)% 11.51% 3.30% 4.51% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 301 $ 1 $ 15 $ 11 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.31% 1.25%+ 1.24% 1.25% After expense reimbursement and earnings credits 1.28%++ N/A N/A N/A Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.77% 0.64% 1.10% 1.27% After expense reimbursement and earnings credits 0.80% N/A N/A N/A Portfolio turnover rate 62% 59% 74% 49% - -----------------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. + The ratio of net operating expenses to average net assets for Class I and Class N was 0.99% and 1.24%, respectively. ++ The ratio of net operating expenses to average net assets for Class I and Class N was 1.00% and 1.25%, respectively. N/A = Not Applicable. See accompanying notes to financial statements. 109 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of thirteen series: Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund and International Equity Fund (formerly Global (Ex-U.S.) Equity Fund); (each a "Fund" and collectively, the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class I, Brinson Class N and UBS Investment Funds Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The financial highlights of the UBS Investment Funds Class are presented separately. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. A. INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are valued at the most recent bid price. Investments in affiliated investment companies are valued at the daily closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate as of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statements of operations. C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. INVESTMENT INCOME: Interest income, which includes the amortization of premiums and accretion of discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 2001, therefore, no federal income tax provision was required. At June 30, 2001, the following funds had capital loss carryforwards for federal income tax purposes available to offset future net capital gains through the indicated expiration dates:
EXPIRATION DATE EXPIRATION DATE FUND JUNE 30, 2008 JUNE 30, 2009 - ---- --------------- --------------- Global Technology $ -- $ 66,391 Global Bond Fund 1,109,176 1,591,264 U.S. Balanced Fund -- 1,202,043 U.S. Bond Fund 1,664,910 1,639,169 U.S. Large Cap Equity Fund -- 5,942,698 High Yield Fund 861,570 4,844,981
110 Post-October losses are deemed to arise on the first business day of a portfolio's next taxable year. For the year ended June 30, 2001, the following funds incurred, and elected to defer, net capital losses of the following:
NET CAPITAL NET CURRENCY FUND LOSSES LOSSES - ---- ----------- ------------ Global Technology Fund $ 565,667 $ -- Global Biotech Fund 140,175 4,458 Global Bond Fund 17,609 1,950,561 U.S. Large Cap Growth Fund 495,803 -- U.S. Bond Fund 378,190 -- High Yield Fund 3,603,317 --
F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class I will not incur any of the distribution expenses of the Brinson Class N nor will the UBS Investment Funds Class. H. EARNINGS CREDITS: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances are used to offset a portion of the Fund's expenses. These amounts are reflected in the statements of operations. I. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. With respect to Global Technology Fund, Global Biotech Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, UBS Asset Management (New York), Inc. (the "Sub-Advisor") is responsible for managing a portion of these Funds pursuant to a Sub-Investment Advisory Agreement (the "Sub-Advisory Agreement") with the Advisor. The Sub-Advisor receives 0.10% from the Advisor under the Sub-Advisory Agreement for providing services to the Advisor. The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. The Advisor may recapture any amounts waived or reimbursed with respect to the Global Technology Fund and Global Biotech Fund subject to the following conditions: (1) the Advisor must request reimbursement within five years from the date on which the waiver and/or reimbursement was made, and (2) the Fund must be able to reimburse the Advisor and remain within the operating expense limits noted in the following chart. No amounts were recaptured by the Advisor during the year ended June 30, 2001. Investment advisory fees and other transactions for the year ended June 30, 2001, were as follows: 111
UBS BRINSON BRINSON INVESTMENT ADVISORY CLASS I CLASS N FUNDS CLASS ADVISORY FEES FUND FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED - ---- -------- ----------- ----------- ----------- --------- ----------- Global Fund 0.80% 1.10% 1.35% 1.75% $1,629,697 $ -- Global Equity Fund 0.80 1.00 1.25 1.76 516,271 72,994 Global Technology Fund 1.40 1.55 1.80 2.55 25,043 54,478 Global Biotech Fund 1.15 1.30 1.55 2.30 23,776 52,816 Global Bond Fund 0.75 0.90 1.15 1.39 290,895 84,285 U.S. Balanced Fund 0.70 0.80 1.05 1.30 113,210 55,432 U.S. Equity Fund 0.70 0.80 1.05 1.32 1,050,438 175,110 U.S. Large Cap Equity Fund 0.70 0.80 1.05 1.32 48,938 86,264 U.S. Large Cap Growth Fund 0.70 0.80 1.05 1.57 65,657 50,978 U.S. Small Cap Growth Fund 1.00 1.15 1.40 1.92 507,842 42,110 U.S. Bond Fund 0.50 0.60 0.85 1.07 321,255 83,670 High Yield Fund 0.60 0.70 0.95 1.55 317,198 89,950 International Equity Fund 0.80 1.00 1.25 1.84 2,413,368 14,630
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 2001, were as follows:
FUND FEES PAID - ---- --------- Global Fund $ 4,802 Global Equity Fund 4,380 Global Technology Fund 4,172 Global Biotech Fund 4,172 Global Bond Fund 5,046 U.S. Balanced Fund 2,605 U.S. Equity Fund 6,600 U.S. Large Cap Equity Fund 2,794 U.S. Large Cap Growth Fund 4,641 U.S. Small Cap Growth Fund 4,950 U.S. Bond Fund 5,589 High Yield Fund 4,380 International Equity Fund 11,530
The Global Fund invests in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 19.51% of the Fund's net assets at June 30, 2001. Amounts relating to those investments at June 30, 2001 and for the year then ended, were as follows:
NET CHANGE IN SALES REALIZED NET UNREALIZED AFFILIATES PURCHASES PROCEEDS GAIN/(LOSS) GAIN/(LOSS) VALUE - ---------- ------------ ------------- ----------- -------------- ---------- Brinson U.S. Small Cap Equity Fund $ 2,000,000 $ 7,000,000 $2,423,300 $ (1,243,311) $4,320,042 Brinson High Yield Fund 3,700,000 12,300,000 484,242 (356,783) 7,530,852 Brinson Emerging Markets Equity Fund 3,500,000 4,700,000 (161,662) (1,194,513) 7,386,994 Brinson Emerging Markets Debt Fund -- 5,200,000 1,919,637 (2,078,775) 5,884,177 Brinson Supplementary Trust Fund 203,827,960 198,921,641 -- -- 6,737,178
112 The following Funds invest in shares of the Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is an investment company managed by the Advisor. The Supplementary Trust is offered as a cash management option only to mutual funds and other accounts managed by the Advisor. The Supplementary Trust pays no management fees. Distributions received from the Supplementary Trust are reflected as interest income in the statements of operations. Amounts relating to those investments at June 30, 2001 and for the year ended June 30, 2001, were as follows:
SALES INTEREST % OF FUND PURCHASES PROCEEDS INCOME VALUE NET ASSETS - ---- ------------ ------------ -------- ----------- ---------- Global Fund $203,827,960 $198,921,641 $594,897 $ 6,737,178 4.12% Global Equity Fund 96,921,549 93,391,204 115,294 5,984,286 8.60 Global Bond Fund 31,103,518 35,430,408 100,847 1,092,304 2.81 U.S. Balanced Fund 23,219,205 22,328,117 93,498 1,514,779 5.60 U.S. Equity Fund 96,223,538 93,340,118 268,905 3,732,834 2.68 U.S. Large Cap Equity Fund 1,804,337 3,020,319 10,429 -- -- U.S. Small Cap Growth Fund 41,336,811 41,029,704 220,763 2,810,748 6.06 U.S. Bond Fund 154,788,203 154,970,179 133,055 35,070 0.05 High Yield Fund 114,745,799 124,861,601 193,657 69,394 0.12 International Equity Fund 840,656,462 810,975,331 685,259 34,810,488 17.68
3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 2001, excluding short-term investments, were as follows:
COST OF PROCEEDS FROM FUND PURCHASES SALES - ---- ------------ ------------- Global Fund $221,602,431 $355,464,246 Global Equity Fund 51,462,817 50,196,558 Global Technology Fund 6,172,715 3,796,306 Global Biotech Fund 6,637,599 4,106,582 Global Bond Fund 60,840,758 65,207,376 U.S. Balanced Fund 35,723,500 23,313,778 U.S. Equity Fund 78,327,216 146,277,187 U.S. Large Cap Equity Fund 5,878,948 18,851,836 U.S. Large Cap Growth Fund 5,054,628 6,614,102 U.S. Small Cap Growth Fund 44,768,648 45,317,686 U.S. Bond Fund 196,814,811 194,245,333 High Yield Fund 56,281,732 42,467,454 International Equity Fund 177,652,996 367,493,476
113 4. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statements of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts during the year ended June 30, 2001, was the Funds' custodian. 5. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio or equitize cash. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statements of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING The Global Fund and International Equity Fund loaned securities to certain brokers, with the Funds' custodian acting as the Funds' lending agent. The Funds earned negotiated lenders' fees, which are included in securities lending-net in the statements of operations. The Funds receive cash and/or securities as collateral against the loaned securities. The cash collateral received is invested in interest bearing securities which are included in the schedule of investments. The Funds' monitor the market value of securities loaned on a daily basis and initially require collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of foreign securities loaned. The value of loaned securities and related collateral outstanding at June 30, 2001, were as follows:
MARKET VALUE OF COLLATERAL FOR SECURITIES SECURITIES LOANED LOANED ----------- -------------- Global Fund $34,002,642 $34,552,487 International Equity Fund 14,703,498 15,553,849
114 7. DISTRIBUTION PLANS The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment Funds Class. Each Plan governs payments made for the expenses incurred in the promotion and distribution of the Brinson Class N and the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the average daily net assets of the Brinson Class N of each of the Funds. Annual fees under the UBS Investment Funds Plan, which include a 0.25% service fee, are as follows as a percentage of the average daily net assets of the UBS Investment Funds Class of each of the Funds:
% OF FUND NET ASSETS - ---- ---------- Global Fund 0.65% Global Equity Fund 0.76 Global Technology Fund 1.00 Global Biotech Fund 1.00 Global Bond Fund 0.49 U.S. Balanced Fund 0.50 U.S. Equity Fund 0.52 U.S. Large Cap Equity Fund 0.52 U.S. Large Cap Growth Fund 0.77 U.S. Small Cap Growth Fund 0.77 U.S. Bond Fund 0.47 High Yield Fund 0.85 International Equity Fund 0.84
8. LINE OF CREDIT The Trust has entered into an agreement with Chase Manhattan Bank to provide a 364-day $100 million committed line of credit to the Funds. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate plus 0.50%. The Funds pay an annual commitment fee of 0.10% of the average daily balance of the line of credit not utilized. The average borrowings under the agreement for the year ended June 30, 2001, were as follows:
AVERAGE NUMBER OF DAYS FUND BORROWINGS OUTSTANDING - ---- ----------- -------------- Global Fund $10,550,000 8 U.S. Bond Fund 6,500,000 4 High Yield Fund 3,442,857 14 International Equity Fund 14,452,139 36
115 REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders The Brinson Funds We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds -- Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund, and International Equity Fund (formerly Global (Ex-U.S.) Equity Fund); (collectively the "Funds") as of June 30, 2001, and the related statements of operations and cash flows (Global Fund only) for the year then ended, statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' 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. 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 as of June 30, 2001, by correspondence with the custodian and brokers, or alternative procedures for confirmations not received. 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds -- Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund, and International Equity Fund at June 30, 2001 and the results of their operations and cash flows (Global Fund only) for the year then ended, statements of changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP New York, New York August 3, 2001 116 FEDERAL TAX INFORMATION (UNAUDITED) For the year ended June 30, 2001, the percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders, the designation of long-term capital gain and the amounts expected to be passed through to the shareholders as foreign tax credits are approximated as follows:
DIVIDENDS 20% RECEIVED LONG-TERM FOREIGN TAX FUND DEDUCTION CAPITAL GAIN CREDIT - ---- --------- ------------ ----------- Global Fund 16.97% $ 9,460,103 -- Global Equity Fund 12.62 5,284,058 -- Global Technology Fund 1.64 -- -- Global Biotech Fund 3.15 -- -- U.S. Balanced Fund 19.96 -- -- U.S. Equity Fund 100.00 10,124,571 -- U.S. Large Cap Equity Fund 59.41 -- -- U.S. Large Cap Growth Fund -- 915,202 -- U.S. Small Cap Growth Fund 2.54 1,565,435 -- U.S. Bond Fund 0.91 -- -- International Equity Fund -- 19,994,317 $492,321
In addition, for the year ended June 30, 2001, gross income derived from sources within foreign countries amounted $5,954,076 for the International Equity Fund. For the year ended June 30, 2001, the percentage of income earned from direct treasury obligations approximately amounted to the following:
DIRECT TREASURY FUND OBLIGATIONS - ---- ----------- Global Fund 36.57% Global Bond Fund 30.31 U.S. Balanced Fund 47.02 U.S. Large Cap Equity Fund 13.88 U.S. Bond Fund 27.01
117 THE BRINSON FUNDS 209 South LaSalle Street - Chicago, Illinois 60604-1295 - Tel: (800) 448-2430 -----END PRIVACY-ENHANCED MESSAGE-----